Estates and Wills Board Exam Notes - The Best Answers

WILLS AND ESTATES BOARD EXAMS: - In terms of trusts, fiduciary accounts = look over them but don’t go into exceptional detail Introduction: - Under South African law, a person may make a will directing how his assets shall devolve after his death (Law of succession will apply [The wills Act 7 of 1953] will apply) or a person may die without leaving a will, in which (Law of intestate succession will apply [intestate Succession Act 81 of 1987]). - A person who has dies having made a will but does not dispose all of their assets, then they are said to have died partially intestate and testate. o The assets that have not been dealt with will be dealt with intestate - SA law recognises the freedom of testation subject to the provisions of the will not being immoral, vague or contrary to the constitution o Thus testator may disinherit whom he wants (including children and family members) o However this does not preclude them from calling maintenance - The wills act 7 of 1953 prescribes requirements and formalities for a valid will and applies where a will has been executed on or after 1 January 1954. o The law of succession amendment act 53 of 1992 made considerable changes to the execution of wills.  Thus if a person died before 1 October 1992– then wills act prior to amendment applies • The requirements for a will to be valid in terms of Section 2 must be adhered to strictly  If person died after 1 October 1992 – then formalities of the amendment act will apply • A will which is complete and regular on face of it (prescribed formalities have been compiled) is presumed to be valid until contrary has been proven - Where a will does not comply with the formal requirements of the Wills Act, in terms of section 2(3) of the HC, may direct the master to accept the document which has been drafted or executed by a person who is since deceased as the will of that person where the court is satisfied that the document is intended to be the will - Testator may now sign and sing includes: o Signature o Initial o Mark - Witnesses are precluded from making a mark, they actually do need to sing it - The certifying officer is now limited to a commissioner of oaths who may make his certificate at the time of execution or on condition the will was executed in his presence, as soon as possible thereafter the death of the testator o Testator must also sign on each page of the will other than the page on which his certificate appears  Certificate can accordingly appear anywhere on any page of the will - An estate account must be lodged with the Master within 6 months from date of issue of letters of executorship - Estate duty if payable must be paid 30 days from assessment and within 12 months of the death of the deceased - In order to have give effect to a bequest who is donated to a minor child o The bequest must be paid to the master for a deposit in the guardian fund o But payment may be made to the natural guardian, provided he furnishes security to the master  Unless he is exempted from furnishing security by a order of court Formalities under Section 2 of the Wills Act: a) The will must be in writing b) Will must be singed at the end thereof by the testator or somebody in his presence at his direction c) The testator or other person signing on his behalf must be done in presence of two or more competent witnesses (above the age of 14 years old). o Will must be signed by the testator at the end d) The testator or any person on his behalf must sign on every page; witnesses only need to sign on the last page. e) If signed by making a mark or by someone else in testator presence by his direction, a commissioner of oaths must certify himself to the identity of the testator and that the will so signed is the will of the testator, and the commissioner of oaths will sign on each page, excluding those page with the certificate attached f) The will must be executed (signed and witnessed) in the presence of the commissioner of oaths who shall attend to certify the will as soon as possible after the will has been signed o If the testator dies after having signed the will but before commissioner of oath has not signed, commissioner of oath will as soon as possible thereafter complete his certificate and sign each page of the will excluding the page with the certificate - Section 4 states any person of or over the age of 16 can make a will provided he is capable of appreciating the nature and effect of his act. - Section 2(3) of the wills Act provides ‘rescue provision’ o I.e. permits a high court to order the master to accept a document which has been drafted or executed, but which does not comply with the formalities for the execution or amendment of wills, on condition the high court is satisfied that the document drafter or executed by a person who since died, correctly reflects the intention of such person to be his will or amendment  Instructions to amend and/or draft as well as a document which is merely intended to convey information about what the testator wished to have included do not comply with requirements of this section - It appears that for a document to be drafted personally, it would include being drafted by hand, typed, prepared on a word processor or dictated to someone else, who, on his instructions reproduces the wording in a document on a typewriter Photocopy of a will: - In terms of section 2(3) of the wills Act, the court ordered the master to accept a photocopy of a will that the court found had been properly signed and executed Amendment: - Amendment has been redefined in definition section 1 to mean deletion, addition, alteration or interlineation. - Section 2(2) provides that any amendments is presumed, unless contrary I proved, to have been made after the will was executed - Formalities for amending a bill contained in section 2(1)(b) and provide o Any amendment must be identified by the signature of the testator or by person made in testator presence under his direction o If made by another person in testator presence or under his direction, must be made in front of two competent witnesses. o The amendment must further be identified by signature of such witnesses made in presence of testator and each other o If amendment is made by mark or by such other person, a commissioner of oaths must certify on the will that he has satisfied as to the identity of the testator and that the amendendment has been made by or at the request of the testator.  He must then afford a certificate as soon as possible after the amendment has been identified, shall as soon as possible thereafter complete his certificate Revocation: - Regarding the revoking powers of the high court in terms of section 2(3) o If the HC is satisfied that a testator has made a written indication on his will or before his death caused such indication to be made; or o Performed any other act with regard to his will or before his death caused an act to be apparent from the face of the will, o Drafted another document before his death caused such document to be drafted o By which he intended to revoke his will or part of his will, high court shall declare the will or part concerned as revoked - The act of revocation must appear from the face of the testamentary document itself o Needs to be written revocation and the act does not allow revocation in any form or manner - Revocations performed by the testator himself need not be signed as long as it is clear from face of the will that such written revocation was performed by him. - However where revocation is caused to be performed by somebody else, there needs to be some form of written indication that it was the intention of the testator. o If there is