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Estate administration: The winding up of your financial affairs

The administration process can be time-consuming and laborious.

Depending on the size and complexity of the estate, the administration process can be time-consuming and laborious.

Where a deceased estate has a value of less than R250 000, the process is somewhat simpler and less time-consuming. However, for estates over R250 000, the formal winding-up process – including the appointment of an executor – must be followed.

Reporting the death: The moment a person dies, their deceased estate comes into existence and must be administered in terms of the Administration of Estates Act. From the loved ones’ perspective, their first task is to report the death in terms of the Births & Deaths Registration Act to the Master’s Office.

Where the deceased was resident in South Africa, the death must be reported within 14 days to the Master’s Office in whose jurisdiction the deceased lived in the 12 months preceding their death. If the deceased was living outside of South Africa at the time of death, their death can be reported to any Master’s Office. Anyone who has control or possession of any property of the deceased or their will is able to report the death, and this is done by completing a J294 form which includes the personal details of the deceased, their immediate family, and the nature of their marriage contract. Once the death has been reported, a death certificate will be issued and it is absolutely essential to ensure that all the details included on the certificate are 100% correct as any errors can delay the winding-up process. If any errors are detected, the certificate will need to be amended by the Department of Home Affairs.

Locating the will: The deceased’s will is important because it will determine how the estate will be wound up keeping in mind that, in the absence of a will, the estate will be wound up in terms of the laws of intestate succession. If the deceased’s loved ones are not aware of the location of the will, they will need to take all steps necessary to determine (a) whether a will exists and (b) where it is being kept. In searching for the will, they will need to contact the deceased’s bank, investment houses, insurance companies, attorneys and/or financial planners which can further delay proceedings. Once the will has been located, the loved ones are required to notify the nominated executor of the death and begin the process of collating all the necessary documentation that the executor will require to perform their duties.

The preliminary interview: One of the first jobs of the executor is to arrange a meeting with the deceased’s family and loved ones to gather information and documentation essential to the winding-up process. During this process, the executor will begin drafting a rough inventory of the deceased’s assets, liabilities and income. Documents that the executor will require include the deceased’s ID, passport, birth certificate, marriage certificate, original signed will, antenuptial contract, title deeds, divorce and maintenance orders, to name just a few.

The appointment of the executor: Before the nominated executor can proceed with their duties, they need to be formally appointed by the Master, and this can only happen once all the required documentation has been submitted. If satisfied that all documentation has been received, the Master will issue what is referred to as Letters of Executorship which effectively formalises the executor’s appointment as legal representative to the deceased estate.

Opening an estate late bank account: One of the executor’s first duties is to open a bank account in the name of the deceased. The name of the bank account will be in the name of the deceased preceded by the words ‘Estate Late’, and the account will be used to manage all the estate’s transactions.

Reporting the estate to Sars: Taxes follow us to the grave and, as such, another important function of the executor is to report the estate to Sars so that the deceased’s tax affairs can be finalised. In fact, a deceased estate cannot be finalised until the deceased’s tax affairs have been fully settled with Sars, including income tax, CGT, and donations tax. Remember, death is considered a CGT event and the deceased is deemed to have disposed of their assets for an amount equal to the market value of the assets on the date of death. The executor is required to submit a pre-death tax assessment to Sars which includes all income and deductions applicable up until the date of death. They must also file a final post-death tax assessment in which all CGT payable by the estate must be declared.

Advertising for creditors: The next step is for the executor to advertise the deceased estate to locate all creditors and debtors of the estate. In terms of Section 29 of the Act, the executor is required to place the advert in the local newspaper and government gazette, allowing a period of 30 days for interested parties to come forward and lodge a claim against the estate. Remember, no assets can be distributed to the deceased’s heirs and beneficiaries until all debt has been paid.

Preparing the L&D account: Once the estate has been advertised for the required period and all claims have been lodged, the executor must put together a liquidation and distribution account, and determine whether the estate is solvent. Where the estate is solvent, the executor must set out how the assets in the estate will be distributed in accordance with the deceased’s will.

Lodging the L&D account: Upon completion, the executor must lodge the L&D account with the Master where it lies open for 15 days to allow for queries. If the Master has any queries regarding the account, the executor is required to respond and, only once the Master is satisfied, will they give permission for the L&D account to be advertised.

Advertising the L&D account: The L&D account must then be advertised in the local newspaper and government gazette in terms of Section 35 of the Act. This provides an opportunity for any interested parties to lodge objections with the Master. If no objections are lodged after a period of 21 days, the court will issue a certificate of no objection and the executor will be granted authority to distribute the assets in accordance with the L&D account.

Obtaining a release from Sars: Before settling any of the estate’s debts, the executor must first ensure that all outstanding taxes have been paid to Sars, following which the receiver of revenue will issue a release.

Paying the creditors: Once the estate’s taxes are finalised, the executor can begin the task of paying the estate’s liabilities, including the fees charged by the executor which cannot exceed 3.5% of the gross value of the estate, excluding Vat. The executor is also entitled to charge a fee of 6% of any income that they collect on behalf of the estate.

Distributing the assets: Once all the estate’s debt has been paid, the executor must begin the process of distributing the assets to the heirs, beneficiaries, and legatees in accordance with the will. The heirs are required to sign a verification of receipt of any property inherited as proof that the asset has been transferred into their name.

Applying for discharge: Finally, the executor must provide the Master with proof that the estate has been duly liquidated, that the creditors have been paid, and that the property has been transferred to the correct heirs. If they are satisfied that the executor has fulfilled their duties, the Master will sign a filing slip and close the estate. At this point, the executor is discharged from their duties and the deceased estate no longer exists.

ADVISOR PROFILE

Eric Jordaan

Crue Invest (Pty) Ltd

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