Deceased Estate Administration, Wills and Trusts

 

 

 

Administering a deceased estate in South Africa is a complex process, and the timeline can vary significantly.  It can take anywhere from six months to several years to finalize an estate.  Several factors can contribute to delays, including the workload and processing times at the Master of the High Court and the South African Revenue Service (SARS).

Because legal administration and regulation differs from country to country you should have a separate will for each country where you have assets.

When a deceased estate's liabilities exceed its assets, it's considered insolvent.  In such situations, the executor must sell assets to generate funds to pay outstanding debts. However, even after asset liquidation, there might not be enough money to cover all obligations.

Possible outcomes - 

  • Asset Liquidation The executor will sell estate assets to raise funds.
  • Insolvency If the proceeds from asset sales are insufficient to cover all debts, the estate is declared insolvent.
  • Unsecured Debts May Not Be Paid  Unsecured debts, such as credit card balances, store accounts, and some personal loans, are often the first to be affected in an insolvent estate.  It's likely that these creditors will not receive full repayment, or possibly any repayment at all.
  • Creditor Losses  Creditors, particularly those with unsecured debts, may incur losses as they may not recover the full amount owed to them.  The available funds are typically distributed proportionally among creditors, meaning everyone receives a percentage of what they're owed, but not the full amount.

A deceased estate must be reported to the Master of the High Court in the province where the deceased ordinarily resided. This should be done within 14 days of the date of death.

In certain limited circumstances, the estate can be reported to the Magistrate's office in the district where the deceased lived. This is only permissible if all of the following conditions are met

  • The deceased died without a will (intestate); and
  • The gross value of the estate is less than R125,000; and
  • The cash available in the estate is less than R20,000.
     

Generally, a deceased estate should be reported by a family member of the deceased, such as the surviving spouse or children.  If no family member is available or willing to report the estate, the responsibility falls on anyone who possesses the deceased's will or controls any property belonging to the estate.
 

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The Role of an Executor in South Africa

The loss of a loved one is a deeply emotional experience, and the subsequent task of administering their estate can feel overwhelming.  Navigating the legal and financial complexities involved can have significant long-term consequences, making expert guidance essential.
 

What is the Role of an Executor? 

An executor is the individual responsible for managing and distributing a deceased person's estate. This involves a range of duties, including identifying and collecting all estate assets (like property and vehicles), safeguarding and investing those assets until they are distributed, paying any outstanding debts and liabilities, filing necessary tax returns for both the deceased and the estate, and finally, distributing the remaining assets to the beneficiaries as specified in the will. Essentially, an executor ensures that the deceased's wishes, as outlined in their will, are carried out correctly and legally.

Administering a Deceased Estate in South Africa

The loss of a loved one is a deeply emotional experience, often accompanied by the complex task of administering their deceased estate.  Understanding the duties and responsibilities involved is crucial for ensuring a smooth, legal, and respectful process. This guide outlines the key steps in deceased estate administration in South Africa.

Understanding a Deceased Estate

A deceased estate encompasses all of a person's assets (property, belongings, investments), liabilities (debts, obligations), and personal effects at the time of their death. Administration involves managing these elements according to the deceased's will or, if no will exists, according to the laws of intestate succession.

The Executor or Administrator Establishing Legal Authority

The process begins with establishing legal authority to manage the estate.  This involves appointing an executor (named in the will) or, if there is no will or named executor, an administrator (appointed by the court, usually a close family member).  This individual is responsible for overseeing the entire administration process.

