Half of all South Africans currently cannot afford to die.
This is according to Riaan Botha, head of fiduciary sales at Absa bank which currently oversees the Absa Trust – the largest trust company in South Africa.
“We have 100 years’ expertise in the drafting of wills, administration of deceased estates and administration of trusts,” said Botha.
“Throughout the years we have had the unfortunate burden to convey the message to 50% of families and/or dependents of deceased individuals whose estates we administer that there is not sufficient liquidity in the estate of the deceased to settle all liabilities upon death without having to sell an asset.”
This figure is also consistent with reports of the Master of the High Court, he said.
When you die, it is a widely held belief that whatever you’ve stated in your will, is what gets done. Whether it’s dishing out money to the family left behind, or passing on heirlooms and assets – what you will, is done.
While a will plays a significant role in dealing with the admin after your passing – there are many other parties at the front of the queue, ready to take a slice of your estate.
Yes, a will is that important
According to Botha, one of the most important considerations after your death is whether or not you have a will.
A will is essentially a contract that you enter into with the person who will deal with all of your assets (and liabilities) when you die.
A non-existent, unsigned or incorrectly signed will causes practical problems and places surviving family members and dependents under immense stress when you are not around to help them make, often difficult, financial decisions.
“If you do not have a valid will, your estate will be distributed in accordance with the Intestate Succession Act, 81 of 1987, which will probably not reflect your wishes and/or may not necessarily be in the best interests of your beneficiaries,” said Botha.
He outlined some of the dangers of not having a valid will, which include:
- The inheritance of minor children will have to be paid into the Guardian’s Fund. If a valid will had been in place, provision could have been made for the setting up of a testamentary trust for the benefit of minor beneficiaries.
- The Master of the High Court will have to appoint an Executor, and this could delay the winding-up process.
- Certain family members, such as parents and siblings, whom you might have wished to inherit a portion of your estate will be excluded as the entire estate will pass to the surviving spouse and/or the children – or lacking them, to specific heirs as indicated in the Intestate Succession Act.
- If there are no living family members, the entire estate may be forfeited to the state after 30 years, after being advertised in the Government Gazette annually for that period of time. The law of intestate succession does not regard common law or life partners as spouses.
Who gets your money first
According to Botha, all debts need to be settled upon death. Claims will be ranked as follows:
- Secured claim – a secured claim is one in respect of which a creditor holds security, such as a mortgage bond.
- Preferent claim – where one has a right to payment “out of” the property of the estate, which is enforceable before other creditors’ rights, a creditor’s claim is preferent, for a general notarial bond who is not in possession of the debtor’s movable property.
The taxman doesn’t care if you are dead
According to Botha, capital gains tax may be payable on certain assets, and depending the value of the estate there may be estate duty taxes payable.
Who gets the house and car?
Any outstanding bonds will need to be settled or if that is not possible, a new bond will have to be registered over a property by the heir of the property, said Botha.
“In the case of outstanding vehicle finance or other loans, these will also have to be settled as a claim will be instituted by the creditor for repayment of the loan.
“If the loan cannot be repaid, the asset will be repossessed and sold in order to cover the outstanding debt or part thereof.”
Do you actually need an executor?
In terms of the Estate Administration Act, an executor need to be appointed to administer your estate if the gross value exceeds R250,000, said Botha.
The Executor has to fulfill the following duties:
- The death notice and original will needs to be handed in to the Master’s Office. A main file is then opened, together with sub-files for correspondence and documentation.
- A Liquidation and Distribution Account is opened – this is effectively an accounting function. Letters to creditors and debtors must be prepared in order to determine claims for and against the Estate. The notice to creditors must be placed in appropriate publications, such as the Government Gazette and newspapers. A separate bank account should also be opened.
- Valuations of assets must be obtained. This can be complicated if there are, for example, shareholdings in unlisted companies. Fixed property can also be difficult to value in many cases.
- An Income Tax Return must be completed.
- Sufficient cash must be collated in order to pay debts. Short-term claims from financial dependents may need to be considered – a surviving spouse may not have personal funds available, and may not be able to wait until the Estate is finalised.
- Specific legacies or bequests, and inheritances to beneficiaries will need to be processed.
- Estate Duty may also need to be calculated and paid over, depending on the value of the estate and the relationship of the beneficiaries to the deceased.
- Capital Gains Tax calculations may also need to be performed.
- Assets need to be transferred to heirs. All the assets of the deceased must be registered in the name of the new owner.
Who needs to know you died?
According to Botha, the bank of the deceased is one of the first calls to make when informing non-loved ones of a passing as all bank accounts need to be frozen.
Following this, the employer of the deceased, to ascertain if there are any pension and/or Group Life benefits.
They must then contact the nominated executor of the deceased to start the administration process.