Being nominated to be an Executor of an estate is easy, however acting as the Executor when the time comes is a different story! Besides it being extremely onerous and given that an estate can take anywhere between six months and several years to wind up, it can also be a time-consuming and laborious job. Understanding the duties and responsibilities of your executor will help you to understand why it is so important to appoint someone with the right set of skills, relationships with the Master of the High court, as well as the manpower in order to ensure that the process runs as smoothly as possible.
When a person passes away, their estate automatically comes into existence, regardless of whether you die testate (with a Will) or intestate (without a Will). The winding-up process begins immediately and whoever you have appointed as an executor needs to begin the task of applying for letters of executorship. It is important to remember that if you have nominated a family member or friend as your executor, taking on the role of executor during this very difficult time can be very traumatic. Just for this reason alone, it is best to consider appointing an independent person or entity who has experience in deceased estates and who can remain impartial and unemotional through the process.
The length of the winding-up process largely depends on the size and complexity of the deceased estate, but can also be delayed where the deceased died of unnatural causes, where the will is contested, where there are liquidity issues in the estate, or where a surviving spouse or children lodge claims against the estate. The process can also be held up by turnaround times in the Master’s Office, Sars, banks and financial institutions, or where heirs reside overseas.
The executor’s first job is to meet with the family of the deceased to obtain all necessary information in order to report the estate to the Master’s Office, and this needs to be done within 14 days from the date of death. The death notice must be completed and forwarded to the Master’s Office in the jurisdiction where the deceased lived 12 months prior to his death. Together with the death notice, the executor should include a rough inventory of the deceased’s assets, a copy of the will and an application for a Letter of Executorship.
If the Master is satisfied with the skill and expertise of the nominated executor, he will issue a Letter of Executorship which effectively gives the executor authority in respect of all matters pertaining to the winding up on the estate which includes opening bank accounts, placing advertisements, paying creditors and selling or transferring assets belonging to the deceased. Any powers of attorney existing at the date of death will automatically fall away. This entire process can take up to three months to complete, and should the Master not be happy with the Executor nominated, he can request that a new Executor is appointed, which the Master themselves may appoint.
Once appointed, the executor is required to open an estate late bank account and place a Section 29 advert in the local paper and Government Gazette which should appear on the same day. The purpose of this advert is to notify debtors and creditors of the deceased estate, granting them a 30-day period to submit any claims against the estate.
After the 30-day period has elapsed and all claims have been lodged, it is then the Executor’s job to prepare a Liquidation and Distribution Account (L&D Account). The L&D Account reflects all the assets and liabilities of the estate and determines its solvency. If there is a Will, the Executor will use this document to determine how the assets will be distributed. In the absence of a Will, the assets will be distributed in accordance with the Intestate Succession Act. Complications can arise where the deceased did not include a clause in his will dealing with the residue of his estate. In such circumstances, the executor will need to distribute any residue of the estate in terms of the laws of intestate succession. Therefore, it is extremely important to ensure if an estate in its entirely is not bequeathed to the beneficiaries, that beneficiaries to inherit the residue of the estate is nominated in the Will
In addition, complications and delays can also arise where the deceased did not make provision for his dependents, to whom he has a duty to support. In these instances, the dependents will need to lodge a claim against the deceased estate. If the deceased had a maintenance obligation to an ex-spouse that he did not make provision for in his Will, this can result in further delays. Such claims can affect the liquidity in the deceased estate, which can mean that the executor has to liquidate certain assets in the estate in order to meet its claims and other liabilities. In general, the executor will only liquidate assets where it is necessary to meet the liabilities in the estate, or where it is more practical – such as where the deceased bequeathed his vehicle to three heirs.
Any liquidity problems in the estate can result in delays and possibly financial difficulties for the heirs and beneficiaries. The deceased estate is liable for income tax assessment until the date of death, and the executor is required to settle any tax obligations with SARS. In addition, he is required to settle any CAPITAL Gains Tax liabilities and pay over estate duty where applicable. As remuneration for his services, the executor is entitled to up to 3.5% of the value of the executable estate, excluding VAT, plus 6% collection commission of any income received by the estate after the death of the deceased. Any complications and/or contestation can also result in prolonged and expensive litigation which can reduce the residue in the estate.
Once finalised, the L&D Account is lodged with the Master where it is required to lie for 15 days so as to allow for queries. Anything pertaining to the L&D Account can be queried, and the executor is obliged to provide answers to the Master. If there are no objections, the Master will grant permission for the account to be advertised.
At this point, the executor is required to place a Section 35 advert in the local newspaper and the Government Gazette, and the account will lie open for inspection at the Magistrate’s Court for a period of 21 days. This process provides the opportunity for any objections, together with reasons, to be lodged with the Master. If no objections are lodged, the court will issue a ‘certificate of no objection’ and this certificate must then be lodged at the Master’s Office in order to grant the executor the authority to distribute the assets.
Once they have authority, the executor can begin to distribute the assets in accordance with the L&D Account. Assets such as immoveable property will be transferred into the heirs’ names or, where the property has been liquidated, the proceeds paid out in accordance with the Will. Before any inheritance can be remitted to heirs living abroad, the executor will need to obtain permission from SARS
As a final step, the executor is required to provide the Master with proof that the estate has been liquidated in accordance with the Will, and must provide the Master with copies of the acquittances, proof that creditors were paid, and that property was duly transferred. Once he is satisfied, the Master will issue a filing slip and formally close the estate.
If you have managed to read up to this point, you would understand how laborious the process of acting as the Executor of an estate is, and it is for this reason we always recommend appointing a professional third party to act as Executor, and in turn, we have relationships with such, who do offer reduced Executor fee structures, to ensure your assets are received by your beneficiaries, and not eroded by fees.
Should you wish to update your will, or put a new Will in place, feel free to contact me and we can discuss how best to do so, as well as what options are available to you to ensure liquidity within your estate.