Key Duties and Responsibilities

  • Gathering Information and Notifying Parties The executor/administrator must collect all relevant information about the deceased's assets and liabilities. This includes locating the will, insurance policies, bank statements, property deeds, investment portfolios, and debt records.  Crucially, they must notify relevant parties, including financial institutions, creditors, and government agencies, of the death.
  • Obtaining Letters of Executorship/Administration  If a will exists, the executor applies for Letters of Executorship, which validate the will and confirm their authority. If there is no will, the appointed administrator applies for Letters of Administration, granting them legal power to manage the estate according to intestate succession laws.
  • Identifying and Valuing Assets  A comprehensive inventory and valuation of all assets are essential. This includes tangible assets (real estate, vehicles, jewelry, personal belongings) and intangible assets (bank accounts, investments, intellectual property). Accurate valuation is crucial for fair distribution and calculating potential estate taxes.
  • Settling Debts and Liabilities The executor/administrator must identify and settle all legitimate debts owed by the deceased. This involves notifying creditors, verifying claims, and prioritizing payments.  Debts may include mortgages, loans, credit card balances, utility bills, and taxes.  All legitimate debts must be settled before asset distribution.
  • Distributing the Estate Once debts are paid, the executor distributes the remaining assets according to the will's provisions or intestate succession laws. This may involve transferring ownership of assets or selling them and distributing the proceeds.  The executor must act in the best interests of the estate and beneficiaries.
  • Estate Tax Filings  The executor is responsible for preparing and filing all necessary tax returns (pre-death, post-death, estate duty, capital gains tax, donations tax) with the South African Revenue Service (SARS).  Professional tax advice is highly recommended to ensure compliance and optimize tax planning.
  • Finalizing the Estate  The final step involves preparing a detailed financial report, the Liquidation and Distribution Account, which summarizes all transactions, distributions, and settlements.  Once approved by beneficiaries and relevant authorities, the executor/administrator can be discharged from their responsibilities, formally closing the estate.

The Risks of Serving as an Executor of a Deceased Estate in South Africa

Serving as an executor of a deceased estate in South Africa carries significant responsibilities and potential risks.  These risks can vary depending on the specifics of each estate, and all appointed executors share these potential liabilities.  Even if an agent is appointed to act on behalf of the executor, the executor remains ultimately responsible and accountable.  Failure to adhere to the Administration of Estates Act (Act No. 66 of 1965) can result in penalties and even imprisonment.  Executors can be held personally liable for a wide range of issues, including (but not limited to):

  • Loss of the Will Misplacing or losing the original last will and testament can lead to significant financial damages and wasted expenses for the heirs.
  • Neglect of Duties Failure to fulfill the duties outlined in the Administration of Estates Act can result in legal repercussions.
  • Oversight of Previous Marriages Neglecting to investigate the estates of predeceased spouses for limited interests can create complications and liabilities.
  • Contractual and Legal Oversights Failing to properly address donations within an Antenuptial Contract, claims from a divorce order, or calculating accrual claims can lead to disputes and financial losses.
  • Unresolved Legal Matters Failing to properly manage pending legal actions initiated by the deceased can negatively impact the estate and the beneficiaries.
  • Business Interests Complications If the deceased owned business interests, the executor must navigate complex regulations regarding employees, UIF, severance pay, business continuity, taxes, and VAT returns. Failure to do so correctly can result in significant penalties.
  • Tax Non-Compliance Failing to submit all required tax returns to the South African Revenue Services (including pre-death, post-death, estate duty, capital gains tax, and donation tax returns) can result in substantial penalties and legal action.
  • Incorrect Distribution Incorrectly identifying next of kin, determining inheritance proportions, misinterpreting the Intestate Succession Act, or incorrectly distributing cash and transferring assets can lead to legal challenges and financial losses for the beneficiaries.
  • Impartiality and Conflict of Interest  An executor must act impartially and avoid any conflict of interest.  Neither the executor nor their family or friends may unfairly benefit from the estate (e.g., through the sale of assets).  The executor must adhere to the instructions in the will, as well as reasonable instructions from the heirs, and must not allow disputes with heirs to interfere with their duties.

Legal Help

Given these potential pitfalls, it is crucial for anyone considering or serving as an executor to fully understand their responsibilities and seek professional guidance. Aucamp Attorneys can provide expert assistance in navigating the complexities of estate administration, minimizing risks, and ensuring the smooth and lawful execution of a deceased estate.  Contact Aucamp Attorneys for a consultaiton.