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Two types of deceased estates - what is the impact on the administration process? (Media Release)
Opinion editorial by Maryna van Jaarsveld, Estate Administrator at Legatus Trust (Media Release: 20150423)
When you have a will drafted, it is wise to make use of a professional service provider to advise and guide you through the process. After all, no two deceased estates are the same due to each person’s unique circumstances.
There are two main types of deceased estates you should be aware of. The Section 18(3) estate and the full estate. Which is which and how does it impact on the administration process?
The administration of an estate is determined by its gross value. If you left an estate with an asset value exceeding R250 000 you left a full estate. The law changed and the value of a Section 18(3) estate was changed from R125 000 to R250 000 on 24 Nov 2014.
The section 18(3) estate
The Section 18(3) estates is generally considered simpler and less costly to administer than the full estates (due to the lesser value of the estate; no advertisements, no need to submit L&D accounts). The executor’s fee will be levied in terms of the Estate Administration Act, which is 3.5% plus VAT of the gross value of the estate.
The Master of the High Court issues Letters of Authority for a Section 18(3) estate. Such Letters appoint the executor; states the details of the deceased (and surviving spouse if married in community of property) and an inventory stating details of the assets and values thereof. Thus there is no need for a Liquidation and Distribution account.
Such letters authorise the executor to take control of the assets, pay the debts and transfer the residue and assets to the heir/s in terms of the Administration of Estates Act. The Master may request a statement of liabilities if there are minor beneficiaries.
After issuing the letters of authority the Master of the High Court generally closes the file.
If it so happens that more assets are found in the name of the deceased or found not to be assets in an estate, the letters of authority have to be replaced and this could even lead to a Section 18(3) estate changing to a full estate, or vice versa.
If you died and left an estate with a gross value exceeding R250 000, your executor is dealing with a full estate, a lengthier and costlier estate to administrate.
For a full estate the Master of the High Court issues Letters of executorship authorising the executor to liquidate and distribute the estate. Such Letters appoint the executor and states the details of the deceased (and surviving spouse if married in community of property). Now there is need for a Liquidation and Distribution account.
After receiving the letters of executorship from the Master of the High Court, the process formally starts and an estate bank account is opened for the particular estate and the deceased’s bank account closed.
Once there are funds in the estate account, a Section 29 advertisement is placed in the Government Gazette and local newspapers (in the areas where the deceased resided the last year of life). Thus giving debtors and creditors 30 days to lodge any claims they might have against the estate.
Solvency is determined after all the information about the assets and liabilities of the deceased estate have been received. Should the estate be insolvent (liabilities exceed the asset value) a different administration process will be followed in respect of the relevant acts.
A solvent estate may have a cash shortfall. Then a preliminary statement is drafted and furnished to the beneficiaries, thus enabling them to consider how to settle the cash shortfall.
If the estate is solvent and without a cash shortfall (or a solution found to settle the cash shortfall will be sorted out and not delay the process), the liquidation-and distribution statement is drafted, checked and lodged with the Master of the High Court for his approval.
The Section 35 advertisement is placed to give notice that the liquidation and distribution account will lie for inspection for 21 days at the local magistrate office and/or the Master of the High Court.
If no objections are received against the account, the executor proceeds with a preliminary distribution of assets to the beneficiaries. If applicable, an attorney will now be instructed to proceed with the transfer of fixed property to the heir.
All tax matter have to be assessed and SARS has to issue a tax compliance certificate before the estate can be finalised. If the deceased had a tax consultant, the executor will request them to attend to the matter and the cost thereof will be a claim against the estate.
Winding up a full estate is an extended process and the Master of the High Court will keep the file open until all the requirements of the Estate Act have been met to his satisfaction.
Only then may the executor request the filing slip from the Master, which is the official release of the executor’s duties to the estate.
Years after an estate has been finalised, such estate may become entitled to surplus fund payments from a pension fund. The file will be re-opened and the process restarted to deal with such assets.
All testate estates have to be administered in terms of the Administration Estate Act and intestate estates in terms of the Intestate Succession Act.
All decisions during the administration of an estate should be made in conjunction with the beneficiaries.
The services of a trust company like Legatus Trust, a long-standing, well respected authority on the drafting of wills and rendering fiduciary services throughout South Africa, will ensure that your will is drawn up correctly, taking your personal circumstances into account and ensuring that the winding up of your estate is completed with the minimum of hiccups.
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