THE ADMINISTRATION OF A DECEASED’S ESTATE: 10 STEPS OF ADMINISTRATION
- Reporting of an estate
*Section 7(1)(a) of the Administration of Estates Act 66 of 1965
Within 14 days after death, an estate must be reported to the Master of the High Court in whose jurisdiction the deceased resided 12 months prior to their death. The following must be lodged when applying for an appointment:
- A certified copy of the Death certificate and ID of the deceased;
- Original Will, Death notice, Inventory, reporting affidavit as well as acceptance of Trust as an Executor (in duplicate);
- Valuation certificates for the assets belonging to the estate;
- A covering letter from an agent confirming that they will assist the appointed Executor with the administration of the estate;
- Obtaining the Letters of Executorship
*Section 14 & 16 of the Administration of Estates Act 66 of 1965
Reasonably, within 21 days after lodgment of the estate documents, the Master of the High Court will issue the Letters of Executorship. This letter provides the appointed Executor with the authority to attend to the administration of the estate. The Executor practically steps into the shoes of the deceased and winds up their estate either in terms of a Last Will and Testate or the Intestate Succession Act.
- Notice to Creditors
*Section 29 of the Administration of Estates Act 66 of 1965
Once the Letters of Executorship have been issued, an advert in terms of the abovementioned section is published in the local Newspaper as well as in the Government Gazette simultaneously. The purpose of this advert is to inform creditors that the deceased has passed away and give them the opportunity to claim against the estate.
- Initiate process with SARS to obtain the Tax Clearance certificate
Upon death, there are 3 tax consequences that are triggered. Firstly, the income tax number needs to be coded to that of a deceased’s estate as opposed to a living individual. Secondly, all assets belonging to the estate are deemed to have been disposed of at date of death, this triggers Capital Gains Tax. Thirdly, Estate Duty. South Africa is the only Country that charges both CGT and Estate Duty. The rebates and/or abatements provided for both estate duty as well as CGT serve to mitigate the impact of these obligations on an estate. Once the final tax assessment has been issued as well as the CGT and Estate Duty calculations have been conducted, the Executor can then apply to SARS for a Tax Clearance certificate in favor of the estate.
- Collection of estate assets
The Executor is charged with the duty of collecting and accounting for all assets belonging to the estate. This includes the valuation of the immovable properties, tangible assets (motor vehicles, art, etc), furniture and personal effects as well as closing all bank accounts and cashing policies. All cash belonging to the estate is transferred into an estate late account which the Executor opens upon receipt of the Letters of Executorship. In a more complex estate, the Executor will ordinarily appoint new directors for all business entities and ensure that same are compliant with company legislation and valuated to the satisfaction of the chief revenue inspector at SARS. Each estate has its own finger print and as such, no two estates are the same.
- Drafting of the Liquidation and Distribution account
Once the final tax assessment has been obtained from SARS, all the assets have been collected, accounted for and valuated the Executor will then attend to the drafting of a Liquidation and Distribution account, which serves to summarize the estate and confirm estate value and distribution as well as legislation guiding the distribution of the estate.
- Lodgment of the Liquidation and Distribution account for approval
The Liquidation and Distribution account will thereafter be lodged with the Master of the High Court for examination and approval. The Executor will also attach an originally signed Rev 246 – The Estate Duty Return. A copy of the Liquidation and Distribution account is simultaneously lodged with the Estate Duty department as SARS for confirmation of the estate duty calculation.
- Advertisement of the Liquidation and Distribution account;
*Section 35 of the Administration of Estates Act 66 of 1965
Once the Liquidation and Distribution account as well as Estate Duty calculation (if the estate is dutiable) is approved and permission to advertise has been granted by the Master of the High Court, the Executor will then advertise the account in terms of the abovementioned section in both the local Newspaper as well as the Government Gazette simultaneously. A copy of the account will lay for inspection at the local Magistrate’s Court for a period of 21 days. The Magistrate’s Court will thereafter issue a certificate confirming that the account laid for inspection for a period of 21 days with no objection lodged against same.
- Distribution of the estate
Upon receipt of the Magistrate Court’s certificate, as well as the Master’s Office approval to advertise, as well as the tax clearance certificate, the Executor is thereafter in a position to distribute the estate. This entails the transfer of ownership of the immovable properties, transfer of all tangible assets into the name of the heir, including shares and policies and thereafter, once all assets have been transferred in terms of the Liquidation and Distribution account, the Executor will then pay all creditors that claimed against the estate and the surplus will be transferred to the heir as a final cash distribution.
- Executors Affidavit to close out administration of the estate
*Section 35(2) of the Administration of Estates Act 66 of 1965
The Executor is then required to depose to an affidavit in terms of the abovementioned section which serves to confirm that the creditors were paid and that the heirs received their inheritance. The affidavit, closing statements as well as proof of all payments are lodged with the Master’s Office in order for the Master to discharge the Executor of their duty. The estate file may thereafter be archived.
Legacy Yezibaya (Pty) Ltd