another document, there needs to be a mark from the testator approving the other document - A change of status has no effect on the validity of a Will, a will remains valid unless and until it is revoked. - A popular exam question is that when a deceased dies within 3 months after he was divorced and after executing a will to his ex-wife = section 2(B) of the wills act is applicable: o The effect of this is that if this happens the wife is seen as having died before the dissolution of marriage and therefore will not benefit under the will, thus the estate devolves according to intestate succession. o If the deceased died without any descendants, then the rest of his estate will devolve to his new wife. Surviving Spouse and Descendants of Certain Persons Entitled to Benefit in terms of will Section 2(c) - If any descendant of a testator (excluding minor and mentally ill persons), who together with the surviving spouse of the testator is entitled to benefit in terms of a Will renounces his right to receive the benefit, such benefit will vest in the surviving spouse – thus even if there is an illegitimate stepchild who renounces their share of the inheritance , the surviving spouse of the deceased will be entitled to share of the inheritance of that stepchild ( not mother or father of the step child who is not the surviving spouse) o If however there is no surviving spouse, then the other descendants shall be entitled to receive what that descendant would otherwise have received per strips unless the context of the will in this situation otherwise indicated - A beneficiary has an election to accept or reject an inheritance, this may not be done in a piece meal fashion unless the will expressly give beneficiary to do so. Adopted child – Section 2D(1)(A) - Adopted children are regarded as being born from their adoptive parent and not as a child of the natural parent except in the case: o When a natural parent who was married to the adoptive parent at the time of the adoption o Kewana v Santam Insurance (TKA) – a child adopted by a person in terms of any law Illegitimate children – Section 2D(1)(B) - Children who are born out of wedlock are ignored in determine his relationship with the testator, if a testator leaves bequest to his children, it will include illegitimate and adulterous children Bequest to a class of persons – Section 2D(1)(C) - Unless contrary is shown, any benefit allocated to the children of a person or to the members of a class of persons mentioned in the will, shall vest in the children or members of the class alive at time of inheriting. o Children include those who at the time benefit who have been conceived, o Children or members of a class of nominated beneficiaries who are neither born or conceived prior to the death of the testator shall be excluded from inheriting unless contrary is shown in the will o Thus for example (my children, or grandchildren), the class is closed at the date of death Competency to make a will – Section 16: - Only a person of the age of 16 or over may make a will, provided that he has the mental capacity to appreciate the nature and effect of his act o Right to make a will is not affected my emancipation or marriage ext. Witnesses: - A witness shall not be disqualified from receiving any benefit from a will, if the will has been attested to and signed by at least 2 other competent witnesses who are not named in the will o i.e. the will is witnessed by 3 or more other witnesses so that there at least two witnesses who have received no benefit - Section 4A(2)(C) Common law: - Under common law the following people are precluded from inheriting: o Person who has unduly influenced the testator to give him a benefit under the will o A person who is unworthy – does not inherit from the bloody hand  i.e. there must be blameworthiness – self-defence means there is no disqualification o person who has concealed the will Drafting Wills: - The wills act prescribes the formalities to be complied with in order for a will to be valid. - The wills act does not prescribe the content of a valid will o The validity of a will, will not be affected by the inclusion or non-inclusion of any clause - A joint will is a document containing the wills of 2 or more persons set out in one document for convenience o Parties may revoke without the knowledge or collaboration of the party - There is a presumption that every bequest is presumed to be unconditional and vests in the beneficiary on testator’s death. o Vesting gives the beneficiary the right to claim the benefit, which is only payable once executor’s liquidation and distribution account has lain from inspection and free from objection o Thus vesting occurs immediately on death of testator, but only payable once liquidation and distribution account has been drawn up – section 35(12) of Estates Act Per stripes and per capita: - Per stripes means a distribution by representation - i.e. where a beneficiary whom predeceases the testator and is survived by 3 children, then those children are entitled 1/3 of the benefit that the beneficiary would have gotten. - Per capita means distribution in equal shares among the persons entitled to take - i.e. where a bequest is left to the children per capita of A and B, all the children of A and B share bequest equally A beneficiary who accepts the benefit from a will is known as adiation and a beneficiary who refuses to accept is known as repudiation. - In terms of Surviving Spouses Act 27 of 1990 – the surviving spouse of a marriage dissolved by death after the commencement of this act, has a claim against the estate of the deceased spouse for his reasonable maintenance needs until either death or remarriage, insofar he is unable to provide for such needs from his own means or earnings. o The survivor’s own means and earnings have to be exhausted before any valid claim may be entertained against the deceased spouse. - SA recognises the freedom of testation, however a bequest in a will however may not be illegal, impossible, immoral or against public policy (Oosthuizen v Bank Windhoek (NHC) o E.g. a will excluding the jurisdiction of the court –(Barclays Bank DC & NO v Anderson) Clauses in the Will: a) Heading - : wills usually contains heading citing testator name, so that one may identify the will being the will of the testator o May also note testator’s identity number and residential address. b) Revocation clause: o Wills must contain a revocation clause “I revoke all previous wills” o Important because if not inserted, all pervious wills still apply. c) Appointment of Executor / Trustee: o Testators often nominate family member (a spouse or a child) as executor of estate o Advisable to appoint alternative nominated executor or substitution “ I nominate “A” and failing him “B” and “C” o An executor must furnish the master of the court security unless he or she is a parent, spouse or child of the deceased or unless she/he has been exempted in the will from finding security  Security is furnished on a form entitled “Undertaking and Bond of Security”  An insurance company completes and signs the bond of security in which it binds itself unto the master as surety for the obligations undertaken by the executor d) Professional Fee: o Executor acts in a fiduciary position and thus cannot charge fees for the work he may perform in that capacity unless the will provides otherwise, o Thus even if the executor is an attorney and is in a legal action, the attorney may not recover  However do note if attorney acts as an agent then he may recover a fee o Testators may place a clause in though – “ I direct that my executor shall be entitled to charge in addition to the Executors remuneration for his administration of