Most people sign a Will as they have been informed that it is necessary to have a Will and to nominate an Executor and heirs but unfortunately, most people leave the process at this point and do not regularly review the document once signed. An important aspect of completing a Will is to ensure that what you have said should happen in your Will, actually does happen.
Do you know and understand what your Executor will need to do in order to administer your estate? What follows is a high-level explanation of the basic process to be followed by your Executor and what you can do to assist in ensuring that their job is not only made easier, but more importantly, that your heirs can receive their inheritance as soon as practically possible.
Appointing an Executor – What is their Role?
When you pass away, it is the responsibility of your immediate relatives or your nominated Executor to report your estate to the Master of the High Court and to obtain Letters of Executorship to be able to deal with your estate. In order for your Executor to correctly advise the Master of the assets that comprise your estate, it would be a good idea to ensure that this information be made readily accessible to the nominated Executor. Once you have signed your Will and put it in a safe place where your heirs can find it, you should not only place a list of your assets, bank account details, investments and the like with the Will, but also record the contact details of all the relevant people who deal with those assets. This would mean including the contact details of your attorney, your accountant, your insurance broker and stock broker or financial advisor on the list so that your Executor can easily contact these people in order to ensure that they can obtain the full details of your estate.
Once your Executor has a list of all the documentation in your estate, they will have to complete an inventory of assets, which will be needed to report to the Master. This inventory together with a death notice, the Will, and supporting documents will be submitted to the Master in order to obtain a Letter of Executorship, which will allow your nominated Executor to administer your estate.
The Process
This is the start of a fairly lengthy process in terms of which your Executor will have to advertise your estate to inform any potential creditors of your passing and to allow them to submit a claim, if any.
The Executor will then have to liaise with all the relevant role players in respect of the assets in your estate and obtain certificates of values on all your assets and investments as at the time of your death. This will include obtaining sworn valuations in relation to the value of your immovable and movable property, certificates of balance on funds in your bank accounts and certificates of balance on your investments and share portfolios. While in principle this sounds like a simple process, it is unfortunately time-consuming, as invariably the Executor will be dealing with numerous institutions who either have backlogs or alternatively are not the most efficient.
The purpose of obtaining certificates of value in relation to the assets in your estate is so that your Executor can prepare a document called a Liquidation and Distribution Account, which is effectively a snapshot of the value of your estate at the time of your death. This Liquidation and Distribution Account will also then make provision for all your liabilities and the costs related to the administration of your estate inclusive of a fee for your Executor, all valuation costs, transfer costs for the shares and properties and additional liabilities after the date of your death.
Simultaneously, with the process of collecting the information needed to prepare a Liquidation and Distribution Account, your Executor must also liaise with the South African Revenue Services (SARS) in order to deal with the tax implications that come about at the time of your death. These will include the submission of any outstanding income tax returns, and a final “year of death” income tax return. A number of people do not realise that death is a deemed capital gains event. What this means is that, at the time of your death, SARS deems a transfer to have taken place to your deceased estate. In terms of this, a capital gains calculation would have to be done in relation to all the assets, which would be subject to capital gains as at the date of your death (note that there are certain exemptions). This calculation would then be included in your income tax return to be submitted to SARS for an assessment, as the amount due in relation to income tax and capital gains tax must be reflected as a liability in the Liquidation and Distribution Account.
The Liquidation and Distribution Account also has a distribution section, which is the portion of the account which reflects how the assets listed are to be distributed to your heirs. This will clearly set out who is to receive the various assets of your estate in terms of your Will.
The account will also deal with all the income and expenditure received subsequent to your death by your Executor and shows what amounts were received and how they are to be dealt with as part of the distribution to your heirs.
A final aspect of the Liquidation and Distribution Account will be the estate duty calculation. Estate duty is calculated on the net value of the estate after administration expenses have been paid, less the abatement, which every person receives in respect of their estate, of R3.5 million. All amounts in excess of this R3.5 million exemption are subject to estate duty at 20%. There are certain other exemptions to estate duty such as any amounts left to a spouse, as well as specific life assurance policies – these aspects should be discussed with your attorney when your Will is drafted.
Once the Required Information has been Collected
Once the Executor has received the required information to support the figures in the Liquidation and Distribution Account, this account is then submitted to the Master of the High Court for permission to advertise the account. The purpose of this is to advise the heirs and creditors how the estate is to be wound up and the account will be made available for inspection for a period of 21 days. It is only after the 21 days has expired, and the Executor has received confirmation that there have been no objections to the account, that the Executor will be allowed to pay out the proceeds.
Conclusion
As indicated, this is a very simplified overview of a process which can take anywhere from 12 to 24 months to finalise and there are numerous aspects for the Executor to take into account in conducting this process.
In addition to consulting with your attorney to prepare a Will, it would be wise to discuss the administration process with them, and as stated previously to ensure that your documentation is carefully prepared and available for your Executor to make this process as smooth as possible and to allow your heirs to inherit sooner rather than later.
A comprehensive suite of Family Office services is available to Dynasty clients. You are welcome to contact us for any assistance with regard to your succession or estate planning.
