The importance of a will and the administration of the estate

It is important to have a Will. However starting the process to draw up a Will can be a very sensitive and daunting experience for most people. But death as we know is one of those certain things in life, and because we don’t know the time or the hour, it is always better to be prepared.

It is important to start thinking about your estate in the event of your untimely demise and the contents of your Will. 

There are many benefits to having a valid Will in place. In drawing up a Will, these are some of the aspects to consider:    

Deciding how your estate will be divided

A valid Will determines how your assets will be distributed amongst your heirs upon your death. Without a valid Will, your assets will be distributed in terms of the Intestate Succession Act of 1987, where the rules of devolution may not be in accordance with your actual last wishes. 

Deciding who will wind up your estate

An Executor will make sure that your property is distributed according to the terms of your Will. The Executor will be in a position to collect and account for your assets at date of death and settle any outstanding debts that you have incurred through your lifetime. Where no Executor is appointed, the Master of the High court will appoint someone (usually a family member). It is important to appoint an Executor that knows what they are doing, who is trustworthy and honest. The Executor ultimately plays an important role in the administration process of winding up the estate. This process will be explained in detail towards the end of this article.

Deciding on guardianship and who will take care of your minor children

A Will allows you to stipulate who you would prefer to look after your minor children should you no longer be around to do so. If there is no Will in place and a guardian is not appointed (this will necessitate a court application), the state will decide who will be in the positon to take care of your children - this may not have been your preferred choice.

Minimising of Estate Duty and Capital Gains Tax (CGT)

In the case of assets being awarded to a surviving spouse, roll over relief is available for Estate Duty (section 4A and 4q of the Estate Duty Act) and CGT. Section 4A provides that the first R3.5m of the first dying spouse’s estate is not subject to the payment of Estate Duty and in terms of section 4q, the value of any bequest to a surviving spouse is also not subject to estate duty. This will assist in minimising exposure to Estate Duty and CGT in the hands of the first dying spouse and, whatever is left in the hands of the surviving spouse, will ultimately be taxed upon their death, subject to the exemptions.

Speeding the process to avoid a lengthy process

All estates must go through the probate process, with or without a valid Will. Having a Will, however, speeds up the winding up process and informs the Master of the High Court how the individual would want their estate divided. If you die intestate, this means you die without a Will or your Will is invalid and your estate will be distributed in accordance with the Intestate Succession Act 81 of 1987. Dying intestate means that your estate will be divided amongst your surviving spouse, children, parents or siblings according to a set formula. Where there is a surviving spouse and one child, the surviving spouse will inherit the greater of a child’s share or the amount of R250 000 (this amount is fixed from time to time).

For example:

In a situation where your estate is valued at R3 000 000 (three million rand) and in the unfortunate event that you pass away and you leave behind a spouse and two children, then your estate will be divided by three (being your surviving spouse and two children), making the child’s share R1 000 000 (one million rand). As the child’s share is greater than R250 000, your spouse will inherit R1 000 000 leaving R2 000 000 (two million rand) in the estate, where each child receives R1 000 000 (one million rand) each.

Dying intestate may result in one or more unintended persons benefitting from your estate, leaving your true wishes not being realised. Furthermore, as you would have appointed your chosen Executor in your Will, when you die without a Will, it is left to the Master of the High Court to appoint an Executor to wind up your estate. This could cause additional hardship for your family as such persons would be unknown to your family and this could lead to significant delays in the administration of your deceased estate.

Guiding your family in a time of loss

A valid Will provides comfort and peace of mind to your family in the event of your unexpected demise.  In the Will, you would have named the Executor to administer your deceased estate, you would have identified your beneficiaries and their bequests under the Will, you would have provided for minor beneficiaries by establishing a trust as part of the provisions of your Will, and you would have appointed guardians and custodians of your minor children. You may have inserted additional provisions into your Will dealing with funeral arrangements and special bequests or instructions.

What are the requirements for a valid Will?

Not only is it important to be informed on the beneficial elements to having a Will, it is also important to understand the importance of having a valid Will in terms of the Wills Act 7 of 1953 (“the Act”). The formalities required for the execution of a valid Will apply to all persons and in order to avoid future disputes in the courtroom, these requirements have to be implemented in order to prevent your Will being deemed invalid. The requirements of a valid Will in terms of the Act are as follows:

• A Will is a legal document and it can only legally be drafted by a person who is 16 years or older.
• A Will must be in writing. This simply means that a Will may be handwritten or typed.
• You are required to be mentally capable of appreciating the nature and effect of making a Will.
• The Act requires two competent witnesses to sign the Will, these witnesses must be 14 years or older and they cannot be beneficiaries of the Will.
• Both you and the witnesses must initial every page of the Will and sign the last page in the presence of each other.

