The cost of passing on

Are Executors’ fees relevant to the services rendered by a Professional Executor?

A common mistake often made when appointing an Executor in your Will, who will ultimately tend to the Administration of your Estate, is to shop around for the cheapest option in relation to Executors’ fees as opposed to the most reputable institution or individual. The function of the Executor is to protect the assets of the Estate, pay debts and liabilities owed by the deceased and to distribute the balance of the deceased’s assets to the beneficiaries. This all seems straight forward on paper, but what may seem like a simple process at first glance, can turn into an administrative and legal nightmare if the correct procedures are not followed. In-depth knowledge of the Law of Succession, the Wills Act, the Administration of Estates Act and the Income Tax Act is a prerequisite for the efficient administration of any Estate.

A brief overview of the administration process

The first step in the administration of an Estate is to complete and submit the necessary documentation to the Master of the High Court in the prescribed manner, in the district where the deceased resided at the time of death. After the Estate has been reported, the Master appoints the Executor by issuing a Letter of Executorship (if the deceased’s assets have a gross value of more than R250,000) or a Letter of Authority (if the deceased’s assets have a gross value of less than R250,000). This process can take anything from six to eight weeks depending on service delivery from the Master’s Office. One unfortunately cannot guarantee the length of time that it will take to obtain the Master’s approval and it often involves a visit or two to the Master’s office to expedite this process.

The primary function of the Master is to protect the interests of all creditors, heirs (major and minor beneficiaries), or all other persons having any claim against the estate. In exercising this function, the Master is afforded extensive powers of supervision. This includes the duty to protect the fiscus with regard to Estate Duty, where payable. The administration of Estates is thus under the exclusive jurisdiction of the Master.

After the Executor has been formally appointed, the physical administration process starts. The duly appointed Executor must publish a notice in the Government Gazette and in at least one newspaper circulating in the municipal district in which the deceased resided, calling on all persons having claims against the Estate to lodge their claims within a specified period, usually within 30 days from the date of the latest publication.

Within a period of six months after the Letters of Executorship have been issued or such further period as the Master may allow under certain exceptional circumstances, the Executor is obliged to submit a liquidation and distribution account. This account will reflect all assets, liabilities and distributions that will be made in terms of the provisions of the Last Will and Testament of the deceased. In the preparation of this account, the Executor determines the value of all the assets and liabilities in the Estate as at the date of death. This involves liaising with all service providers, closing of bank accounts and the physical collection of all assets.

In terms of section 28 of the Estates Act, the Executor is required to open an account, in the name of the Estate, with a banking institution in the Republic of South Africa. All monies received by the Executor must be deposited into this account. The Executor will also ascertain whether the Estate is liable for Estate Duty, Income Tax and/or Capital Gains Tax.

The Master will examine the account and, if he/she finds that all is in order he/she will authorise the Executor to advertise the account to lie for inspection. The account must lie open at the Office of the Master and, if the deceased was ordinarily resident in any other district, a duplicate of the account must lie open at the office of the Magistrate – for at least 21 days, for inspection by any interested parties. The Executor must further publish a notice in the Government Gazette and at least one or more newspapers circulating in the district in which the deceased resided, stating the period during which and the place at which the account will lie for inspection.

The Master will notify the Executor once the inspection period has passed, if the account has lain for inspection free from objections. The Executor can then pay the creditors and distribute the estate among the heirs in accordance with the account. The Executor will lodge with the Master the receipts and acquittances of the creditors and heirs. Once all the Master’s requirements have been complied with, the Master will issue a filing notice stating that the Estate has been completely finalised.

This entire process takes on average between 18 to 24 months to complete, if there are no legal proceedings involved or undue delays on the side of the Master’s Office or other service providers.

For more information, contact Personal Trust on 021 689 8975.