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Practical considerations after the death of a loved one

How to deal with estate matters.

Ingé Lamprecht: The death of a spouse, parent or other loved one is usually quite an emotional experience for those involved. Unfortunately, there are certain practical considerations related to the process of administering the deceased’s affairs that cannot be ignored. To unpack these practical issues, I’m joined by the CEO of the Fiduciary Institute of Southern Africa (Fisa), Louis van Vuren. Louis, the first issue is to obtain a death notice. What is a death notice and how do you get one?

Louis van Vuren: Ingé, the death notice is not the death certificate that will eventually be issued by Home Affairs. It is a notice issued by a medical practitioner in which the practitioner notes the identity of the deceased, the date and time of death and the preliminary finding as to the cause of death. The cause of death is preliminary, but in cases of death from natural causes that will usually become the final cause of death, which will be recorded on the death certificate as well.

Ingé Lamprecht: The corpse must be removed by an undertaker from the place of death. What do you need to keep in mind in this regard?

Louis van Vuren: I think the first thing is that in cases of natural deaths, it is a formality and the undertaker of choice or an undertaker which is appointed under a funeral cover policy or other contractual arrangement will make arrangements to remove the corpse. If the death occurred at a place like an old age home or in the hospital or so, this process is usually virtually seamless as these institutions have the contact details of the relevant undertakers and they usually only want to know which undertaker will have to be contacted. The undertakers can also facilitate the process to obtain the death certificate from Home Affairs. Sometimes it is at an extra fee; sometimes it is included in the funeral cover arrangement.

Ingé Lamprecht: Should you include burial or cremation instructions in your will, or even your preference with regards to organ donation?

Louis van Vuren: Well Ingé, it is not really practical to do any of these in your will, the reason being that the will is usually in the first couple of days after death the last thing that family think about. Matters like burial arrangements are best dealt with if they are discussed with the family beforehand. If the deceased has been cremated already, there is nothing you can do if you then read in the will that the person had specific instructions in the will with regards to burial. Also, organ donation: To transplant the organs, the organs must be removed quite quickly and it is usually also not practical to deal with that in a will. It is better to discuss this with family while you are still alive and there is also the Organ Donor Foundation of South Africa where a person can register as an organ donor.

Also, things like the withholding of artificial life support when there is no chance of recovery, let’s say after a motor car accident – or something like that – is best arranged by letting your family know beforehand. During your life, have the discussion with them as to your wishes in this regard and you can also do a so-called ‘living will’. This is not a legally binding document, but at least it records your wishes with regard to artificial life support and related matters.

Ingé Lamprecht: Louis, there are certain things that have to be reported to the Master of the High Court within 14 days from the date of death. Can you explain these requirements?

Louis van Vuren: Yes, the Administration of Estates Act requires the close family to report the death to the Master of the High Court within 14 days from the date of death. Now, if you have a professional executor nominated in your will, then that person will, in the process of applying for appointment by the Master of the High Court as executor, take care of all these. But if the deceased person did not have a valid will, or in the will appointed a family member, then this family member or any other family member will have to take this responsibility to report the death within 14 days.

And obviously the death notice that we referred to earlier is crucially important here, because at least a copy of that needs to be lodged with the closest office of the Master of the High Court. Also, a preliminary inventory of assets of the deceased must be handed in at the Master’s Office within 14 days of the date of death and both these duties actually carry a penalty if they are not complied with (in section 102 of the Estates Act). The maximum penalty is 12 months’ imprisonment. Now I’m not aware of any case where this has ever been applied, but it is a serious duty to make these reports to the Master. This preliminary inventory is not a final statement of assets and liabilities, but at the same time it still has to be as accurate as possible, to prevent problems later.

Then also any person with a document that looks like a will, or is a will, or is a copy of the will of the deceased must be handed in at the Master of the High Court as soon as possible after death. Now obviously from a practical point of view the whereabouts of the will may not be known to the family and therefore it is also a good idea during one’s life to make sure that at least some family member is aware of the whereabouts of the will. There may be good reasons for the whereabouts of the will not to be too widely known, but at least some family members should know where the will is kept or who the executor is going to be.

