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Expenses Associated with Managing a Deceased Estate

In cases where an individual passes away with an estate value surpassing R250 000, the proper administration of their estate is mandated by the Administration of Estates Act 1965. These regulations are applicable regardless of whether the person died with a valid will (testate) or without one (intestate).

A crucial responsibility of the appointed executor is to diligently account for the debts and obligations within the deceased individual's estate. It is important to note that the heirs and beneficiaries can only receive their respective inheritances once all the estate's liabilities have been settled.

In this article, we will delve into the different expenses associated with the administration of a deceased estate.

deceased estate administration

Deceased Estate Administration Costs South Africa

Taxation

One of the primary responsibilities of the executor is to ensure the fulfillment of tax obligations to the South African Revenue Service (SARS). It is important to note that the executor will need to perform two tax assessments: the pre-date of death assessment and the post-date of death assessment. The pre-date of death assessment encompasses the deceased individual's income and applicable deductions up until the date of their passing. On the other hand, the post-date of death assessment includes dividends, interest, and rental income earned during the administration period until the Master formally approves the liquidation and distribution account.

When formulating an estate plan, it is crucial to consider any potential liabilities concerning estate duty and capital gains tax. Estate duty is a tax imposed on the dutiable estate of the deceased and is levied at a rate of 20% on the first R30 million and 25% on any amount exceeding R30 million. However, it's worth noting that the first R3.5 million of your estate's value is not subject to estate duty. In cases where the deceased was married at the time of death, the R3.5 million abatement can be transferred to the surviving spouse, granting them a R7 million estate duty abatement upon their own passing.

Maintenance Obligations and Accrual Claims

When calculating estate liquidity, it is crucial not to overlook maintenance obligations and accrual claims, as these factors can significantly impact the administration of an estate. Understanding the implications of these claims is essential.

If you are married under the accrual system, which allows each spouse to maintain separate estates during the marriage, the accrual regulates the growth of each spouse's estate from the date of marriage. Upon the death of the first spouse, the accrual is calculated. If the value of the deceased spouse's estate exceeds that of the surviving spouse, the surviving spouse is entitled to a claim against the deceased's estate for their share of the accrual. It is important to note that this claim holds priority.

Furthermore, in the case of maintenance obligations arising from a divorce order, these obligations do not cease upon the death of the obligated party. The executor has the responsibility to ensure that these obligations are honored, typically through a lump sum payment. Failure to address these obligations adequately may require the executor to liquidate assets intended for other beneficiaries, potentially resulting in severe financial consequences.

Settlement of Outstanding Debt

After fulfilling the tax obligations, addressing accrual and maintenance claims, the executor's next responsibility is to ensure the settlement of any remaining debts owed by the estate. This process involves publishing a Section 29 advertisement in the local newspaper and the Government Gazette. These advertisements serve as notices to creditors, informing them of the deceased's estate and inviting them to come forward and submit their claims. It is only after all the creditors have been paid that the Master grants permission to the executor for the distribution of inheritances and bequests to the heirs and beneficiaries.

It is important to note that if the deceased did not make adequate provisions within their estate to settle their debts, the executor may need to liquidate assets in order to fulfill the financial obligations of the estate.

Executor's Fees

According to the current regulations, the maximum allowable fee that an executor can charge is 3.5% of the gross value of the assets in the estate, with an additional 15% VAT. Furthermore, an executor is entitled to charge 6% on all income generated on behalf of the deceased estate from the date of death until the final settlement. This includes various types of income such as rental earnings, interest, dividends, trading profits, or farming income.

It is worth noting that when appointing an executor in your will, there is an opportunity to negotiate a discounted executor's fee, which can be specified and recorded accordingly.

Please keep in mind that these fee structures are subject to current regulations and may be subject to change.

Other Administrative Costs

Funeral and Burial Costs

The expenses associated with the funeral and burial are typically covered by the deceased estate. However, it is advisable to ensure that your loved ones have access to funds or a funeral policy that can cover these costs. They can then claim the expenses from the estate. It's important to consider that funeral costs can range from approximately R10,000 to R50,000, depending on various factors.

Master's Fees

According to the current regulations, estates valued between R250,000 and R400,000 are subject to Master's fees, which are levied at a rate of 600. The fees follow a sliding scale for estates exceeding this value, with a maximum fee of R7,000.

Estate Late Bank Account

One of the initial tasks of the executor is to open an estate late bank account, typically incurring a charge of around R600 from most banks.

Transfer Costs

In cases where immovable property from the estate is transferred to an heir, whether through testate or intestate succession, the estate is responsible for paying the transfer costs. These costs consist of the attorney's conveyancing fees and are determined based on a sliding scale that is periodically adjusted. It is important to note that beneficiaries and heirs are exempt from paying transfer duty on property inherited through testate or intestate succession from a deceased estate.

Bond Cancellation Costs

In the event that the executor needs to cancel a bond on a property, the estate is responsible for the associated bond cancellation costs. These costs typically range from around R4,000 to R5,000, depending on the terms set by the lender.

Professional Fees

During the administration of your estate, the executor may require the assistance of professionals to facilitate the process. These professional fees will be covered by the estate. For instance, if you are married under the accrual system, the executor may engage the services of an accountant to calculate the accrual. Additionally, if the sale of any immovable property is necessary, the estate may need to pay the estate agent's commission.

Advertising Costs

Publication of the required Section 29 and Section 35 adverts, as mandated by the Act, typically costs around R1,500, subject to publication rates.

Maintenance of Assets

Any expenses incurred for the maintenance of assets within the estate, such as garden services, plumbing, electrical repairs, or cleaning costs, will be covered by the estate.

Valuation and Appraisal Costs

If the Master insists on having an asset within the estate valued by a sworn appraiser, the estate will bear the costs associated with the valuation, including the appraiser's traveling expenses.

Duplicated Rates Clearance Costs

In cases where your estate owns immovable property, it will be required to settle rates and taxes to the municipality in advance, covering a period of up to six months.

Van Deventer & Van Deventer Incorporated – Deceased Estate Attorneys

At Van Deventer & Van Deventer Incorporated, we specialize in providing comprehensive deceased estate administration services tailored to meet your specific needs. Our team of experienced professionals is equipped with the knowledge and expertise to handle every aspect of the estate administration process, from tax obligations and creditor claims to asset management and distribution.

With our meticulous attention to detail and commitment to ensuring a smooth and efficient administration, we strive to alleviate the burden on your loved ones during this challenging time. Trust us to navigate the legal intricacies and safeguard your estate's interests.

Contact us today to learn more about our personalized deceased estate administration services and let us assist you in managing your estate affairs with care and professionalism.

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