Will, Trust & Estate Planning

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Importance of Planning

Proper estate planning could make a world of difference to the lives of those you leave behind.

The estate administration process in a nutshell

  1. The estate administration process begins with the executor reporting the estate to the Master’s Office in the jurisdiction where the deceased lived. This includes the lodgement of numerous documents i.e. the original Last Will and Testament, a copy of the death certificate, a death notice, acceptance of trust (as executor) forms and a preliminary inventory. The preliminary inventory includes the details of all the assets the deceased held at the date of his/her death. In order to gather all of the abovementioned information and documentation, the executor will need to meet with the deceased’s family.
  2. Provided that the Master of the High Court is happy with the documents furnished, Letters of Executorship (if the gross value of the estate is above R250 000) will be issued, which authorise the executor to proceed with the administration of the estate and deal with all matters related to this. These include opening an estate banking account, gathering information on all assets and liabilities of the deceased, and dealing with the tax matters of the deceased up to the date of death and thereafter including the calculation of estate duties payable.
  3. Once the executor has gathered all the necessary information, he/she will be in a position to draft a First and Final Liquidation and Distribution Account. The account contains details of all the deceased’s assets and liabilities and reflects the distribution of the legacies and rest and residue in accordance with the Last Will and Testament. The Liquidation and Distribution Account is then lodged at the Master’s Office and the Master may issue a query sheet containing any queries or requests for additional information that the Executor is obliged to answer.
  4. Once the Master is satisfied that the queries have been adequately dealt with, the Executor will be granted permission to advertise the account as lying for inspection (at the local Magistrate’s office) in a local newspaper and Government Gazette. This is done to give any creditors the opportunity to come forward with any claims they may have against the estate.
  5. If there are no claims, the Magistrate will issue and lodge a certificate confirming this with the Master. Upon receipt of this certificate, the Master will confirm that the Executor can distribute the estate to the heirs in terms of the Last Will and Testament. Once the estate has finally been distributed, the Master will issue a filing notice confirming that the estate has been finalised.

While the above process may not seem unduly onerous on the face of it, there are many factors that can cause delays and complications. These are briefly outlined below.

Capital gains tax

Death triggers a capital gains tax event i.e. the deceased is deemed to have sold all of his/her estate on the date of death and a complex capital gains tax calculation therefore ensues. There are, however, exemptions or rollovers when a deceased leaves the entire estate to a spouse.

Liquidity

Liquidity is vital as liabilities in an estate include income tax, estate duty, executor’s fees, Master’s fees, valuation fees as well as any other liabilities the deceased may have incurred during his/her lifetime. Currently estate duty is 20% of the gross asset value of your estate up to R30 million and 25% of the gross asset value in excess of R30 million. A well-drafted estate plan by a financial adviser will alert you to any liquidity issues your executors and heirs may face after your death.

Tax return submissions

The submission of tax returns in estates has become far more complex than it was previously as the deceased’s tax practitioner has to continue submitting returns for the deceased until the Liquidation and Distribution has been finalised. An after date of death tax reference number has to be applied for and generated from SARS.

Master’s delays

Executors are facing numerous challenges with the Master’s Offices around the country and as a result, undue delays are being experienced.

Benefits of Planning?

Proper estate planning has several benefits:

  • The settlement process won’t be delayed.
  • It ensures a smooth transfer of assets to your nominated beneficiaries.

An estate planner will ensure sufficient liquidity in your estate in order to avoid:

  • Interest-bearing claims attracting further interest because they’re not sorted out fast enough
  • Unnecessary taxes such as estate duty, donations tax, capital gains tax and VAT
  • Assets to be sold in an economic climate where reasonable prices aren’t attainable
  • Forced sale of assets, e.g. farming property that may have been in the family for generations
  • Heirs left without income, while trying to avoid the forced sale of estate assets
  • Friction between heirs where assets cannot be divided equally.

A final word

In conclusion, it is highly recommended that you appoint an independent and professional executor to attend to the administration of your estate. While it is useful for the professional executor to act with a co-executor who is part of the family, the stress of estate administration for a family member who is not familiar with the process could be overwhelming. This could lead to unnecessary delays and queries. Each person’s situation is unique, and one needs to understand how all of the processes apply to individual circumstances.

In light of the aforementioned, it should be noted that an absolutely important issue, often overlooked, would be the liquidity (cash) of the estate. If this needs to be addressed, now is a good time to do so.

Contact us (Keith 083 3444 122 or office 011 268 8034) for a FREE drafting of your Last Will & Testament by a Professional Legal Trust

 

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