Approaching a professional who has experience in drawing Wills is essential, in our view.  In the event that you are placed in a position where your Will is not valid, the courts would need to be approached to adjudicate on the validity of your Will. The Act empowers the Court to declare a Will to be upheld or revoked. This means that the High Court is empowered to order the Master to accept or reject a Will.

For example:

This scenario is dealt with in the case of Macdonald v The Master. The deceased in this case left a note in his own handwriting on a bedside table and the note read as follows: “I, Malcom Scott MacDonald, ID 5609065240106, do hereby declare that my last Will and testament can be found on my PC at IBM under directory C:/windows/mystuff/mywill/personal ”. The day after his death the file was opened and its contents printed as his last Will and testament. The Master did not accept the Will because it did not comply with the formalities as set out in the Act. An application was brought to Court to condone the Will even though it was not signed by the individual, two witnesses and in each other’s presence. The Court ordered that it was the intention of the testator that this document should be his last Will and ordered the Master to accept it.

The flexibility provided by the Act does not release the deceased from the formalities in terms of the Act. Any Will must still comply with the formalities, failing which it will have to be proved that: (a) the document was drafted by the deceased (b) the deceased had died since the drafting of the document and (c) the document was intended by the deceased to be his or her last Will. In order to avoid unnecessary litigation, it would be better to comply with the formalities as set out in the Act. The courts will consider all facts before condoning a Will and in specific and unique cases, one will be forced to provide evidence as seen in the MacDonald case.

The administration of the deceased estate

This leads us to the final discussion on the administration of the deceased estate.  Winding up a deceased estate can be a complex and lengthy process that can take anything between 12 to 18 months to complete. The time required depends largely on the size and nature of the assets and liabilities. The process to and timeline for winding up a deceased estate is as follows:

• The first step will be to consult with the deceased’s family in order to obtain all the relevant documentation to register the estate at the Master’s office of the High Court (“Master’s Office”) within 14 days from the date of death, in the jurisdiction where the deceased was domiciled 12 months prior to his/her death. In the event that the deceased is a non-resident of South Africa, and the deceased held assets in the Republic of South Africa, the death can be registered at any Master’s Office. In such case, an affidavit must be signed by the Executor confirming that the death is registered at one Master’s Office.
• Once the estate has been registered, the Master will issue Letters of Executorship should the gross value of the estate be more than R250 000.  If not, Letters of Authority will be issued and the estate will be administered according to the provisions of Section 18(3) of the Administration of Deceased Estates Act 66 of 1965.
• The Letters of Executorship provides the Executor with the authority to act in respect of all matters pertaining to the winding up of the estate. For example, the Executor may (i) open an estate late bank account; (ii) notify all third parties of the passing of the deceased (iii) determine the assets and liabilities of the deceased as well as various other duties.
• The Executor would now be required to draft a Liquidation and Distribution account (“L&D”). The L&D reflects all the assets of the deceased, whether collected or awarded to the beneficiaries, as well as the liabilities and administration costs of the estate.
• Once the L&D has been finalised, the amount of the estate duty (if applicable) can be determined and paid, the income tax return can be submitted, and any exposure to Capital Gains Tax, can be paid to the South African Revenue Services.
• The L&D is required to be lodged at the Masters’ Office with all supporting documents and after a period of 15 business days, the Master’s Office will issue a query sheet, for any and all queries the Master may have pertaining to the L&D.
• The Master will determine whether the L&D is in order, and if in order, permission will be granted by the Master to advertise the L&D account in the Government Gazette and the local newspaper in the area where the deceased resided. The account will also lie open for inspection at the Magistrate’s Court for a period of 21 days.
• In the event that there are no objections, the Magistrate will issue a certificate of non-objection (“CONO”). The CONO needs to be lodged at the Masters Office in order to grant the Executor with the authority to distribute the assets of the deceased to the beneficiaries of the estate. Once all of the above has occurred, the Master will issue a final letter confirming that the estate has been finalised.

Have an experienced Executor

It is beneficial to have an Executor who knows what he is doing in order to prevent delays on the administration process and to effectively advise on the estate duty taxes and capital gains tax. The appointment of an inexperienced Executor may have the following consequences:

• The delay of winding up the estate, and the beneficiaries only receiving their inheritance after many years and or receiving way less than they were supposed to because of the lack of knowledge of the Executor.
• Possible penalties and interest on estate duty if not paid over to SARS within 12 months of date of death.
• The costs of administration will increase significantly.
• The beneficiaries will suffer, especially if the beneficiaries are minors.