A persons death gives rise automatically to a deceased estate following which the process of winding up the estate begins. The timeframe for winding up a deceased estate depends on several factors including the complexity of the estate, the experience and efficiency of the executor, the service levels of the relevant Masters Office, and the cooperation of all parties involved, including financial institutions, family members and attorneys.
Although every estate is different and subject to the deceaseds unique set of circumstances, the general process of estate administration is as follows:
Interviewing the family and loved ones of the deceased
Purpose:To prepare a rough inventory of the deceaseds assets and to apply for letters of executorship.
What this step entails:The person nominated as executor is required to set up a preliminary interview with the family and/or loved ones of the deceased. Keep in mind that, at this stage, the executor has not yet been formally appointed to the position by the Master and they are not yet mandated to transact on behalf of the deceaseds estate. During the preliminary meeting, the nominated executor is required to gather information and documentation pertaining to the deceaseds assets and liabilities to prepare a rough inventory for submission to the Master together with the deceaseds will. The nominated executor will also request to be formally appointed to the position.
Timeframe:The death notice is to be forwarded to the Masters Office within 14 days of death.
Appointing the executor
Purpose:To step into the shoes of the deceased and begin managing the estates affairs.
What this step entails:If the Master is satisfied that the nominated executor has sufficient expertise, they will issue what is known as letters of executorship. Once issued, the executor is formally mandated to act on behalf of the deceaseds estate, with two of their first jobs being to open an estate late bank account and to take control of the deceaseds assets. Any general powers of attorney signed by the deceased lapse and instructions will be issued to the deceaseds financial institutions to freeze any accounts that form part of the estate.
Timeframe:The issuing of the letters of executorship can take anywhere between two weeks and three months.
Advertising for creditors: Section 29 advertisement
Purpose:To notify creditors of the deceased estate and provide an opportunity to lodge claims.
What this step entails:In order to take stock of the deceased estates liabilities, the executor is required to place a Section 29 advert in the local newspaper and government gazettes which effectively provides potential creditors a period of 30 days in which to lodge any claims against the estate. Remember, no assets can be distributed to the heirs until all the debts of the deceaseds estate have been duly paid, so this is an important step in the process. The executor will need to give consideration to the estates liabilities, keeping in mind that certain liabilities, such as the surviving spouses accrual claim and a childs claim for maintenance, take preference.
Timeframe:Placing of advert takes around two weeks depending on the efficiency of the executor.
Preparing the L&D account
Purpose:To finalise the accounts of the deceaseds estate.
What this step entails:Once the advert has stood for 30 days and all claims have been lodged with the Master, the next job of the executor is to prepare a liquidation and distribution account which reflects all assets and liabilities of the estate and determines its solvency and liquidity. Estate solvency means that the value of all the estates assets is greater than the total combined liabilities in the estate. If found to be insolvent, the Master may direct that the estate be wound up in terms of the Insolvency Act. In determining the estates liquidity, the executor must determine whether there is sufficient cash (or assets that can easily be converted to cash) to cover the liabilities and costs of the estate. If the deceaseds estate has liquidity shortfalls, the executor may need to realise certain assets so that the estate can meet its obligations, keeping in mind that this could result in administrative delays. Once the L&D account has been drafted, the executor must lodge it together with all supporting documentation and the deceaseds will where it is required to lie open for queries for a period of 15 days. Any queries on the L&D account must be handled by the executor and, when satisfied, the Master will sign off the books.
Timeframe:Depending on the complexity of the estate, the L&D account can take several months to finalise.
Reporting tax liabilities to Sars
Purpose:To report the deceased estate to Sars and calculate tax liabilities.
What this step entails:An important function of the executor is to report the deceaseds death to Sars and to calculate the tax liability of the estate, bearing in mind that Sars is paid first. The executor is required to prepare a pre-date of death tax assessment which includes all income and deductions applicable up to the date of death, as well as a post-date of death assessment which includes all dividends, interest and rental income that accrued during the winding-up process up until the Master formally approves the L&D account.
Timeframe:Performed as part of the L&D account preparation process.
Advertising the L&D Account: Section 35 advertisement
Purpose:To provide creditors with the opportunity to lodge any objections to the L&D account.
What this step entails:Once the Master has signed off the L&D account, the executor must advertise the account in the local newspaper and Government Gazette using a Section 35 advertisement. The account will then lie open for a period of 21 days to allow for any objections (supported by reasons) to the signed-off L&D account to be lodged. If no objections are lodged, the court will issue a certificate of no objection. This certificate must then be lodged at the Masters Office in order to grant the executor the authority to distribute the assets.
Timeframe:Advertising of the L&D account can take one to two months to complete.
Distributing assets among the heirs
Purpose:To ensure that all debt and taxes are paid and that all heirs receive their inheritance.
What this step entails:Once all debt and estate costs have been paid, the executor is required to distribute the estates assets in accordance with the L&D account. This process would include transferring fixed property into the names of the appropriate heirs and paying out proceeds in accordance with the will. Once all heirs have confirmed receipt of their respective inheritances by signing an acquittance, the executor must send all acquittances and final bank statements to the Master as proof that the estate has been distributed. Once they are satisfied, the Master will issue a filing slip and formally close the estate. The executor is required to retain all records pertaining to the estate for the prescribed period.
Timeframe:This process can take several weeks to conclude although, upon receipt of all acquittances, the Masters Office generally takes around two weeks to formally close the estate.
Author: Craig Torr – Crue Invest (Pty) Ltd.