my estate professional fees for professional work attended to in that profession during the course of his administration e) Security: o Every executor must provide security to the satisfaction of the master for proper performance of his functions. f) Duties: o Executor – the executor is concerned with the administration, liquidation and the distribution of the estate property  Determines the assets and liabilities of the estate which are reflected in liquidation and distribution account which he must draw  Must also calculate and pay estate duty o The net estate of a deceased person is distributed (after payment of the administration fees, liabilities, Estate duty and future maintenance) g) Legacies: o Distribution occurs firstly to paying pre-legacies and legatees  Legacy is a bequest of specific property, moveable or immovable to a specified person, trust or charity. h) Heirs: o The residuary heirs succeed to the residue of the estate, it the heirs share of the estate that payment of all expenses are paid including administration expenses, debts, estate duty, pre legacies and legacies. i) Fideicomissum and usufructs o Both usufructuary and fiduciary have right to use and enjoy property and to fruits thereof, for duration of their lives, no person is allowed to alienate or otherwise dissipate the property unlee fideicommissum is created o Usufructuary heir can never acquire ownership as the property is bequeathed to another. j) Collation: o Collation is based on the presumption that parents wish to treat their children equally in life and death so whatever the child has received in their lifetime is deemed to be part of their inheritance, however this presumption is rebuttable and testator may indicate this  “there is no collation” o If there is a dispute between what could be collated this must be stated  “ I direct my son JOHN and my daughter MARY shall collate the sum of R 50 000.00 each which I gave them as wedding gifts. Save for these amounts, I direct that neither of them nor any of other children shall collate any other gifts or amounts which I may have given them during our life time” k) Funeral direction: o A testator should be asked what he requires shall be done with his body and should indicate preference  “ I direct my body to be cremated and my ashes to be scattered along an airbase” o If not stated then it is up to the heirs to decide what happens with the body. l) Unworthiness: o A person may be declared unworthy as a result of the death of another caused by that persons blameworthiness: o There can be clauses that exclude blameworthiness  “No heir or beneficiary shall be deprived of any benefit of this will on the ground that his or her conduct cause my death, if such person acted in good faith with my directions under any living will which I may have executed or if such conduct whilst negligent had no moral turpitude attached to it” m) Attestation clause: o Not a requirement of a will but good practise to use it  “I confirm that I signed each page of this will Sandton on this 10th day of June 2017 in the presence of two witnesses, all of us having singed the will in the presence of each other and who are competent persons and neither of whom is a beneficiary or the spouse of any beneficiary under this will Living Will: - A living will is an advance directive in which a person expresses his refusal to consent to any medical treatment and attention which will keep him alive by artificial means when he is no longer competent to express his instructions. - In SA there is no law to the validity of a living will and normally follows the same format of a ordinary will. Intestate Succession: - Many South Africans die intestate and a sound Knowledge of the Intestate Succession Act is Essential. - The intestate succession Act applies where a deceased has not executed a valid will or has not dealt with all his assets in a valid will and in this case his estate or that part of which is not dealt with in a valid will. - Where a descendant has contributed to the deceased being killed or murdered, by law that descendant is disqualified from inheriting and his sum of money will be passed onto his descendant in terms of section 1(7) of the Intestate Succession Act. - Rules: - If the deceased is survived by: o A spouse and leaves no descendants, then the surviving spouse is the only intestate heir section 1(1)(a)  In the case where deceased died in terms of polygamous marriage, the estate will be divided equally among surviving spouses. o If there are descendants and no spouse, such descendants shall inherit intestate Section 1(1)(b)  Where there is spouses and descendants – the spouse will inherits greater of: o Where deceased was married in terms of polygamous marriages and is survived by spouses and descendants:  Each surviving spouse becomes entitled to R 250 000 or child’s share (whichever is greater).  In such cases a child’s share is determined by adding the number of spouse to the number of stirpes  In cases where the estate is not large enough to pay each of the spouses R R250 000 then the distributable estate is reduced proportionally amongst surviving spouses. o Where there is no surviving spouse and no descendants but is survived by parents, the parents will inherit in equal shares section 1(1)(d)(i)  If one parent is deceased, the surviving parent shall inherit one half of the intestate, and the descendants of the deceased parent shall inherit the other half • If there are no descendants who have survived the deceased parent, the surviving parent shall inherit the intestate. o Where no surviving spouse, no descendants and no parents the estate is divided into two  One half share of estate will devolve upon the descendants of the deceased’s mother and other half will devolve on the defendant’s of the deceased father  Descendants related to both the late mother and late father will take from both parents (with a full hand) whereas those related to only one of the parents will take from that parent (with half full hand) o Where there is no surviving spouse, no descendants, parents have deceased and left no descendants:  The other blood relations of the deceased who are related to him nearest in degree shall inherit the intestate in equal shares (per capita, the nearest relatives taking to the exclusion of more remote relatives) o No surviving spouse, no descendants, parents and all other blood relatives are deceased or cannot be located – I.e no living relatives traced  the estate is paid to the Guardians Fund where it will remain for 30 years, if no one comes for payment then the estate will be forfeited to the state - The word spouse must be understood as either married or a partner in a permanent same-sex life partnership in which partners have undertaken reciprocal duties of support Gory v Kolver NO and Others o Spouse includes persons married in terms of polygamous or monogamous marriage (Daniels v Cambell) and (Hassim v Jacobs) Important aspects of intestate succession: - Illegitimate children can inherit from both natural parents as well as their blood relations Section 1(2) - Descendants of the deceased and descendants of his parents inherit per stripes and representation takes place Section 1(4)(a)). - A child’s share is calculated by dividing the value of the number of stirpes (surviving children and predeceased children with descendants) + one Section 1(4)(f)) o Where a deceased was married in terms of recognised polygamous marriage, a child’s share is calculated by dividing the value of the estate by number of stirpes plus however many wives there may be. - An adopted child is considered to be descendant of his adoptive parents Section 1(4)(e)(i) o Thus an adoptive parent is not considered