Tag Archives: Executor

How does inheritance work?

A2When someone dies they normally have what is called a ‘will’. The people who benefit from this ‘will’ are known as the heirs. Upon someone death, the heirs receive an ‘inheritance’. The person who administers the will of the deceased is called an ‘executor’.

What legislation affects inheritances?

South Africa’s inheritance laws apply to every person who owns property in South Africa.

The three main statutes governing inheritances in South Africa are:

  1. The Administration of Estates Act, which regulates the disposal of the deceased’s estates in South Africa;
  2. The Wills Act, which affects all testators with property in South Africa;
  3. The Intestate Succession Act, which governs the devolution of estates for all deceased persons who have property in the Republic and who die without a will.

All property located in South Africa is subject to these laws, and there are no separate laws for foreigners. Immoveable property is not treated any differently to other types of moveable assets for inheritance purposes. Inheritance issues of foreigners and South African citizens are primarily dealt with by the Master of the High Court; however, if a dispute arises, then the case can be heard in any High Court of South Africa.

Foreigners who acquire immovable property in South Africa through purchase or inheritance must register their transfer of ownership by registering a deed of transfer with the Registrar of Deeds in whose area the property is situated. The process of registering a deed of transfer is carried out by a conveyancer, or specialised lawyer, who acts upon a power of attorney granted by the owner of the property.

Tax and inheritance

In South Africa, there is no tax payable by the heirs who get an inheritance. Capital Gains Tax (CGT) is also not payable by the recipient of an inheritance. Estate Duty and CGT, where applicable, are usually payable by the estate. If it is a foreign estate, it will be subject to the taxes of its country of origin.

What about donations or gifts?

Donations and gifts are treated differently to inheritance. For individuals, donations are subject to a Donations Tax of 20%, with an annual exemption of up to R100,000 of the value of all donations made during the tax year.

  • Non-residents are not subject to Donations Tax. However, in cases where the resident donor transfers his property to a non-resident (donee), and the resident donor fails to pay the Donations Tax, the non-resident (donee) and the resident (donor) will be jointly and severally liable for the tax.
  • Donations between spouses are exempt from Donations Tax, as are donations made to certain public benefit organisations.

Reference

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

HOW IS A DECEASED’S ESTATE ADMINISTERED?

a1_bThe administering of a deceased estate is regulated by the Administration of Estates Act No 66 of 1965 (as amended) and divided according to a valid will or the Intestate Succession Act No 81 of 1987 (as amended) or a combination of both acts.

Various other acts and regulations may, however, also be applicable, like those applicable to income tax (with due allowance for VAT and CGT), Estate duty and Donations tax, and support of surviving spouse.

After a death

When someone dies, his/her estate must be reported to the Master of the High Court as soon as possible, and certain report documents, together with the original will, where applicable, should be delivered to the Master.

In the case of estates with a gross value of less than R250 000 the Master may dispense with an official appointment of an Executor to execute the required administering process. In all other cases, an Executor will be appointed by the Master, who will issue an Executor’s letter to the appointed Executor.

The Executor

As soon as the Executor’s letter has been issued the formal administering of the estate, which the Executor has to follow, will commence. One of the Executor’s first tasks would be to announce to the creditors, acquire details regarding estate assets and have it valued if necessary, and recover certain assets. Known and filed liabilities should be investigated and attention must be paid to income tax.

The Executor is now compelled to submit a liquidation and distribution account (statement of assets and liabilities) to the Master of the High Court within six months after being issued with the Executor’s letter, or ask for a formal postponement. This estate account will indicate all assets and liabilities, distribution of heirs and details of assets outside the estate which are directly payable to beneficiaries.

The Master will check the estate account and then issue a questionnaire to the Executor. As soon as the Master has granted approval the Executor may proceed to announce the account as being open for inspection for 21 days at the Master and the nearest Magistrate’s Office.

Should any written challenges be submitted, it should be dealt with according to the regulations in the Administration of Estates Act. Should there be no challenges, or when the Executor has disposed of all challenges, the Executor may proceed to make payments to heirs and carry over any other assets to the beneficiaries.

Administering obstacles

In most cases the administering process should not be complicated, therefore it would be possible to finalise within a fair period of time (approximately six to nine months). There are, however, many obstacles which may slow down this process and even bring the administering process to a virtual standstill. Some of the most well-known and general obstacles are poor service from government and private institutions, invalid and unpractical wills, shortage of cash, quarrels and disputes among family members and beneficiaries, lack of information, disorder in the tax and other affairs of the deceased, lawsuits before and after death, and legal post-mortems in case of an unnatural death, which may sometimes be required before policies can be paid out.

Conclusion

The administering of an estate is a specialised environment which should be left to capable people with knowledge of the Administration of Estates Act and years of experience. Ignorance regarding the run of events as well as errors of judgement may eventually cost you dearly if you don’t make use of the available expertise.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)