We recently had the privilege of listening to a powerful presentation by human potential expert, speaker and author Nikki Bush on ‘Dancing with Disruption’ in which she talks about winding up her husband’s estate after he was murdered in an armed home invasion and the impact that this shocking event had on her life. She refers to this type of circumstance as a ‘What If’ event that transposes you into a space which is entirely foreign and, as she says, ‘disruptive’.
During her talk, it became very apparent how overwhelming the experience of a loved one dying is and how important it is to have the right support in place to cope with the process that unfolds after the death of a person one is so intricately involved with. At that moment and for many months, the focus of the bereaved is on the loss, the emotion and the grief – it is destabilising and distracting. Whether it is expected or a sudden, tragic event, as with Nikki, one’s resources are taken up in coping with all that that entails. There is little space left for paying attention to the complicated process that unfolds with winding up the estate of the deceased.
After the first couple of weeks with the burial ritual for the deceased over, life carries on, and no matter the emotions, the lengthy estate winding up process starts, and as Nikki rightly points out – SO IT BEGINS ……….
BEFORE ‘WHAT IF’
Before moving on to what happens after death, it is important to note that being prepared and organised BEFORE this ‘What If’ event makes the administration less onerous. To have a ‘Life File’ which includes all your important documents such as your will, insurance policies, property deeds, bank account information, and any other relevant financial or legal documents is really a pre-requisite. It makes the task of winding up the deceased’s affairs much more manageable and less stressful for the bereaved. Having dealt with many deceased estates, we cannot stress enough how much this does assist with the process.
AFTER ‘WHAT IF’
What does winding up an estate mean?
The estate winding-up process refers to the legal procedure followed to settle the affairs of a deceased person. This process ensures that all debts are paid, assets are distributed to the rightful heirs, and compliance with relevant legal requirements is maintained. The process is governed primarily by the Administration of Estates Act, No. 66 of 1965, and is overseen by the Master of the High Court.
Here are a few guidelines to work with to assist in coping with these types of events and better understand the estate process after death as it unfolds.
NOTHING can happen without the death certificate and the original will of the deceased (if there is no original will, that is a topic for another day!).
Reporting the estate
The estate must be reported to the Master of the High Court within 14 days of the date of death. This is done by the executor/administrator or a close relative of the deceased.
Appointment of the executor
If a valid will exists, it usually names an executor. If no will is present, the Master appoints an executor in accordance with the law. The executor is responsible for managing the estate’s affairs.
The Master of the High Court issues a Letter of Executorship for estates exceeding R250,000 in value or a Letter of Authority for smaller estates. Once the letter of executorship is issued, the estate is no longer frozen, and the process begins.
Appointment of administrator
Estates are cumbersome to administer and require expertise on the legalities of the process. Therefore, the executor (often a family member) appoints an administrator who is an expert and grants them power of attorney to do the winding up. When mentioning executor below, this would be substituted with administrator if one has been appointed.
Notification to creditors
The executor must publish a notice in the Government Gazette and a local newspaper, calling on creditors to submit claims against the estate within 30 days. This helps in identifying outstanding liabilities that must be settled before distributing assets.
Gathering and valuation of assets
The executor must identify, collect, and secure all assets of the deceased. This can include bank accounts, property and real estate, vehicles, investments and shares, personal belongings and business interests.
During this period, a vast amount of administration takes place on transferring debit orders, organising change of ownership of vehicles, opening an estate bank account, considering short-term insurance requirements, property transfers or sales, i.e. anything and everything the deceased was involved in has to be dealt with.
Settling debts and taxes
Before any distributions to beneficiaries, the executor must ensure that all debts and taxes are settled.
This includes settling funeral expenses, paying off outstanding liabilities such as personal loans and mortgages, ensuring all income tax and estate duty obligations are fulfilled, submitting a final tax return to the South African Revenue Service (SARS) and paying capital gains tax, if applicable.
Estate duty is payable on estates valued over R3.5mn at a rate of 20% on the excess up to R30mn and 25% for any amount exceeding R30mn.
Drafting the Liquidation and Distribution Account
The executor must prepare a Liquidation and Distribution (L&D) Account, which outlines the following:
- A breakdown of all assets and their values.
- All debts settled.
- The balance available for distribution to heirs.
- How the assets will be allocated.
This account is submitted to the Master of the High Court for approval. If accepted, a notice is published, allowing for a 21-day period where interested parties can inspect and raise objections.
Distribution of the estate
Once the L&D Account is approved and no objections are raised, the executor proceeds with the distribution of the estate according to the will. If no will exists, assets are distributed according to intestate succession laws.
Final closure of the estate
Once all assets have been distributed, the executor submits proof to the Master’s office that the estate is fully wound up. The Master then issues a discharge certificate, formally closing the estate.
TIMELINE
This varies from estate to estate, but in SA, it can take anything from 2-5 years (OR less in some cases and MORE in others), but rather be prepared for the long haul!
The estate administration process can be delayed due to missing or incomplete documents, disputes among heirs or creditors, difficulty locating assets or beneficiaries, SARS clearance delays and delays at the Master’s office.
CHALLENGES FOR THOSE LEFT BEHIND
The biggest concern, in many cases, is access to cash and having liquidity that can fund living expenses while the estate is being wound up. There are ways to mitigate this effect, such as life policies OR transferring cash to heirs before death.
Add to that the fact that there are expenses in estates to be paid, and very often, one lands up in a situation where there is not enough liquidity, i.e. cash to fund these. There are many assets which can be liquidated if necessary, and these would then be used to pay said expenses. If there is a liquidity shortfall, the heirs may be called upon to fund the shortfall.
Conclusion
The above is merely a synopsis, and there is so much more detail we can provide. It is a complicated and lengthy process, but one that has to be completed! Listening to Nikki and her experience, the more organised you are before death in organising your affairs, the easier it is for those left behind, and having professional guidance in winding up an estate is of great value. It is difficult to be the person recovering from the death of someone close to you and having to pay attention to all the administration involved in this process. Having support is vital, and if we can be of benefit in this regard, please contact us – we have over 30 years of experience being involved in the winding up of estates and are well aware of the many pitfalls which may arise.