Ingé Lamprecht: On the point of the executor, when will an executor have to be appointed?

Louis van Vuren: Ingé, the Administration of Estates Act provides that for gross estate values below R250 000 an executor need not be appointed and the Master may appoint a so-called Master’s representative which is usually a family member to close bank accounts and distribute the deceased’s assets according to the will or the provisions of the Intestate Succession Act if the deceased didn’t have a will.

If the gross estate is more than R250 000 in value then the Master must appoint an executor to administer the estate. That process can be quite lengthy if the deceased did not have a last will, because then the Master must appoint the executor after consultation with the family and any other person the Master deems appropriate – any other stakeholder.

If the wills have been handed in at the Master, obviously the Master must then scrutinise and declare which will or which document is the last valid will of the deceased. So the Master must do two things – firstly look at which of the documents handed in are actually valid wills in terms of the Wills Act, and then which one is the latest one. Now interestingly enough, the Wills Act does not require a will to be dated, but from a practical perspective it is difficult for the Master to determine the last valid will if the document wasn’t dated.

The Master may also demand security from the executor – and that is [done] to protect the heirs and the creditors in case something goes wrong. This security comes by way of a type of short-term insurance cover that is called a ‘court bond’ and obviously this adds to the cost of the administration process. Usually with a professional executor, the Master will not demand security.

Ingé Lamprecht: Louis, what are the duties and obligations of the executor?

Louis van Vuren: Well, the first or the most important duty is that as soon as the Master has issued letters of executorship, in other words, appointed the executor, the executor must take control of all the deceased’s property, which can be a complex process or a simple process. If the deceased has one fixed property (one house, let’s say), two cars and some money or investment, then it can be quite a simple process, but if the deceased had been a business person – sole proprietor of a business doing business in their own name – it can be quite a complex process and the executor must actually take control of all those assets.

The executor must then also take a number of steps in the administration process, and one of the most practical and first things is to ensure that proper short-term insurance is in place or remains in place. I’ve personally been involved in a case where the son of the deceased drove the deceased’s car and was involved in a car accident and then upon investigation it transpired that the short-term insurance lapsed. It became quite a sticky issue.

The executor would also place an advertisement for creditors to lodge their claims against the estate and for debtors to pay their debts to the estate and these advertisements must be placed in the Government Gazette and the local newspaper and must appear on the same Friday. These advertisements are in the newspapers on Fridays and in the Government Gazette on Fridays, and must appear on the same day in these two publications. This advertisement gives debtors and creditors 30 days to come forward. Then obviously, in the process of taking control of the deceased’s property, the executor must close the deceased’s bank accounts and this has also become very important in the last number of years because of electronic banking. I think we are probably all aware of people who allow family members to use their bank cards and they disclose their pin numbers to family members despite the serious problems that could land them in with the bank, but what does happen from time to time is that family or next of kin withdraw money from the bank account after death and obviously in certain circumstances, this could even amount to theft and there are some serious cases that have been reported over the last 10 to 15 years.

The closing of bank accounts, from a practical perspective, may present the surviving spouse with a cash flow problem – especially if the current account was overdrawn. And you can imagine that the surviving spouse could be cash-strapped because of the fact that all the bank accounts are now closed.

The executor can pay a maintenance allowance from the estate to the surviving spouse, but there are two important considerations here. Firstly, there must be sufficient cash in the estate to make this possible for the executor to do, and secondly sometimes the appointment of the executor takes some time and that then means that the surviving spouse could be severely cash-strapped before the executor can do anything about it. So from a planning perspective, it is a good thing to make provision for that period.

The executor must then also evaluate all claims and accounts and accept or reject each one, and the executor must collect all claims in favour of the estate and record those.

Ingé Lamprecht: Louis, another one of the executor’s duties is to draft the liquidation and distribution [L&D] account. Can you explain what this process entails and why it is necessary?

