Administration of estates (Part 3): Financial Responsibilities

In the preceding blogs in our series, we broke the complex process of administration of a deceased estate into, as they say, bite-sized portions.  We now, look at the final section of the process which includes the financial responsibilities of the administrator.

  1. Opening an estate account.

The administrator must open an estate cheque/current account in the name of the estate with any bank in the Republic, as soon as the estate moneys in hand exceed R1000 .00. Any moneys in hand at such a time as well as any moneys received for the estate in the future must be deposited into the account.

  1. Determining solvency

The administrator, while preparing the Liquidation and Distribution account, will have enough information to determine whether the estate is solvent, if so, they may continue to the next steps. In the event that the estate is insolvent, section 34 of the AEA must be consulted.

  1. Collection of cash and payment of debts

The administrator will need to collect cash from all debtors and liquidate moveable and immovable assets as and if necessary, in order to pay creditors’ claims, if any.

  1. Methods of liquidation

There are five methods of liquidation:

  • Award of assets in specie
  • Partial disposal
  • Total disposal
  • Redistribution agreement
  • Section 38 takeover
  1. Preparation and submission of Liquidation and Distribution account (L&D)

Regulation 5(1) of the Administration of Estates Act precisely describes all that needs to be present in a Liquidation and Distribution account, from the heading to the certificate.

After the L&D has been completed, it must be submitted to the Master’s office for approval. Though it is important to describe in full detail in the first L&D whether estate duty is payable, whether any of the beneficiaries are minors and whether a section 38 takeover will be applied for.

  1. Submission of estate duty return form

The Master will sometimes request that the SARS REV267 form be completed and SARS certified. Open both the REV267 and L&D together, use the L&D to fill in the REV267, submit to the Master. Though the Master does not always request that the REV267 be SARS certified, it does happen.

  1. Notice in the Government Gazette and a newspaper that the L&D is lying open for inspection

Section 35(5) of the AEA regulates these notices. When the L&D has been approved by the Master, notices similar to the section 29 notices mentioned before must be placed in the Government Gazette and a local newspaper. Section 35(6) does also require that a copy of the L&D be lodged at the Magistrate’s Court where the deceased regularly resided at for inspection. The Master does sometimes request for a magistrate’s certificate stating that such has happened. These notices must lay for inspection for a minimum of 21 days.

  1. Payments and transfers

After the L&D has lain open for the prescribed time and no interested parties have lodged any objections, the executor must, within two months, pay any outstanding debts and liabilities, pay any pre-legacies, make transfers to legatees and make transfers to heirs, in that order, as applicable.

  1. Compliance with final requirements

The Master may in the form of a query sheet require some proof or documentation after the L&D has lain for inspection, this may include the following:

  • Proof that the Master’s fees have been paid
  • Proof that creditors and beneficiaries have been paid as described in the L&D
  • Proof that immovable property has been transferred
  • Submission of bank statements and paid cheques
  1. Finalisation of the estate

After the final requirements have been complied with, the executor must request the Master to provide them with a filing notice and discharge. The filing notice denotes that the Master is satisfied with the finalisation of the estate and the executor will be relieved from their position as such after the Master has discharged them.

In conclusion, the estate administration process ensures that the deceased’s financial obligations are met, beneficiaries receive their inheritance, and the estate is legally settled. Although it may be complex and time-consuming, especially if disputes arise, following the proper steps minimises potential legal issues. As this process can be complicated and overwhelming for someone who is not experienced or who does not understand the application of the law, we recommend that you focus on your family and the healing after the loss of your loved one. Let Burden Swart & Botha Inc. Attorneys take care of the complexities on your behalf, fairly, honestly, and efficiently.