Almost everyone will deal with the trauma of a loved one dying, but often this trauma is compounded by complicated and expensive estate administration, liabilities and unforeseen tax burdens.
Most people do not realise the financial implications of dying, and many do not have enough cash in their estates to settle debts and pay costs, according to Louis van Vuren, CEO of the Fiduciary Institute of Southern Africa (Fisa).
Marietjie Strauss, regional manager for Gauteng at Sentinel Trust, says the first thing that must be paid for is the funeral.
"Make sure your close relatives know what you budgeted for and where to collect the money from, such as a funeral policy or savings account. You don't want your family hosting a huge funeral chomping away on their inheritance if you planned for a small, intimate service," says Strauss.
The next step is to report the estate to the master of the high court, where a specific legal process must be followed. The appointed executor must first settle liabilities, then attend to specific items that have been bequeathed to specific people or organisations. The balance of the estate is called the residue. The residue will be transferred according to your will, and if you did not leave a will, "according to the rules of intestate succession law", says Van Vuren.
He says there are two different processes — one for estates valued at less that R250,000 and one for those valued at more than this amount. There are not many formalities for estates below R250,000 and "most family members can attend to the process themselves". However, for estates exceeding R250,000 an executor must be appointed — usually the person or entity nominated in your will — to administer and wind up the estate.You can appoint a family member as your executor, but the master of the high court may demand security from the executor unless the executor is qualified to comply with all the relevant laws, says Van Vuren. Security can be obtained by way of a court bond, a type of short-term insurance, which costs extra money for the premium.The executor must account for all assets and liabilities in the estate in a document known as the liquidation and distribution account, which is lodged with the master of the high court."The liabilities include those amounts owing by the deceased at the time of death, as well as the administration costs resulting from the administration process," says Van Vuren.
Many people know that your estate can be liable for estate duty of 20% of assets not left to a spouse and which exceed the estate duty exemptions (R3.5m for a single person). But not many are aware of all the administration costs, which Van Vuren says include:..