Welcome to our exclusive series of personal – and business – wealth management insights from Ajay Wasserman, Founder and CEO of the Fio Group. He is an expert business and wealth consultant to business owners and entrepreneurs to create long-term sustainable wealth.
In this article, I would like to speak to you about the role an executor plays in the resolution of your estate.
What is an executor?
An executor is an individual or institution that resolves your estate after you have passed away. You can nominate anybody to be executor; it’s typically somebody close to you, a financial or legal professional. It’s important to note that whomever you choose has a right to charge a fee to resolve your estate. The South African Tax Act states that the executor fee can be up to 3.5% of your estate value exclusive of VAT. This equates to approximately 3.99% of your estate’s asset value.
Duties of an executor
Here is a list of the duties an executor is obligated to undertake.
- The nominated executor needs to meet with the deceased’s family to acquire all the appropriate information and documentation required, e.g. the valid death certificate and a list of the deceased’s assets and liabilities
- The deceased estate has to be reported to the Master of the High Court in the area in which the deceased resided.
- The executor must notify all creditors (persons or entities to whom the deceased owed money) to inform them of the death. The notice will also ask creditors to submit their claims against the deceased estate within a period of not less than 30 days or more than three months after the notice is published in the Government Gazette and a local newspaper.
- All existing bank accounts of the deceased must be closed. A completely separate bank account must be opened in which all money that forms part of the deceased estate will be kept.
The executor needs to determine whether the deceased estate has enough assets to pay for the accumulated liabilities. The executor needs to consider selling some of the assets that form part of the deceased estate should there not be enough money to pay some – or all – of the liabilities.
- The executor is responsible for drafting accounts that must be advertised for the public to inspect. These accounts need to then be lodged at the offices of the Master of the High Court. The accounts will outline the assets and liabilities and how the deceased estate will be divided and distributed between nominated beneficiaries.
- The executor needs to pay the creditors and distribute the deceased estate after the Master has approved the accounts of the High Court.
Should I nominate a family member, legal or financial professional?
If you nominate a family member as an executor who isn’t a legal or financial professional, it’s unlikely that they will know how to perform the task. He/she will also be emotional due to your passing. Therefore, it makes sense to nominate a third party who can oversee the estate resolution objectively.
Remember, they will charge an executor fee of 3.5%. For example, if you have an estate valued at R1 million, you will easily have to pay up to R40,000. This is not even taking into consideration property transfer fees, estate duty liabilities or any other things that you might have to pay into the estate.
So, make sure you understand and agree to this expense before you sign your Will. Your lawyer or financial institution that draws up your Will can recommend a fixed executor fee if you prefer?
Fees and other costs that may need to be paid into an estate
There are numerous fees that need to be paid to resolve an estate. Here is a list of some lesser-known expenses which vary depending on the size of the estate. Below is a table taken from an article published by Business Tech called The hidden costs when you die in South Africa of approximate fees for an estate valued at R1 million.
So, it’s easy to see how the expenses can pile up, especially if your estate is valued at significantly more than R1 million.
- An executor can be an individual or institution that resolves your estate after you have passed away.
- The South African Tax Act states that the executor fee can be up to 3.5% of your estate value exclusive of VAT.
- You have the choice to nominate anybody to be the executor of your estate; it’s typically somebody close to you, a financial or legal professional.
- Make sure that you understand all the expenses associated with estate resolution because it can become expensive.
- Creditors have 30 days or no more than three months to submit their claim(s) against the deceased estate.
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