to be the descendant of his parents unless:  The natural parent is also adoptive parent  The natural parent was married to the adoptive parent at the time of the adoption - Administration of deceased estate: - The administration process is a procedure designed to ring the financial affairs and administration of an estate to a successful and orderly practical solution. - All estates are administered under the supervision of the Masters of the High Court and service points and posts appointed in terms of Section 2 of the Estates Act Process: - The founding documents to report the estate must be completed and signed, and the prescribed documents to obtain letters of executorship must be completed and signed by the nominated executor submitted to the master of the high court having jurisdiction. - After master has issued letters of executorship, the executor must advertise in newspaper where deceased was residing and in the government gazette advising creditors of the death and affording them (minimum of 30 days) to note their claim against the estate with the executor. - The assets and liabilities must be valued and validated and thereafter the executor must draw up a liquidation and distribution account in terms of regulation 5 , recording the assets and liabilities of the deceased at date of death o The liquidation and distribution account must be lodged to the master within 6 months of the grant of letters of executorship, - Once the master is satisfied that the account has been correctly drawn, the account must be advertised Section 35(5) as lying for inspection for a period of not less than 21 days - After an account has been up for inspection and the master decision has not been taken on review, the executor shall proceed to finalise the administration by paying creditors and distributing the estate in accordance with account o Case amounts must be distributed within 2 months of the estates becoming distributable. - The persons involved in the administration of estates o Master of court - supervisory function (grant letters of executorship) and advisory function.  Masters will also perform certain judicial functions o Executor - executors are either appointed by a will (S14) or by dative – by family members (s18) who is then empowered to administer the estate of the deceased. o Conveyances - the transfer of fixed property out of a deceased estate is attended by a conveyancer who attends to transfer in a prescribed manner into the name of heir. o Receiver of revenue – if assets are sold after date of death, the estate must register as a tax payer to calculate capital gains. o The surviving spouse - these persons naturally have an interest in the estate of the deceased - it is worth noting that if assets become apparent after the liquidation and distribution account has been lodged with the master, then the executor has a duty to immediately notify the master by letter and attach either a supp or amended liquidation and distribution account o Further the executor must request the master to dispense with the requirement of having to advertise the said account for inspection. Requesting an extension for lodging of the liquidation and distribution account: - If an account cannot be lodged within 6 month period from the date of grant letters of executorship or in the time extended by the master of the court, the executor must apply to the master in writing for an extension in terms of regulation 6 of the Estates Act. - Such application must be in writing , made for good reason and specify the following: (NB) o Why account cannot be lodged in prescribed time period o The steps taken by the executor and progress made in this regard o The progress that has been made in the liquidation or realisation of the estate o The amount of money on hand or which has been deposited to the estate banking account o Why an interim account (first liquidation and distribution account) cannot be lodged o Whether the estate is insolvent - Executor should also apply for an extension for such period. Drafting liquidation and distribution account: - The prescribed form is contained in Regulation 5(1) of the Estates Act - The liquidation and distribution consists of 9 sections: o Heading o Money Column o Liquidation Account o Estate duty addendum o Recapitulation Statement o Distribution Account o Income and Expenditure Account o Fiduciary Assets Account o Certificate by the executor 1) Heading: - The following need to be included in the heading: o The account described liquidation and distribution account o The ordinal number of the account must be stated (first, second or third) o Whether it is a final account or supplementary account, or an amended final or supplementary account. o State the full names and surname of the deceased (regulation does not mean maiden name) o State identity number of the deceased (if allocated) or otherwise state birth o State the date of the deceased o State marital status of the deceased at the date of death o If deceased was married at date of death state that  If married in community of property – full names including maiden name and identity number of surviving spouse must be allocated.  If out of community of property it must be stated whether or not marriage was subject to accrual system o If massing has taken place and the survivor has adiated, it must be stated if the massed estate of the deceased and who so it is adiated. o The master reference number - 7777/2017 o Any other information, occupation address, maiden name of the deceased. 2) Money Column: - Most executors make use of a double money column, using the left hand side for debits and the right hand side column for credits. 3) Liquidation Account: - The liquidation account makes up the most important part of the account; it is where all the assets and liabilities of the deceased as at the date of death are set out in detail. - This sub-account reflects the gross value of the assets at date of death under sub-headings o “immovable property” ; o “moveable property”; and o “Claims in Favour of the estate, ASSETS Immoveable property: - [Description – value – Divestment note] - DVD - All immoveable property registered in the deceased’s name must be reflected in the liquidation account, the description of the property in the account must be precise according to the title deed of the property, irrespective if the property has been sold or is being awarded. - If description of the property has changed, then both previous as well as current descriptions must be furnished - Remember to place the registration Division – Gauteng being JR - Remember to place the title deed number = “Held under title deed T7775/16” - The value of the property to be used depends on the method of liquidation used: o If property was sold during course of administration, then gross proceeds of the sale must be reflected in the liquidation and distribution account. o If property is not realised, then fair market value of the property.  