Sep 27

The ABC of Deceased Estates

Appleton Managing Director, Lauren Hean, discusses the sensitive topic of the cost of dying.

This month, I’m going to discuss a highly sensitive topic in this edition of the Appleton Times, which is the cost and expense of death. We have a fiduciary and professional responsibility to raise these important issues with you to ease the pain of this event and process. I say event and process as death is an event, but what leads up to and follows is a process and by definition, is painful for family and friends of the deceased.

One of the benefits of having Appleton as the nominated executor in your Will is the decades of experience we have in the administration of deceased estates and dealing with the

emotional trauma of death on families, heirs and friends. While we can never take away the pain, what we can and always do is to step in and ease the pain of dealing with the process. 

An important issue is to ensure that your estate is liquid. In other words that there is specific cash or near cash to pay for the numerous expenses of the estate administration

process, without having to be forced into the sale of assets (usually fixed property) to generate sufficient cash to pay for these costs. These challenges can be addressed by good estate planning with your independent financial advisor.

Before looking at the actual costs and expenses of deceased estate administration, one of the major costs to a surviving spouse is simply that of continuing to pay for the everyday expenses of life, such as rates and taxes and monthly debit orders ranging from short-term insurance, to private security, cell phones and DSTV.

Savings, cash and liquidity are required to meet all of these expenses while the estate is being administered and in this regard you may wish to consider specifically tailored products such as the Clientele Estate Preservation Plan Moving on to specifics costs. These are numerous, so I shall simply outline a few of the major ones to consider. When the value of a deceased estate exceeds R250,000 it must be administered fully and in accordance with the Administration of Estates Act of 1965. The following costs and expenses require consideration 

Funeral and burial costs: Funeral and burial/ cremation costs usually need to be covered by the family before an executor is appointed and has access to funds of the deceased. Should your family have funds immediately available to cover the costs of the funeral, they can claim the costs back from your estate. Should you have a funeral policy, please ensure that a beneficiary is nominated thereon for the funds to be accessed immediately and not only be paid once an executor is appointed and estate late account opened. Bear in mind that funerals can cost anywhere between R15 000 and R50 000 depending on scale.

Estate DutyEstate duty is tax paid on the dutiable value of an estate and is charged at a rate of 20% of the first R30 million, and at 25% on anything over R30 million – with the first R3.5 million of the value of your estate not being dutiable. Where the deceased was married at the time of death, the R3.5 million abatement can be rolled over to the surviving spouse who will then have a R7 million estate duty abatement on their death.

Property transfer costsIf immovable property in your estate is transferred to an heir, your estate will be required to pay the transfer costs, being the attorney’s conveyancing fees, in accordance with a sliding

scale determined from time to time. It is important to note that beneficiaries and heirs are exempt from paying transfer duty on property inherited from a deceased estate.

Executor’s feesAs currently prescribed, the maximum amount that an executor can charge is 3.5% of the gross value of the assets in the estate, plus VAT at 15%. In addition, an executor can charge 6% on all income and interest collected on behalf of the deceased estate from the date of death until final winding up. In the case of a marriage in community of property, the fees are charged on the joint estate.

Administration costs Other administration costs that a deceased estate may incur include the following:

Master’s fees: As currently prescribed, deceased estates will be levied Master’s fees up to a maximum of R7 000.

Estate late bank account: One of the first tasks of the executor is to open an estate late bank account for which most banks charge in the region of R600.

Bond cancellation costs: If the executor needs to cancel a bond over fixed property, the estate is liable for the bond cancellation costs which can be around R4 000 to R5 000 depending on the terms of the lender.

Professional fees: The executor of your estate may need to use professionals to assist with the winding up of your estate, and these costs will be paid by the estate. For example, if you are married with the accrual system, the executor may need to employ the services of an accountant to determine the accrual. This also includes paying the estate agent’s commission if required to sell any immovable property.

Advertising costs: The Section 29 (Advertisement to Creditors) and Section 35 (Liquidation

and Distribution Account) adverts are required to be published in terms of the Act and cost up to R1 500 depending on the particular publication rates.

Maintenance of asset: Any costs incurred in respect of maintaining an asset in the estate, such as security, cleaning costs, electrical, garden services or plumbing, will be covered by the estate.

Valuation and appraisal costs: Where the asset in the estate is valued by a sworn appraiser, these costs – together with the appraiser’s travelling costs – will be paid from the estate.

Rates clearance costs: Where your estate owns fixed property, your estate will be required to pay rates and taxes to the municipality up to six months in advance.

So, as you can see, the costs of dying can be extremely onerous and thus it is vitally important that you consider and make provision for this when conducting your estate planning with your professional wealth specialist, or financial advisor.