Basic process of the administration of a deceased estate

Many people do not understand the full process of the general administration of an estate and what steps need to be taken to ensure the estate is administered and finalised in accordance with the applicable legislation and general administration requirements.

This article will set out the basic steps, with some details where required, to assist laypersons in understanding the complexity of the process as well as the estimated timeframes applicable.

The estate administration process is largely controlled by the Administration of Estates Act 66 of 1965, as amended.

1) Reporting of the Estate to the Master of the High Court

This is essentially the first step to be followed and generally involves submitting a specific set of documentation to the Master of the High Court in the jurisdictional district where the deceased resided in the 12 months prior to their death if a deceased passed away abroad and have a foreign death certificate or via the new online portal of the Master if the deceased passed away in South Africa with a South African ID.

These documents include but are not limited to, the original Will, certified copy of the death certificate, identity document of the deceased and surviving spouse (required in certain instances) and various legal forms (which may differ from Master’s office to Master’s office) as is set out in the Act, in order to allow the applicable Master of the High Court to issue the Letter of Executorship formally appointing the Executor(s) to administer the estate and proceed with the process. With the new online portal, these documents and information are all submitted but after loading it on the portal and then attaching the documentation on the same portal.

Without the Letter of Executorship there is no authority for any individual or organisation to act on behalf of the estate. It is important to be aware that a General Power of Attorney given by the deceased to another party lapses on death and cannot be utilised to transact on behalf of that person after they have died.

The issue by the Master of the High Court of the Letter of Executorship can, on average, take between 4-8 weeks or longer to obtain. In certain provinces it can take months, depending on their backlog and volume of work at the time.

2) Section 29 Advertisement to Creditors and Debtors and Opening of an Estate Late Bank Account

Upon receipt of the Letter of Executorship the Executor is essentially responsible for, and must take into custody or into his control all the property/assets related to the estate. They would also need to open a late-estate bank account which is required as soon as the Executor receives cash over and above an amount of R1000.00.

As soon as possible after his appointment the Executor must publish in the Government Gazette and in one or more newspapers within the jurisdictional district that the deceased resided within 12 months preceding his or her death, a notice calling upon all persons having claims against the deceased to lodge such claims with the Executor within the period specified in the notice. The period must normally be no less than 30 days or more than 3 months from the date of the latest publication of the notice and the advertisement needs only be published once in each newspaper and, where possible, on the same day. There is a certain format to be utilised for this advertisement which is set out in the Act.

It is also the duty of the Executor to determine the solvency of the estate and, if found to be insolvent at any point thereafter, the Executor must proceed according to the applicable regulations set out in the Act.

The Executor has an obligation to examine all claims submitted and, if in dispute, they may require the claimant to support his claim and may, with master’s consent, have the creditor examined.

3) Obtaining Estate related Information and Income Tax Information

The next step in the process and perhaps the one that takes the most time, is essentially for the Executor to obtain all estate related information they will need to comply with the next step of the Act, which is the drafting of a Liquidation and Distribution Account.

This account is due within 6 months of the date of issue of the Letter of Executorship and if the Executor cannot submit the account within the said period they must apply for extension from the applicable Master, who has a discretion in this regard. The extension needs to be set up in a specified way reflecting specific information and this process is set out in the Act.

The Executor must compile very specific information for estate purposes which information is to be utilised to draft the Liquidation and Distribution Account (this account is be drafted in a specified way – details set out in the Act). It is the accumulation of this information that can take a lot of time and can essentially delay the matter for an extensive period. Additionally, if any assets are to be reduced to cash, they would essentially also need to attend to these processes during this period.

Whilst this is generally dealt with in a different Act, it is important to mention that the Income tax in terms of SARS requirements, also need to be attended to for the relevant pre-date of death periods (ending on date of death) and post-date of death periods (if and where applicable) at this point in time. This means that the information required to attend to the relevant tax returns would also need to be obtained during the above period. The income tax related to a deceased estate can be a complex subject and it is important that an Executor is fully aware of their obligations in this regard.

It is important to be aware that, if an estate is dutiable, certain steps need to be taken prior to one-year anniversary of the deceased’s death. It is therefore essential to ensure that the anniversary date is diarised and the necessary requirements complied with in a dutiable matter. If this is not attended to correctly and timeously the result is generally interest being charged on the outstanding estate duty from the one-year anniversary of death date to the date of payment of the full estate duty as determined by SARS.

4) Liquidation and Distribution Account

As previously mentioned, the Executor is obliged to draft and submit a Liquidation and Distribution Account within 6-months of the date of issue of the Letter of Executorship. If this cannot be attended to within that time frame an extension needs to be applied for as indicated in 3 above.

