When a person dies, the property of the deceased does not immediately accrue to the deceased’s heirs, but passes instead to a functionary 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.

The first questions that arise are who is the executor and how is he or she appointed?

The executor is appointed and granted au-thority (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 deceased estates. The Master will usually appoint as the executor the per-son nominated for this purpose in the deceased’s will. If there is no will or it cannot be found, then the Master will appoint a family member, such as the surviving spouse or an adult child, or suitably qualified professional person to the position of executor. In the case of a family member, the Master usually requires a professional person to assist the family member.

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.

Where the value of the assets in an estate is less than R125,000, the Master may decline to nominate 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 deceased estate in accordance with the provisions of the Administration of Estates Act.

Initially his 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, for instance, 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 process may 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.

Executor’s Fees – How it works

For undertaking his duties, the executor of a deceased estate is entitled to be remunerated from the estate. If the remuneration is not stipulated in the will, then the official tariff will apply: 3.5% of the value of the estate assets and 6% of income received by the executor. If the executor is a VAT vendor, then the executor’s fee will attract VAT at 14%, with the result that the total executor’s fee, inclusive of VAT, amounts to 3.99% of the estate assets and 6.84% of the income. It is an often over-looked fact that the maker of a Will can negotiate a reduced executor’s fee which can then be stipulated in the Will. This cannot be done after the testator dies, and in the absence of any agreed reduction, the legal tariff will normally apply.

In cases where a family member is appointed as executor, he or she must usually appoint a suitably qualified person, such as a trust com-pany or an attorney, to attend to the task on his or her behalf. The fee for the trust company or attorney should then be agreed be-tween the parties when the appointment is made. In the absence of any agreement then the appointed agent would usually be entitled to charge the tariff.

It is important to note that the executor’s fee is levied on the “gross estate”. This is the gross value of all the property and assets forming part of the estate, prior to the deduction of liabilities such as mortgage bonds on fixed property. Thus the executor’s fee in respect of a property valued at R1 000 000 would be R35 000 plus VAT, notwithstanding the fact that the property is subject to a bond of the same amount, for instance. If the deceased was married in community of property, the fee is calculated on the value of the combined joint estate (i.e. including the assets held in the survivor’s name)! The “gross estate” would include the proceeds of insurance policies of which the estate is the nominated beneficiary; the proceeds of other policies, of which the deceased’s heirs or creditors are nominated beneficiaries, and not the estate, while possibly being subject to estate duty do NOT fall into the gross estate as such and would not attract the executor’s fee.