Louis van Vuren: Ingé, the executor is in a position where they must wind up the affairs of the deceased. In other words, it is a final reckoning of claims for and claims against the estate of the deceased, and the executor is also charged with eventually distributing the estate to the heirs and making sure that all the creditors are paid – and in this process the Act prescribes the format in which the executor must draft an account.

The liquidation part of the account basically sets out what is in the estate in terms of assets and liabilities, in other words what are all the pieces of property and what are all the debts. And the second part – the distribution part of the account – sets out how the estate will be dealt with, in other words how much money will go towards the payment of creditors, what will be left and how that will be distributed to the heirs and beneficiaries of the estate. This L&D account must then also be advertised in the Government Gazette and the local newspaper – again on the same Friday, and that advertisement gives any interested party 21 days in which to object to the account.

The 21 days is an inspection period during which the account lies open for inspection at the Master’s Office and at the local Magistrate’s Office closest to where the deceased lived. Bear in mind that both the will of the deceased (after it was accepted and the executor appointed) and the liquidation and distribution account are public documents and any person can obtain a copy of from a Master’s Office at a fee.

In the process of preparing this liquidation and distribution account, the executor may have to contract sworn appraisers to value certain property or contract chartered accountants to value for instance private company shares the deceased owned on date of death. The executor must also answer all queries by the Master before permission will be given for the account to be advertised. So the process: The executor lodges the account with the Master, the Master then inspects the account and can direct queries at the executor to be answered, and eventually, if the Master is then satisfied, he will give permission for the account to be advertised for the 21-day period.

Now during this period anybody can object to the account, be it an heir or a creditor and one of these creditors is obviously the South African Revenue Service (Sars) and they can obviously object to the account and sometimes they do so. After the 21 days has expired and there has been no objection, the executor can pay all the claims, distribute the estate, in other words transfer fixed property, shares, cash, whatever, to the heirs in accordance with the will and the liquidation and distribution account.

The practical issue here is that the payment of claims and taxes and cash legacies to heirs all require cash in the estate. If there is insufficient cash for all of this in the estate, the executor may be forced to sell assets which then in turn may create a further drain on cash due to potential tax implications of such a sale.

Ingé Lamprecht: Louis, you mentioned that people are allowed to object to the account. What happens if someone objects?

Louis van Vuren: If anybody objects, the Master must make a ruling about the objection – in other words, either accept that there is merit in the objection or reject the objection. And then the executor will either be allowed to continue to distribute according to the liquidation and distribution account if the Master rejects the objection, or the executor could be instructed by the Master to amend the account if the Master upholds the objection.

In this process, obviously any party who is not satisfied with the Master’s ruling to the objection can obviously then take the Master’s decision on review to the High Court. This sometimes happens and can then cause serious delays and [have] serious cost implications.

Ingé Lamprecht: On the issue of tax, Louis – are there any tax issues that have to be considered?

Louis van Vuren: Yes, Sars doesn’t leave you alone once you die. The executor must arrange for the last tax return for the deceased. That is a tax return stretching from the beginning of the tax year, let’s say March 1 for most natural persons to the date of death. So that last pro-rata portion of the last tax year, a tax return must be prepared for the deceased for that period. Since March 1, 2016, the deceased estate is now a separate taxpayer due to an amendment to the Income Tax Act, and for every tax year that the estate is under administration until finalisation, the executor will also have to facilitate the preparation of a tax return for the estate for each tax year.

Obviously also, if the estate is subject to estate duty, at least a preliminary payment must be made within 12 months of the date of death. Otherwise, Sars is entitled under the Estate Duty Act to levy interest on the amount of estate duty payable. So in practice what happens is that a preliminary payment is usually paid 12 months after death and then the executor can arrange for a final settlement in the final account or in the final cash reconciliation before the estate is finalised.

I personally have been consulted by an executor in the last year or two in a case where the deceased died in 1996 and by 2016/2017 the estate duty had not been finalised yet. So sometimes these things take a lot of time.

Ingé Lamprecht: Louis, just lastly – what happens once the whole estate has been distributed?