The Liquidation and Distribution Account can be quite a complex document and the intricacies surrounding the content will not be discussed in this article. It is, however, important to mention that the Executor is obliged to obtain and lodge vouchers in support of the content of his account.

Upon finalisation of the said Liquidation and Distribution Account, the account and all other supporting documents procedurally required by the Master must be submitted to them (and to SARS) after which the said account and supporting documents will be examined by the examiner in charge of the estate at the relevant master’s office. This process takes on average around 4-8 weeks or longer.

It is important to mention that failure to submit this account within the time stipulated (without having requested and receiving extension thereon) would be an offence punishable by a fine and/or imprisonment not exceeding a period of 6 months. If an Executor willfully submits any false account or information, this is also regarded as an offence punishable by way of a fine and/or imprisonment not exceeding 5 years.

5) Section 35 Advertisement – Account lying open for inspection

The Master will provide the Executor with a response to his Liquidation and Distribution Account by way of a ‘query sheet’ or memorandum. In this document they set out any queries related to the account to be complied with before the next step can be taken, as well as the further requirements to be complied with after the next step in the process has been attended to.

The next step, in an estate with no estate duty, once all relevant queries applicable at that point have been complied with, would be the placement of the Section 35 Advertisement, which advertisement must be attended to in a similar way as the Section 29 Advertisement referred to earlier in this article. This advertisement deals with the Liquidation and Distribution Account that must lie open for inspection for a period of no less than 21 days at the Master’s office where the estate was registered as well as the Magistrate’s Court in the district in which the deceased was ordinarily resident, if that district is outside of the one in which the Master’s office is situate. It is the duty of the Executor to ensure a copy of the account is submitted on time to the relevant Magistrate’s Court, if applicable.

In a dutiable estate, one should generally avoid proceeding with the placement of the Section 35 advertisement until such time as SARS has finalised their audit and issued their assessment. Any potential differences or changes in the estate duty calculation (and assessment) once issued by SARS, versus the administrator or Executor’s calculation of the estate duty in the Liquidation and Distribution Account would need to be addressed and submitted to the Master’s office prior to the placement of the advertisement. If there are changes to the calculation directly affecting the Liquidation and Distribution Account, and the account has already been advertised, a further advertisement may need to be placed to ensure it is the latest Account that lay open for inspection.

During the advertising period of 21 days, any interested person may inspect the account. The purpose of this advertisement is to afford an opportunity for any person with an interest in the matter to object to the account if they consider it to be incorrect. Depending on the content of the objection, the Master may instruct the Executor to amend or update the account which amended account (which would then be known as the Amended Liquidation and Distribution Account) must then again, lie open for inspection and be advertised in the same manner as the initial account. Thus, as with the estate duty example above, any amendment to an account, after it has been advertised, will generally require a further advertisement to be placed to allow the public to view the amendments and raise any objections they may have.

6) Distribution of the Estate

Should no objections to the account be received or an objection has been lodged and withdrawn or has not been sustained and no court application has been brought, then the Executor must, as soon as possible thereafter, proceed to pay all remaining creditors and distribute the estate to the heirs in accordance with the said account. It is important to note that, where post-date of death income tax is appliable, a final tax return may be required for completion, submission, and assessment by SARS prior to the said distribution taking place to ensure that the estate’s tax obligations are met.

7) Compliance with Final Master’s requirements

The final step to be followed by the Executor once he has fully distributed the estate to the heirs would be to comply with the master’s final requirements as set out in the previously named ‘query sheet’ or memorandum and to apply for a ‘filing slip’ from the Master’s office once all requirements have been met.

8) Estate duty

The last point, which generally falls within the process described under 3 above, but which deserves special mention, is estate duty and the time periods surrounding this. Where an estate is dutiable, the details of which is not relevant for purposes of this article, the Executor has an obligation to pay the said estate duty within one year of the deceased’s date of death. SARS will charge interest on any outstanding estate duty due and payable at finalisation if this has not been complied with. Should the Executor not be able to comply within the timeframe, the course of action to follow would be to ensure that they pay a ‘reasonable’ deposit (SARS will advise if sufficient or not) of the estimated estate duty calculated at that time within the said one year anniversary of death and, in addition to that, request an interest free extension from SARS for the payment of the balance. It is then up to the SARS Commissioner to review the application and to decide whether they will grant the request and, if so, for what period. It is the Executor’s duty to ensure that he complies with the legalities related to estate duty, set out in the Estate Duty Act 45 of 1955, as amended, within the relevant time frames.
 

The above analysis is a basic breakdown of the legal administration process, which clearly reflects that it is complex and that knowledge of this process is essential to ensure that the various legalities related to the Acts applicable to the process are complied with.
 

Author:

Anica Ungerer-De Groot, Director