Where there is doubt as to which value must be used, it is always safer to obtain appraised value (formal) or obtain directive from the master of the court o If the deceased owned property that conducted farming, one must ascertain the fair market value of the property conducted at the date of death. - A consecutive number in respect of each item is recorded in brackets next to the money column: - Property must also be stated in either hectare, square meters or sectional title o FARM = Hectares o AGRICULTURAL PLOTS = hectares o Houses (Erf) = Square meters o Sectional title – Square meters Moveable Property: - [Description – value - Divestment Note] - DVD - The moveable assets must be accurately and concisely - In case of motor vehicles – it is important to note o Model o Year model o Registration number - Once again the method of liquidation which has been used will determine the value of property will be reflected liquidation account o If sold in the administration of the estate – gross value of the sale will be used o If not sold then fair market value Furniture and personal effects: - [Description – Value – Divestment Note] - These items can be given inclusive overall description in the amount (Furniture and effects) - Each item need not be specified separately unless such item or group of items has been specifically bequeathed. - Where specific items of furniture and effects have been bequeathed, it may be necessary to specify them separately in the account Shares: - When dealing with shares, one must distinguish between listed shares quoted on the stock exchange and shares in private companies. o In the case where listed on JSE = stock broker must value shares  Remember that shares that are listed are always calculated according to cents per share o If sold then the gross value of the shares must be reflected o Shares that are listed on the JSE must always be valued by a stock broker. - Take note dividends earned on shares will be income & expenditure - Private companies according to section 28 = you must open a bank account o Thus when shares are sold – you must say “proceeds deposited into Estate bank account” o Shares in private company must always be valued by auditor Life Policies: - Only life assurance policies which are paid to the estate are reflected in the liquidation account o Policies which are paid directly to the nominated beneficiaries are not included - All assurance policies which are paid to the beneficiary are regarded as property of the deceased. - If the person is alive, o The policy has a surrender value o Policies with a surrender value are regarded as Section 3(2) property – i.e. property that the deceased could have enjoyed while alive  Relevant in estate duty addendum - If the deceased is dead o Life policy has a maturity value o Policies with maturity value is are regarded Section 3(3) – i.e. property the deceased could not enjoy while alive  Relevant in estate duty addendum Van eck Notes: A) WHERE A LIFE POLICY ON THE LIFE OF THE DECEASED IS TAKEN OUT BY DECEASED: - Where deceased ceded or donated to spouse/child in terms of ANC o NOT – reflected in liquidation account o NOT – reflected in estate duty addendum - Where there is a nominated beneficiary (estate is not beneficiary) o NOT – Reflected in liquidation Account o YES – you would add it to point 6, property to be deemed property – in estate duty addendum - Where there is no nominated beneficiary (but estate is beneficiary) o YES – Record maturity value as a claim in favour of the estate – in liquidation account o YES – Less at point 3 and add at point 6 – in estate duty addendum B) LIFE POLICY ON LIFE OF DECEASED TAKEN OUT BY SOMBODYN ELSE - Where policy is taken out on the life of the deceased to purchase an asset or share o YES – Record purchase price of asset/shares – in liquidation account o YES – Add point 3 and Less premiums paid and interest earned on the premiums (If estate duty is payable, person would liable contribute) - in estate duty addendum o - Where life policy taken out by partner/shareholder/director o YES – Record purchase price of asset/shares – in liquidation account o NO – do not record – in estate duty addendum - When there is no other reason for life policy taken out o NOT – Do not record in liquidation account o YES – Add point 3 and less premiums paid and interest earned on the premiums (if estate duty is payable, person is liable to contribute – in estate duty addendum C) LIFE POLICY TAKEN OUT BY DECEASED ON LIFE OF SPOUSE/SOMEONE ELSE - Where life policy has both a surrender value and a maturity value o Yes – Record surrender value in liquidation account – in liquidation account o NOT – Do not record – in estate duty addendum Cash assets: - The deceased may have operated various banking investment, saving and at the date of death. - The capital value of the investments of each account as at date of death together with interest accrued to date of death must be reflected in the liquidation account Disinvestment note: - In terms of this sub account, the executor must state how he intends in dealing with or divesting the estate of each asset or group of assets, other than in the case of cash or proceeds from assets realised. LIABILITIES: - Liabilities can be grouped together under three basic headings, a. Administration expenses b. Claims against the estate c. Estate duty 1) Administration expenses: - Administration expenses are incurred by the executor in administering the estate - They include the following: o Advertising costs o Bank charges o Postages and petties o Security bond o Executrix fees o Masters fee o Valuation costs o Costs realising assets o Costs of transfer bond o Cancellation costs o Costs preserving assets Estate advertisements - There are two statutory notices which must be advertised by the executor in a local newspaper and the government gazette, the costs involved in this are administration expenses. - There is compulsory two advertisements which need to take place o Section 29 – Advertisement to creditors and debtors  The cost of these advertisements must be inserted into the liquidation and distribution account o Section 33(4) and (5)(a) – advertisement in government gazette and local newspaper when and where the liquidation and distribution account is to lie for inspection for a minimum of 21 days.  The account may only lie for inspection after it has been lodged. - Do take note that both these costs are normally the same to each other - The charge for government gazette is R 37.50 Masters Fee: - The masers fee is calculated on the gross value of the estate assets as it appears in the liquidation account and is calculated in terms of schedule 2 of Regulations - Masters fee is calculated by the following o No master fee payable if gross value of assets is less R 15 000 o Where gross value of assets is R 15 000 but less than R 17 000, master fee is R42 o If the gross value of assets is more than R 17 000, for each R 2000 over a further R6 is payable o If gross value is R 203 000 or more, then the maximum fee is R 600.00 Executors Remuneration; - May be determined by will but where the will is silent, Section 51(a) read with regulation 8 will apply - The master if such special reasons exist, may reduce or increase any remuneration. - If fee is to be fixed by will, it is suggested that the fee be fixed to a percentage of the tariff change (e.g. 5.5% of R .00 - if no provision is provided for then regulation 8 will apply o 3,5% on gross value of assets o 6% of income collected after date of death o A minimum fee of R 350 - Bear in mind that if the executor is VAT registered entity, then you must add on 14% to the amount calculated to be the executors fee. Bank Charges: - The bank charges reflected here are those levied on the estate banking account, all bank charges may be deducted as administration expenses - Remember the opening of a section 28 Estate banking charge Transfer costs and transfer duty: - The only asset the executor is obliged into the name of the beneficiary is immoveable property - Ownership passes only on transfer of immoveable property and can only be attended to by the executor. - The transfer costs are accordingly administration expenses. - The estates act has now been amended and an executor who is practising conveyancer may charge his professional fee for transferring property out of the estate in addition to his executor fee. - Since the property can only be transferred after the liquidation