PROPERTY IN DECEASED ESTATES & THE BASICS OF ESTATE DUTY

Harcourts

Dennis Scott

 

As Estate Agents we often receive requests from clients to assist with the valuation and sale of property in deceased estate.

It is important to note that any valuations or suggestions by estate agents of selling prices can have far reaching effects on the estate duty payable. Usually property is a major portion of an estates value and valuations should be realistic and market related.

Under or over valuations will result in delays in winding up the estate and could be avoided if at the earliest possible opportunity reputable Real Estate agencies are consulted.

 

It is often presumed that a last will and testament exists, however if this is not the case then any beneficiaries of the estate will be faced with interminable delays occasioned by having to wind up the estate through the Master of the High Court without a will.

 

To ensure that there is a smooth process of dealing with the major assets of the deceased an executor should be appointed in the last will and testament.

The Executor

During a person’s lifetime they will accumulate assets, in other words, belongings such as a house or a motor vehicle. These assets and their liabilities will form part of a person’s estate. At the death of that person, their deceased estate must be administered, in other words, divided, distributed and controlled by someone. This person is called an executor.

However, the role of an estate executor and who can be appointed as one has been largely misunderstood.

What does the executor do?

 

“Executor” is the legal term for referring to the person, or people, nominated in your will to carry out the directives you set out in your will.

This means that it is the executor’s responsibility to disburse your property to the mentioned beneficiaries in your will, but also obtain information on potential heirs, collecting and arranging payments, and approving or rejecting creditors’ claims.

It is the executor’s duty to calculate and pay the estate tax, and to ensure that the correct documentation is filed with the relevant authorities.

The executor is the individual that represents your estate.

Who can be appointed as the executor?

 

It has become normal to appoint a friend, family member or beneficiary to act as the executor, as they most likely have intimate knowledge of your estate and your affairs, but also, they will not rack up the fees that a legal body might accrue.

However, there is a misconception that you can avoid the fees by appointing a family member as the estate executor, but this could also mean that you are deferring the cost to the nominated family member.

Family members appointed as executors on larger estates immediately find themselves out of their depth, and not only end up hiring a professional executor, but may also pay more for these services than necessary.

A simple way to address this is by appointing a “professional” executor during your lifetime. This allows you to negotiate the executor fees.

If you appoint a family member, make sure that they understand that they will have to appoint a professional agent, and that they should negotiate the fee and be very cautious of agreeing to a fee arrangement in terms of which the professional agent charges their professional fee, instead of the legislated tariff of fees

ESTATE DUTY

When a person dies, they leave behind an estate which includes everything they own. Estate Duty is payable on the estate of every person who dies and whose nett estate is in excess of R3,5 million. Duty is charged at the rate of 25% if the estate exceeds R30 million. Currently, SARS is responsible for collecting the Estate Duty of a deceased person.

How does an estate get reported to SARS?

 

Even if Estate Duty does not apply to you, it is still necessary to inform SARS that the person is deceased. It is recommended that you consult with a legal expert when going through this  process.

Copies of the following documents must be sent to SARS:

Death certificate or death notice.

Identity document of the deceased.

Letters of Executorship (J238) (if applicable).

Letter of Authority (J170) (in cases where the estate is less than R250 000).

Certified copy of the executor’s identity document.

Power of attorney (if applicable).

The name, address and contact details of the executor or agent.

The last Will and Testament of the deceased.

An inventory of the deceased’s assets.

The liquidation and distribution accounts (if available).

 

These documents may be sent to the relevant Centralised Processing Centres which are closest to the Master of the High Court where the estate is being administered. 

 

How does Estate Duty work in relation to an inheritance?

 

All income received or accrued before the deceased’s death is taxable in the hands of the deceased up until the date of death, and will be administered by the executor or administrator acting as the deceased’s representative taxpayer.

After the date of death of a person, a new taxable entity comes into existence –

“the estate”.

The assets of the deceased will be held by the estate until the liquidation and distribution account has lain for inspection and become final under section 35(12) of the Administration of Estates Act after which the assets will be either handed over to the heirs or delivered to the trustee of a trust estate.

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.

 

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