The law affects everything in our lives ….. and it does so in death as well.
Once a person dies, something must happen to the deceased’s assets (house, furniture, monies, investments, debt). To ensure that the interests of all deceased persons are protected, the Master of the High Court (hereafter “the Master”) by law is the overseer of the interests of deceased persons.
Hence, there are certain steps to follow with all deaths.
The first step is that the death must be reported to the Master – no matter whether the person was rich or poor. There are prescribed forms in this regard that must be completed.
The best way to make sure that your assets are dealt with in the manner that you want them dealt with is to make a will. If you do not leave a will, your assets will be dealt with in terms of the law of intestate succession and persons may inherit your assets that you did not want to inherit from you.
In your will, you will appoint an Executor. The Executor is the person who will take care of all the administrative duties that are required when dealing with your estate after your death.
As mentioned, the first step after your death and before anybody can deal with your assets is that the Executor must report the death to the Master. It must be reported within 14 days after the date of death. Once the matter has been reported, the Master will appoint an Executor.
It is very important that you make provision for your loved ones to have cash available upon your death because normally your bank accounts are “frozen” by the bank when you die. The bank can receive monies into your account but cannot pay monies out. Once the Executor has been appointed, he/she must open a new bank account in the name of “Estate Late Mr X”. This is because once we die, that which we leave behind is called our “estate”. Once the new bank account is opened, the Executor will close all your bank accounts and have the monies transferred to the new “Estate Late Mr X” bank account. These monies will stay there until the Master has approved the paying out of monies.
For the very immediate and until the Executor has been appointed and a new bank account opened, there may be cash flow problems for your family if you have not made other provisions for it. (Registered a Trust for example, or taken out a policy that pays out cash to your family upon death). Depending, it can take up to three months before the Master appoints an Executor so this can cause a serious problem for your family.
There are certain circumstances where the Executor can pay out monies to the immediate family for their maintenance, but it is best to make provision for this possible problem.
This is an account drafted by the Executor. This account shows exactly what the Executor has done with the assets of the deceased person. There is more than one Liquidation and Distribution Account. These accounts must be approved by the Master before the Executor can payout monies (except for maintenance as set out in the previous paragraph). This again is just a check-in place to make sure that the assets of the deceased are dealt with in a legal and correct manner and according to his/her wishes if there were a will.
The First Liquidation and Distribution Account must be delivered by the Executor within 6 months after the Letter of Executorship was issued by the Master.
If the Master accepts the Account, he will give the Executor permission to advertise a notice (in the Government Gazette and one or more newspapers that circulate in the area where the deceased ordinarily resided) that the Account will be available to the public in the office of the Master for no less than 21 days. Anybody can then go and look at the Account and if they have an objection, they can lodge such objection with the Master. An example here would be if you are the son of the deceased and the will says that you must inherit Rx. You notice in the Liquidation and Distribution Account that the Executor shows that the money to be paid to you the son will be substantially less than what you are supposed to inherit in terms of the will. You can then lodge an objection about it to the Master, who will then investigate the matter.
This is to ensure that the Executor deals with the assets of the deceased in a prudent manner.
As soon as the Executor is appointed by the Master, the Executor must place a notice in the Government Gazette and also in one or two newspapers which are circulated in the district where the deceased ordinarily resided. In this notice, all persons that the deceased owed money to are required to institute a claim against the deceased estate within 30 days. These notices are placed to just make sure that everybody that has an interest in your estate takes notice that you have died and that they must take appropriate action.
Estate duty is paid at a rate of 20% on the taxable amount of the estate. The taxable amount of an estate is determined by adding up the value of all the assets of the deceased. Then one deducts R3.5 million from it.
Let’s use the very simplest example to illustrate the point:
Your estate is worth R2 million.
Deduct R3.5 million.
There is no taxable amount, so your estate will not pay estate duty.
Your estate is worth R5 million.
Deduct R3.5 million.
Balance is R1.5 million – this is the taxable amount.
Your estate pays 20% of the taxable amount = R1.5million x 20% = R300 000 is the amount of estate duty that your estate will be liable to pay.
There are ways to lessen estate duty – but this topic does not fall within the ambit of this article, so rather contact us for a discussion on how to save on estate duty. It takes careful estate planning and you should consult a professional before you draft your will.
Under certain circumstances, your estate may be liable for capital gains tax as well. You need to discuss this with us.
If you had a will, your will shall determine what must happen to the house. If you did not leave a will, the Intestate Succession Act will determine what will happen to your house.
*See a separate article on Intestate Succession.
In your will, you can leave the house to your spouse, or you can determine that it must be sold. Hopefully, if there is a bond, you have a policy in place that will settle the outstanding balance so that your spouse is left without the burden of a bond or that the house is not repossessed by the bank because of non-payment.
Depending on how you are married and whether the property is registered in just your name or both you and your spouses’ name, will determine how you can deal with the property.
If the Executor that you appoint is a lay person, chances are that he/she will not know what to do after your death and will most likely appoint a professional person to assist him/her. It is, therefore, best to appoint a professional person from the start to avoid unnecessarily burdening a family member.
There is a certain order to follow in the reporting of the death and dealing with the assets and we advise that you consult with us for assistance.