and distribution account has been lodged, and has lain for inspection and no objection received, the executor must take into account transfer costs - If the bond is registered over property, the bond cancellation costs will also be an administration expense Funeral expenses: - Funeral expenses are reflected as a creditor claim, not an administration fee. - Since amendment of Section 4(a) of the Estate Duty Act, which allows the reasonable cost of a tombstone as a deduction for estate duty purposes, the master now allows the cost of a tombstone as an expense Valuation expenses: - Assets which are not realised in the course of the administration must be valued - The appraiser is entitled to remuneration as per tariff set out in Regulation 9 to the Estates Act Cost of realization: - Where property in the estate has been sold, the cost of realising the asset is an administration expense o E.g. auctioneers fee, estate agent fee and stockbrokers charges 2) Claims against the estate: - The executor must lodge their claims in terms of section 29. - The executor must value and validate the claims made against the estate. - The executor must decide whether to accept or reject all claims submitted - Section 32 provides the mechanism for the executor to validate the claims submitted to him o Creditor may be called to provide an affidavit to support his claim, or with the consent of the master, the claimant may be summonsed to appear before the master or a magistrate in order that he may be questioned by the executor an any heir or legal representation Diverse claims: - These are the normal claims against an estate by creditors, o Balance owing on mortgage bonds, clothing accounts, outstanding balance on overdraft facility ext o E.g. CLAIMS AGINST THE ESTATE Edgars account – balance outstanding As at date of death (5) R3000.00 ABSA BANK – Outstanding balance on overdraft facility Plus interest to date of death (6) R 5000.00 Maintenance claim in respect of the surviving spouse - In terms of the Maintenance of surviving spouse Act, the surviving spouse has a claim for future maintenance against the estate. - Take note that maintenance of surviving spouse is only applicable to the estate of a deceased of a recognised marriage o Civil marriage, civil union, customary marriage, hindu or muslim - A common law partners does not count. - The claim of divorced spouse for arrear maintenance is a normal claim against the estate. Marriage Claims: - One must distinguish whether the spouse were married in community of property or out of community of property - Where spouse is married in community of property, the surviving spouse automatically has a claim for half the joint estate in terms of matrimonial property regime. o Practise has evolved to reflect this claim for half the estate in the distribution account. o The claim for half is then based on what remains after the liabilities (excluding the funeral expenses and estate duty) have been met. o Thus surviving spouse half share – funeral expenses – estate duty = gross value. - Where spouses were married out of community of property with the inclusion of the accrual system, the survivor may have a claim against the deceased in terms of section 3(1) of the Matrimonial property Act 1984. o In terms of this section the spouse who shows the smaller accrual at the dissolution of the marriage (in this case death), the surviving spouse has a claim against the other spouse for half the difference between the respective accruals of their estates.  If the accrual in the deceased’s estate is less than that of the survivor, the deceased’s estate will have a claim against the survivor and this will be reflected as an asset.  If the deceased’s accrual is more than the survivor than half the difference will be a claim against the deceased’s estate and will be reflected as a liability. Income tax: - The executor is the representative tax payer of the deceased. - It is the duty of an executor to lodge the deceased’s final income tax returns to the Receiver of Revenue, in order that the Revenue may lodge a claim (if any) for any outstanding taxing owing by the estate at the date of death. - Should in complicated cases, where the executor makes use of an accountant to lodge the outstanding tax returns. o The accountant’s fee must be reflected as a valid claim against the estate. - When a person dies, they are subjected to both Capital Gains Tax and Estate Duty tax o GGT becomes payable when a taxpayer “disposes” of property, which disposal could take various forms, but is usually the sale of the property. - In the case of deceased estates, it is important to take note of the following important exclusions – assets that are not subject to GGT. o Assets transferred to the surviving spouse of that deceased person o Assets bequeathed to an approved public benefit organisation o Long term insurance policies of the deceased o Personal use assets  Personal use assets are assets which are used mainly for purposes other than carrying on a trade. o When the deceased had a small business interest an exclusion of up R 500 000 can be obtained for the purposes of GGT. o Exclusion of R 2 000 000 is allowed in regard to the disposal of the primary residence  If primary residence is sold – GGT purposes will apply Estate Duty payable by the estate (Regulation 5(1)(c)(vii)) - The estate duty calculation is reflected in this sub account. - Only the portion of the Estate Duty which must be borne by the estate must be reflected in the liquidation account as part of the liabilities. - Once one reaches this stage of the account, estate duty must be calculated before continuing with the rest of the account o If no duty is payable, NIL must be entered in the appropriate place, and the rest of the account can be completed. VAN ECK RECIEPE NOTES: - There is three recepies that need to be made and remembered A. SINGLE PERSON AND MARRIED OUT OF COMMUNITY (ACCRURAL / WITHOUT ACCRURAN) - Property of deceased 1. Property in terms of S 3(2) as per liquidation account (Property enjoyed by deceased) + (Add) 2. Foreign assets - (Less) 3. Deemed Section 3(3) property in liquidation account  All policies on life of deceased which the maturity value are disclosed in liquidation account (because deceased did not enjoy property – he dead)  Accrual claim by deceased disclosed as an asset in liquidation account (deceased will never enjoy the accrual claim  Adiation: out of community property: partially massed estate – the value of survivor property 4. Adjustments -(Less)  Farm: 30 % on sworn valuation or on the fair marked value disclosed in L&D Account -+(less = if sold for more) or(add= if sold for less)  Shares in (Pty) ltd company – difference between by the auditor of company and selling price thereof. +(add) 5. Fiduciary interest/usufruct – (Farm: reduce the value by 30% before doing the calculation) +(add) 6. Property deemed to be property in terms of Section 3(3) – property of the deceased he could not enjoy while alive  All policies of the life of deceased which maturity value was paid out (even to beneficiaries) because deceased could not enjoy maturity value  Policies that are taken out by non shareholder  Exceptions • Policies, ceded, donated to a spouse or child in terms of registered ANC • Key man policies • Policies taken out on deceased by partners, shareholders, directors  Accrual claim by deceased disclosed as an asset in liquidation account Gross value of estate -(less) 7. Allowable deductions in terms of Section 4  Funeral and tombstone & death bed expenses – Sec 4(a)  Liabilities (claims against the estate) – Sec 4(b)  Administration expenses – Sec 4(c)  Foreign assets Sec 4(e)  Bequests, donations to (educational, state