Louis van Vuren: Once the property has been transferred to the heirs, the last cash has been paid out to the heirs (obviously there could be inflow of cash into the estate while the process is going on if there had been investments that delivered dividends or interest or rental income or something like that), so as soon as everything has been paid out and transferred, the executor can then apply for a filing notice from the Master. Once this has been given, the executor can then file away the estate file.

The executor can apply for a discharge under Section 56 of the Administration of Estates Act. But in all my years in this industry I’ve never seen one discharge. So basically, the executor must for the time being at least keep the estate file in case something arises years afterwards, but that doesn’t happen that often.

Further practical issues that you have to bear in mind is that there could be expatriation of inheritances to offshore heirs in which case there are processes with the South African Reserve Bank that the executor has to facilitate and also dealing with offshore assets of the deceased if the deceased didn’t have a separate will dealing with those assets and the latter of these – the dealing with offshore assets – then becomes part of the estate administration in South Africa.

Ingé Lamprecht: Thanks, Louis. Louis van Vuren is the CEO of the Fiduciary Institute of Southern Africa.

Brought to you by the Fiduciary Institute of Southern Africa (Fisa).

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Really practical and important to know. Thank you to both contributors.

A practical example with CGT and estate duty would have been helpful. Secondly, what happens to debit orders for short term insurance etc.?

The possible permutations w.r.t. CGT and estate duty are virtually endless, so therefore very difficult to fit into the available space. The focus of this article was also to deal with the practicalities of the process. W.r.t. CGT the main principles are that the deceased is deemed to have disposed of all property to the deceased estate on date of death and will therefore be liable for CGT on the net capital gains after deduction of the R300,000 year of death exclusion. To this there are four important relevant exceptions: 1) everything that goes to the surviving spouse rolls over to the spouse with the same base cost the deceased had, 2) Personal use items (cars, small motor-boats, furniture etc.) are exempt, 3) the first R2m gain on the primary residence is excluded, and 4) the proceeds of all life insurance on the life of the deceased is excluded as life insurance is taxed within the fund and not in the hands of the policyholder. Estate duty is effectively calculated by taking the gross value of all assets of the deceased (including all policies on the deceased’s life regardless of who the policyholder is or who will receive the proceeds) and deducting all liabilities (debts etc.), all relevant administration costs, income tax and CGT, and all assets that will end up in the hands of the surviving spouse. What is left is called the nett estate. Of this, the first R3.5m is free from estate duty and the amount that exceeds R3.5m is taxed at 20% up to R30m and 25% after that.

The above reading, set of again, without compensation news, crime violence, taxi accident death, corrupt officials, is surely means for another country?

An OUTSTANDING article.

More of this quality MW.

Real value that sadly has affected us as a family in the last week.

“Yes, the Administration of Estates Act requires the close family to report the death to the Master of the High Court within 14 days from the date of death.”

Does this also apply to a South African citizen who has physical assets in SA but was residing and died in USA? Do not know the tax residency of this recently deceased family member.

Many thanks for this practical and useful article. Makes reading MW worthwhile.

The death of a South Africa citizen residing outside SA but with assets in SA must also be reported to the Master’s Office. Sec 7(2) of the Estates Act (66 of 1965) reads:
“(2) Whenever any person dies outside the Republic leaving any property or any document being or purporting to be a will therein, any person within the Republic having possession or control of any such property or document, shall, within fourteen days after the death has come to his knowledge, report the death to the Master who shall take such steps as may be necessary and practicable to obtain a correct death notice.”

Many thanks Louis. Much appreciated.

MW take a visit to the Master of the High Court’s office in Johannesburg and take some photos of what the inside of those offices look like.
An investigation should be made into the role of SARS and the length of time it takes to issue a estate clearance certificate. The reality in South Africa is that it is very difficult and time consuming to finalize an Estate.

Lemon, the degradation starts even sooner like having to identify the body of a loved one lying in a plastic box on the floor of a run down dump known as a provincial hospital!

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