ADMINISTRATION OF DECEASED ESTATES WHAT YOU NEED TO KNOW! 1. HOW DOES THE ADMINISTRATION OF A DECEASED ESTATE START? 1.1 When a person dies leaving assets or a Will, the surviving spouse, or if there is no surviving spouse, the nearest relative residing in the district in which the death has taken place, must report the estate to the Master of the High Court of that district within 14 days. 1.2 After the estate has been reported, the Master appoints an Executor on application made. Your attorney has the skill and expertise to assist you with the preparation and submission of the necessary reporting and application documents and to attend to the proper administration of the estate as it is an involved procedure. 2. WHAT IS THE EXECUTOR’S ROLE? Broadly, the Executor is required to: 2.1 Collect the deceased’s assets and pay liabilities; 2.2 Prepare a liquidation and distribution account and pay estate duty; 2.3 Pay any legacies; 2.4 Distribute the balance of the estate to the heirs in accordance with the will or in accordance with the Intestate Succession Act, 1987 if the deceased died without a will. 3. WHAT TAKES PLACE IN RELATION TO THE ESTATE ACCOUNT? 3.1 As soon as possible after reporting of the estate to the Master of the High Court, the Executor determines the value of the assets and liabilities in the estate as at the date of death. 3.2 The procedure is that after Letters of Executorship have been issued, the Executor must publish a notice in the “Government Gazette” and in one or more newspapers circulating in the district in which the deceased was ordinarily resident, calling on all persons having claims against the estate to lodge their claims with the Executor within a specified period, usually 30 days from the date of the last publication. 3.3 After that, but within a period of six months after Letters of Executorship have been granted (or such further period as the Master may allow), the Executor must submit a Liquidation & Distribution Account of the estate to the Master for the Master’s consideration. This is a full account of all the estate assets and liabilities and proposed scheme of distribution. 3.4 The Master will examine this account and if it is in order, authorise the Executor to advertise the account to lie for inspection by the public. The Executor’s account must lie open for inspection at the office of the Master and local Magistrate’s Court for not less than 21 days. 3.5 The Executor must publish a notice in the “Government Gazette” and in one or more newspapers circulating in the district in which the deceased was ordinarily resident, 2 stating the period during which and the place at which the account will lie for inspection. 3.6 Once the inspection period has passed without objection, the Master will notify the Executor. The Executor can then pay the creditors and distribute the estate among the heirs in accordance with the account. 3.7 The Executor must lodge receipts and acquitances of creditors and heirs with the Master confirming liabilities and heirs have all been paid. 4. TAX 4.1 The Executor must ascertain whether the Estate is liable for VAT and/or income tax including CGT. 4.2 If the deceased was registered as a vendor for VAT purposes, the Executor may have to register the estate. There will be VAT implications. The Executor may have to pay output tax to SARS on all assets in the deceased’s enterprise. It may be possible for the Executor to sell the enterprise as a going concern to another VAT vendor and thereby have the transaction “zero rated”. 4.3 The Income Tax Act provides that when a person dies, that person is deemed to have disposed of his assets in the deceased estate equal to the market value of those assets and any Capital Gains Tax (CGT) then calculated. There are exceptions such as assets accruing to a surviving spouse which are not deemed to have been disposed of on the death of the first dying of the spouses. 4.4 In many estates income tax is payable which will affect the amount of inheritance available to the heirs. 5. WHEN IS ESTATE DUTY PAYABLE? Estate Duty is currently charged on the dutiable amount of the estate at a flat rate of 20% of the net value of the estate after deducting a primary abatement of R3.5 million. 6. OFF-SHORE ASSETS If the deceased had off-shore assets, these may have to be administered in the off-shore jurisdiction according to the laws of that country at an extra cost but nonetheless need to be accounted for in the South African estate for estate duty purposes. 7. EXECUTOR’S REMUNERATION Executor’s remuneration is normally 3.5% of the gross value of the assets in the estate. If there has been income to the estate during the winding up period a fee of 6% fee on the accrued income is allowed. These fees are allowed by regulation and exclude VAT. In the absence of agreement to the contrary, the Executor’s remuneration will be at the above rates. There may also be additional expenses of winding-up or transferring off- shore assets and conveyancing expenses in transferring immoveable property in the estate to the heirs. CONTACT US FOR PROFESSIONAL ADVICE AND ASSISTANCE.