insitutions, religious) - Sec 4(h)  Accrual claimed by surviving spouse – Se 4(IA) NETT VALUE OF ESTATE: -(less) 8. Primary Rebate – primary rebate is R3 500 000 = Dutiable Amount 9. Estate duty payable @ 20% on dutiable amount - Take note at this point if net value of estate is smaller than primary rebate, estate duty payable will be “Nill” B. IN COMMUNITY OF PROPERTY - Property of deceased 1. Property in terms of Section 3(2) as per liquidation account (property enjoyed by deceased) +(ADD) 2. Foreign assets -(LESS) 3. Deemed section 3(3) property in liquidation account disclosed in liquidation account disclosed – All policies on life of deceased of which maturity value disclosed in liquidation account because – deceased could not enjoy when the property 4. Adjustments -(LESS)  Farm: 30% on sworn valuation or on the fair market disclosed in L&D account -+(less = if sold for more) or(add= if sold for less)  Shares in (Pty) ltd company – difference between by the auditor of company and selling price thereof. Calculations In Community of property -(LESS)  Liabilities (administration expenses and claims against the estate) o Funeral expenses of deceased are excluded – pays for it himself  Divide sub total by half – in order to subtract ½ share of surviving spouse = ½ share of deceased  NOW = Less funeral expenses from ½ share of deceased +(ADD) 5. Fiduciary Assets  FARM: Remember to reduce the value of 30% before doing calculation +(ADD) 6. Property deemed to be property Property deemed to be property in terms of Section 3(3) – property of the deceased he could not enjoy while alive  All policies of the life of deceased which maturity value was paid out (even to beneficiaries) because deceased could not enjoy maturity value  Policies that are taken out by non-shareholder  Exceptions • Policies, ceded, donated to a spouse or child in terms of registered ANC • Key man policies • Policies taken out on deceased by partners, shareholders, directors GROSS VALUE OF ESTATE -(LESS) 7. Allowable deductions  Bequests/donations to educational, religious, charitable, institutions of public and state institutions – Sec 4(h)  Benefits received by surviving spouse – Sec 4(q) • Liquidation account - received from deceased ½ share • CASH – received from deceased ½ share • Property deemed = the full maturity value of policy NET VALUE OF ESTATE -(LESS) 8. Less primary rebate – Section 4A – with effect from 1 March 2007  BEING R 3 500 000 DUITABLE AMOUNT 9. Estate duty payable at 20% on dutiable amount = ESTATE DUTY PAYABLE - Take note at this point if net value of estate is smaller than primary rebate, estate duty payable will be “Nill” 4) The Cash Recapitulation Statement - In terms of regulation 5(1)(d) the account must contain a recapitulation statement which calculates if the estate is liquid or illiquid and if illiquid how the executor intends to make good the shortfall. o I.E. if there is enough cash in estate bank account to pay liabilities - The heirs may wish to retain the assets and in this event they will be obliged to contribute the shortfall to ensure the liquidity of the estate. - In terms of this sub – account the total amount of the cash assets and assets reduced to cash are reflected, this information is obtained from the divestment notes of the assets appearing in the liquidation account o Once obtained value of assets cash & reduced to cash then you minus liabilities, cash legacies and estate duty = cash surplus o Formula = Assets Reduced to cash – liabilities – cash legacies – estate duty = cash surplus - Where there is a cash surplus, such cash surplus will be reflected as part of the residual awards in the Distribution account. - This reflects the cash position in the estate from which the estate expenditure must be paid including administration fees, creditors, estate duty and cash bequest - 5) The Distribution Account: - Regulation 5(1)(e) in which we reflect why, to whom and what is distributed o Why – if any award is made in terms of any condition in a will, then without regurgitating or summarising the terms of the condition, it must be noted as “awarded in terms of and subject to the terms and conditions of the will” or in terms of the “Intestate Succession Act” o To whom - beneficiaries full names and surnames and whether they are majors or minors  If minors, the date of birth and identity number is required o What – assets and what amount of cash is to be awarded to each beneficiary  This sub section can be summarized as: Award consists of: Immoveable property R 500 000.00 Moveable Property R 116 666.67 Cash R 956 333.33 Collation: - Depending on who the heirs are, and the nature of the property received during their life time, certain heirs may have to collate o When heirs have to collate, the property collated is not an asset in the estate, but is added for distribution section of the account and adjusted accordingly - Basis of collation is that parents are deemed to treat descendants equally both in life and death - Any amount given to a descendent in their parents’ lifetime is deemed to be part of that child’s inheritance and must be brought to account on the death of the parent. Redistribution Agreement - In most estates an informal redistribution agreement is concluded among heirs o i.e. dad has a watch, motorbike, furniture, listed shares and a house = the five children agree to redistribute their undivided right to 1/5 of each asset by placing their undivided 1/5 share back into the estate and taking full ownership of a specific asset - In the case of immoveable property, a written formal redistribution agreement must be concluded among the beneficiaries and the distribution account must be drawn accordingly to reflect to whom the immoveable property is to be awarded. 6) Income and Expenditure Account - Only income earned and expenses incurred after death must be reflected in the income and expenditure account o Income earned and expenses incurred from the date of the final account to date of payment to the beneficiaries are brought to account in final reconciliation statement - This subsection can be broken up into the following sub categories o Interest received on savings accounts o Interest paid to banks o Executors Remuneration = all income that has come into after death  Remember it is at 6% the executors remuneration  Then you must also add value added tax = 14 % o Balance awarded to the remaining heirs 7) The Fiduciary Assets Account: - Only assets held subject to a fideicommissum are reflected in the fiduciary assets account - These are regarded as the liquidation account 2, as the follow the same format. 