Death’s duty – The role of the Executor
When a person dies, the property of the deceased does not immediately accrue to the deceased’s heirs, but passes instead to a person who is tasked with administering the deceased estate until it is passed to the heirs. The person appointed to perform the task of such administration is termed the “executor” of the estate. This article examines the executor’s duties and explains how the estate is wound up.
Until an executor has formally been appointed, the deceased estate is “frozen” i.e. the assets of the estate, including banking accounts, may not be dealt with. In the absence of proper planning, this period of time is often extremely stressful for the surviving family. It can take months before an executor is appointed, particularly where a Will cannot be found. A power of attorney granted by the deceased prior to his or her death does not assist in the interim: a power of attorney ceases to have legal effect immediately upon the death of the person giving the power.
Appointment
The first questions that arise are who is the executor and how is he or she appointed? The executor is appointed and granted authority (called letters of executorship) to act in this capacity by the Master of the High Court. The Master is a government official whose duties include the overseeing of the winding up of de-
Security measures
Before confirming his appointment, the Master may request security from the executor, to protect the estate against any negligence or dishonesty on the part of the executor. The Master will usually not request security in cases where a surviving spouse, child or parent is appointed or where the requirement of security is dispensed with in the will. If a security bond is required, the executor will need to apply for this from an insurance company before their appointment, for which a fee will be charged, usually as a percentage of the value of the assets in the estate.
Where the value of the assets in an estate is less than R250,000, the Master may decline to appoint a formal executor and instead direct an interested party such as a family member to wind up the estate informally. This person need not comply with the usual formalities, but simply collects the assets of the deceased and pays the creditors and the heirs. In cases where a formal executor is appointed, the executor must wind up the de-ceased estate in accordance with the provisions of the Administration of Estates Act.
The process
Upon the executor’s appointment, his or her duties entail taking possession and control of the assets falling into the estate and the publishing of notices calling on creditors to lodge their claims with the executor. As soon as the initial formalities have been complied with, the executor will have the assets in the estate valued, and will draw the formal accounts of the deceased estate, setting out the assets and liabilities of the estate, and the manner in which the balance of the estate is to be distributed to the heirs. After the Master has inspected the account and it has been published and made available for inspection by interested parties, the executor is able to make payment to creditors and heirs. Once the estate has been finalised and the necessary formalities complied with, the executor will apply to the Master for his discharge.
The entire estate process can often take a year or longer. For this reason, it is critical that one’s financial planning provides for the direct availability of cash for surviving family during this time. Life assurance plays a vital role, as a life policy can be made payable directly to the heirs by way of a “beneficiary nomination”. This ensures that the proceeds bypass the estate and are available to the heirs to see them through until their inheritances are paid.
The nomination of family members as direct beneficiaries on policies has multiple benefits. Not only would these proceeds avoid the 3.5% executor’s fee, but would also provide the beneficiaries, a surviving spouse and children for instance, with a source of income while the estate is being wound up. If the estate was nominated as beneficiary to these life policies, the proceeds would be paid directly to the executor, to be held until the estate is finalised. As this could take a number of months or, in extreme cases, years, the family would have to approach the executor “cap in hand” for an interim advance – and there is no guarantee this would be given.
In certain cases, however, it is appropriate that the estate in fact be nominated as the beneficiary of life policies. This would be the case where the estate requires liquidity to provide working capital for a family business, or to pay cash legacies, creditors, estate duty and the executor’s fee itself. Life insurance is clearly an extremely useful tool with which to provide funds for the executor of a deceased estate to pay not only estate duty and debts, but also to pay the executor his own fee.
Planning for the inevitable
An executor plays a key role following one’s death, especially as they will need to deal with the surviving family. The nomination of an executor is a crucial consideration and one is advised to give the matter careful thought when executing a Will.