My father passed away and the executor Absa sent through a draft for his estate settlement. I looked at the assets and liabilities. My question is are the 3.5% fees from the total assets or the net assets? My father has a flat valued at R480 000 and owes the bank R350 000. My question is: are they charging me 3.5% of R480 000 or 3.5% of R130 000 (R480 000 – R350 000)?
We are sorry to hear about your loss, please accept our deepest condolences.
Please note the information provided below does not constitute financial advice, but is generic information that is applied and used in the context of your questions.
The maximum executor fee that can be levied is 3.5% (excluding VAT). This fee may be negotiable but don’t underestimate the amount of work that is required to wind-up most estates. Executor fees are charged on the gross value of the deceased estate’s assets which includes all property that the individual had, or was due to him, at his death.
In the scenario that you have described, the executor fee will be charged as a percentage of the gross value of your father’s flat i.e. on an amount of R480 000. When it comes to the calculation of executor’s fees, a client’s liabilities are not offset against the value of the assets.
A distinction needs to be made between executor fees and estate duty:
When calculating estate duty, liabilities are considered. This is where the outstanding loan amount (R350 000) is material. Estate duty is calculated, at a rate of 20%, on the total value of the estate (includes property and deemed property) which is reduced by all deductions (liabilities) and then further reduced by the section 4A rebate (abatement on the first R3.5 million of dutiable assets),
The calculation of executor fees is based on the gross value of the estate, as set out in the liquidation and distribution (L&D) account. Certain assets do not attract executor fees such as:
- Insurance policies with a beneficiary nomination (unless the policy is paid to the estate)
- Policies where the deceased is not the owner and the proceeds are not payable to the estate
- Usufructs enjoyed by the deceased prior to death
- Retirement fund benefits
It is important to note that people need to plan correctly for death. You should, if possible, ensure that you have sufficient liquidity within the estate to cover liabilities without having to sell assets.
Estate planning is essential for succession planning and needs to be structured comprehensively in conjunction with a full financial plan and a will. It should not be done without due care, we therefore recommend speaking to your financial advisor should you require detailed financial advice.