8) Estate Duty - Explained below 9) The executors certificate; - This is final sub account and consists of a statement by the executor that the account is true and proper account of the administration of the estate. Certificate I the undersigned Kevin baard, the duly appointed executor in the estate of late SEXY BEAST, estate number 4444, declare as follows: 1) The a foregoing pages contain true and proper account of the liquidation and distribution account; and 2) To the best of my knowledge all the assets and income collected subsequent to date of death of the deceased to date of this account have been disclosed herein Signed at SANDTON on this the 2nd January 2017 Executor Primary Rebate: - the amounts permitted as a deduction calculated in terms of section 4 are then totalled and subtracted from the gross value of the estate (property + deemed property – liabilities) to arrive at NET VALUE - To determine the dutiable amount of the estate, the primary rebate plus any rollover is subtracted from the net value (current 3.5 million rand). - The surplus is dutiable at a flat rate of 20% (estate duty) - Unless the net value of an estate exceeds R 3.5m = THERE IS NO ESTATE DUTY PAYBLE - If the net value exceeds R 3.5m that balance being the dutiable amount liable for estate duty is flat 20% - Section 4A was amended to provide for an increase in the abatement (R3.5m) if a deceased (who dies after 1 January 2010), was the spouse of one or more previously deceased persons o In such cases the dutiable amount of the survivors estate is determined by subtracting the (3.5 x 2) R7.0m from net value of the estate o In cases where there were more than one previously deceased spouse, the executor has the choice to use the lesser amount so deducted in any one of the predeceased estates  E.g. the first dying spouse used only R500 000 and the second dying spouse used R1m of the abatement, the executor has a choice and obviously will elect the smaller protion of the abatement used by the first dying of his spouse in this example thus entitling the subsequently deceased spouse (husband) to claim R6,5 abatement. Example: - FEB 2016 ANSWER First and Final Liquidation and Distribution Account in the intestate joint estate of A (5084) who was married in community of property to B (5084) Date of Death: 30 July 2015 Master reference number: 7777/16 LIQUIDATION ACCOUNT Assets (at date of Death) 1. Immoveable Assets Erf 246, Happy Street, Parkhurst, Johannesburg Registration division JR Measuring approximately 900 square meters Held under Deed of Title T7775/16 Sworn Valuation By virtue of the marriage in community of property ½ awarded to B surviving spouse and ½ share of deceased awarded B, surviving spouse; C major daughter of deceased; and D Major son of deceased in equal shares, in terms of section 1(1)(c)(i) and section 1(1)(c)(ii) of the Intestate Succession Act 2. Movable Assets 2012 Bmw Motor Vehicle with registration number ZPD 066gp Sworn Valuation Nonrico firearm Sworn valuation 2000 Shares in Going Down (Pty) ltd Valued by auditors at R 66 000 Sold by executors (Proceeds deposited into Estate bank account) Household furniture Sworn Valuation 400 shares in Fertile Farms Ltd Valued by stock broker at R 40 000 Sold by executors (due to R 20 0000 profit) 3. Claims in favour of estate Fixed deposit with ABSA (180 000 – 20 000 – 10 000 = R150 000) Capital invested is R 150 000 Interest at date of death is R 20 000 (150 000 + 20 000 = R170 000) (Proceeds deposited into Estate Bank Account) Insurance policy on life of B taken out by A As per letter received = surrender value (Proceeds deposited into Estate Bank Account) Savings Account with XYZ Bank in name of B Certificate of balance (Proceeds deposited into Estate Bank Account) Insurance life policy with First life on the life of deceased As per letter received (Proceeds deposited into estate bank account) TOTAL ASSETS Liabilities (as date of death) 4. Administration Expenses Administration costs (Total R 12 000) Valuation costs: R 25 000 Attorneys Fair and Square Bond cancellation costs Transfer costs Executors remuneration 3,5% on R = TOTAL ADMINISTRATION COSTS 5. Claims against the estate Funeral costs Dr Fine Medical Expenses SARS Final income and tax assessment TOTAL LIABILITIES 6. ESTATE DUTY PAYABLE BALANCE FOR DISTRIBUTION TO BE CARRIED FORWARD TO DISTRIBUTION ESTATE DUTY ADDENDUM 1. Property of deceased in terms of section 3(2) as per liquidation account Less 2. Property deemed disclosed in liquidation account: A) Policy First Life Less / add: adjustments Less A) Difference between selling price and valuation of shares in Going Down (Pty) ltd – (R80 000 – 66 000) = R 14 000 Less B) Liabilities: Section 4(b) and (c) Funeral costs excluded due to being in community of property and therefore the deceased needing to pay for the funeral costs (941 900 – 28 000 =R913 900) Less C) ½ share of surviving spouse (R 2 153 100 x 1/2 = R1 076 050 ) Less D) Funeral expenses = R 28 000 ADD: Property deemed to be property Add E) First Life (Estate) Add F) Old Mutual (Surviving Spouse) GROSS VALUE OF THE ESTATE Less: Allowable deductions Inheritance surviving spouse: Sec 4(q) Distribution Account Property deemed: Policy old Mutual NET VALUE OF ESTATE Less Primary Rebate in terms of Sec 4A RECAPITULATION STATEMENT Cash and assets reduced to cash 1) Shares Going Down (Pty) Ltd) (item 4) 2) Shares in Fetile Farm Ltd (Item 6) 3) Fixed Deposit (Item 7) 4) Insurance policy on life of B (Item 8) 5) Savings Account in name of B (Item 9) 6) Insurance Policy First Life (Item 10) Less Liabilities Estate Duty Cash legacies Cash Surplus to be awarded to residuary heirs in distribution account (R 1410 000 – R 941 900 = R468 100) DISTRIBUTON ACCOUNT Balance available for distribution a per liquidation account Add: Funeral Costs Less: Surviving spouse ½ share awarded to her by virtue of being married in community of property (R 2 766 100 x ½ = R1 383 050) Less: Funeral Costs In terms of the Instestate Succession Act awarded to intestate heirs in equal shares (R 1 355 050 / 3 = R 451 683,33) To B (5084) surviving spouse in terms of Section 1(1)(c)(i) Assets to the value of To C (5084) major daughter of deceased in terms of Section 1(1)(c)(ii) Assets to the value of To D (5084) major son deceased in terms of Section 1(1)(c)(ii) Assets to the value of INCOME AND EXPENDITURE ACCOUNT Income (after death) Interest after death Fixed deposit: ABSA Bank TOTAL EXPENDITURE Expenditure (after death) Executors remuneration 6% on R 10 000 Interest: Bond in respect of dwelling Total Expenditure Balance for distribution (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (16) (17) R 12 000 R 2 000 R 2500 R24 000 R 128 800 R R 28 000 R 7500 R 3600 R 941 900 R 2 738 100 R 6 00000 R 14 000 R 913 000 R 1 076 050 R 28 000 R 451 683,34 R 1 000 000 R 350 000 R 941 900 NIL NIL R 468 100 R 1 410 000 R 1 383 050 R 28 000 R 451 684,34 R 451 684,34 R 451 684,34 R 1 355 050 R 600 R 9 400 R 10 000 NIL R 10 000 R 2 000 000 R 95 000 R15 000 R 80 000 R 160 000 R 60 000 R 170 000 R 300 000 R 200 000 R 600 000 R3 680 000 NIL R 3 680 000 R3 080 000 R 3 066 000 R 2 152 000 R 1 076 050 R 1 048 050 R 600 000 R 1 000 000 R 2 648 050 ____________ NIL R 80 000 R 60 000 R 170 000 R 300 000 R 200 000 R 600 000 R 1410 000 R 1 410 000 R 2 738 100 R 28 000 R 2 766 100 R 1 383 050 R 1 355 050 ____________ R 1 355 050 R 10 000 R 10 000 R 10 000 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) (15) (16) (17) (18) (19) (20) REDISTRIBUTION AGREEMENTS – PLAN Entered into between: NAME – KEVIN BAARD IDENTITY NUMBER – UNMARRIED And NAME – BRONWEN BAARD IDENTITY NUMBER UNMARRIED Whereas the said Kevin and Bronwen are brother and sister and only intestate heir of the late NAME (put an estate number, Johannesburg) AND WHEREAS the net estate has a value of (whatever is placed in the facts (e.g. R 1 500 000)) comprising of The House 2 Reuben Avenue, Olivedale Ext 2, Gauteng Province Measuring 270 hectares Valued at R900 000.00 2015 BMW M3 Sports Car R500 000.00 Cash R 100 000.00 _____________________ R 1 500 000.00 AND WHEREAS the minister of agriculture has turned down the application to transfer the said house to Kevin and Bronwen in equal and undivided shares, thus necessitating a reduction of the estate WHEREFORE KEVIN AND BRONWEN AGREE AS FOLLOWS To Kevin the following is awarded The House 2 Reuben Avenue R900 000.00 Less cash to be paid to bronwen R 150 000.00 In order to equalise the distribution R 750 000.00 To Bronwen the Following is awarded The 2015 BMW M3 Sports Car R 500 000.00 Cash in the estate R 100 000.00 Cash to be paid by Kevin R 150 000.00 R 750 000.00 It is agreed that Kevin will Pay the sum of R 150 000.00 to Bronwen within 30 Days of signature of this agreement. This agreement is subject to approval of the Master of