Newsletter 19 (Jun 2018)Dear Colleague
A cash shortfall can cause significant delays in the finalizing of an estate and can place a heavy burden on loved ones.
GOOD NEWS: Legatus Trust has entered into an agreement with Clientèle in respect of an Estate Preservation Plan which will address these shortfalls in an estate. This is an exciting product that can be offered to clients that will protect their loved ones from unnecessary heartache because of a shortage of, or no cash at all, in an estate. This product is for everyone who is planning his/her estate, which should include the signing of a relevant and up-to-date Will.
The Clientèle Estate Preservation Plan is designed to assist in ensuring that last wishes and legacies are realized. The Plan protects the financial interests of the estate’s beneficiaries from the costs associated with the winding up of an estate, as well as providing financial security during this, sometime lengthy, administration process.
Watch your inbox for the official presentation of this remarkable product. We will also discuss the product in detail in one of our future newsletters.
TO ALL RUGBY FANS: Enjoy the rugby season!
We hope that the Springboks will make South Africa proud!!!
SIGNING OF A WILL
….. Read more in the upcoming edition!
THE IMPACT OF THE DIFFERENT TYPES OF ESTATES ON THE ADMINISTRATION PROCESS
Now that you know what the differences between the two main types of estates are, we are going to expand on the impact these two estates have on the administration process of the estate.
Section 18(3) Estate
An estate totalling R250 000 or less.
In the case of a Section 18(3) estate, the Master of the High Court will issue Letters of Authority, listing all the assets and then close his file. The Master’s Representative must then collect the assets, pay the liabilities and distribute the balance in terms of the Will or the Law of Intestate Succession. This ensures that the estate is wound up much quicker – although, as is the case with many estates, not always completely hassle-free. The Master’s Representative is still bound to deal with the assets in terms of the Estate Act. The Master might still request a Statement of Assets and Liabilities, i.e. if there are minor heirs involved.
Financially, there are less costs involved in a Section 18(3) estate. It is not necessary for advertisements as in the case of the other estates referred to below. No advertisement costs and Master’s fees are payable and the administration costs are also less. Master’s fees, however, will be payable if a Statement of Assets and Liabilities has to be lodged with the Master.
The Letters of Authority allows the Master’s Representative to work only with the listed assets. Should more assets be traced, a new inventory has to be drafted and the Letters of Authority has to be replaced, listing the assets as per the amended inventory. All estates must be administered in terms of the Estate Act and Will of the deceased, or the Intestate Succession Act, should the deceased have passed away without a Will.
All other Estates
An estate with a value exceeding R250 000.
Winding up a regular estate is an extensive process, as the Master of the High Court keeps the file open until his requirements in terms of the Estates Act have been met.
The following describes the estate process in short:
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Once the Letters of Executorship has been issued, the administration process will start formally. A bank account in the name of the estate late will be opened and the deceased’s bank account will be closed.
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On receipt of funds, the Section 29 advertisement will be placed in a local newspaper and the Government Gazette, giving debtors and creditors a period of 30 days to submit their claims against the estate or pay their debts.
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Once all the information of the assets and liabilities of the deceased has been obtained, the solvency of the estate can be determined. If the liabilities of an estate exceed the value of the assets, it is an insolvent estate and a different administration process will be followed in respect of the relevant sections of the Estate Act or in terms of the Insolvency Act.
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A solvent estate may have a cash shortfall. The most effective way to prevent this, is to advise your clients to effectively plan their estate to ensure liquidity to prevent a cash shortfall, if possible. Should there be a cash shortfall though, a preliminary cash shortfall statement can be drafted for the beneficiaries to enable them to decide, or get advice, on how to pay the shortfall. It might be that a direct policy/pension payment had been made to a beneficiary, which can be utilised or assets might have to be sold to cover the cash shortfall. Other solutions may be to take over the bond or get a loan to settle the cash shortfall.
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If there is sufficient cash in the estate and proof of assets and liabilities as at date of death have been received, the Liquidation and Distribution Account (L&D) can be drafted, checked and lodged with the Master of the High Court for approval. The L&D has to be submitted within six months of receipt of the Letters of Executorship, otherwise the Executor will have to apply for extension from the Master.
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The Section 35 advertisement is then placed, giving notice that the Liquidation and Distribution Account will lie for inspection at the local Magistrate’s office and the Master of the High Court for a period of 21 days.
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Once the above advertisement period has expired and no objections to the account had been received, the Executor can proceed with a preliminary distribution to the heirs. Should there be a fixed property/ies, an attorney will be instructed by the Executor to proceed with the transfer to the beneficiaries. Other assets, i.e. motor vehicles, fire-arms, shares, etc. can now also be transferred.
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The Executor will inform SARS of the estate and all the outstanding tax returns until date of death must be assessed before the estate can be finalised. A tax clearance certificate must be obtained from SARS in all estates, whether a person was liable for tax or not.
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Once the estate has been finalised, the Master will be requested to issue a filing slip, which is the official release of the Executor’s duties in an estate.
All decisions in an estate will be made in conjunction with the beneficiaries.
In all estates where there are minor heirs, the Master requires sworn valuations of immovable and movable property.
Should the deceased be entitled to surplus pension fund payments after the estate has been finalised, the file will be re-opened and it might be necessary to once again follow the process described in items 5 – 9 above.
Legatus Trust will draft a proper Will which will add to your client’s peace of mind, ensuring that the administration of the estate will be handled professionally and as smoothly as possible.
ECCENTRIC BROOKLYNITE
An unnamed Brooklynite who died in 1919 was well-known because of his wealth and eccentricity. Therefore, it was no surprise when he left these instructions to the Executor of his estate:
“I own seventy-one pairs of trousers. It is my desire that they be sold by auction after my death and that the proceeds of the sale shall be distributed to the deserving poor of my parish. They must, however, be disposed of severally to different bidders, no single individual being permitted to purchase more than one pair.”
The Executor executed his wishes and instructions to the letter. Later it was discovered that, hidden in each pair of pants, there was a secret pouch containing ten $100 bills.
He left nothing to his family.
Until next time.
“The Legatus Times” Team
