Benjamin Franklin once said that in this world, nothing can be said to be certain, except death and taxes. While we’ve all heard this quote on numerous occasions, clients often fail to take the vital steps required to ensure that the traumatic event of their death is made easier for those left behind.
Understanding the process required to wind up an estate, Financial Advisors are in a good position to advise their clients to get their affairs for the sake of loves ones. I unpack these considerations below.
Where there’s a will
The first and most important step is to ensure that you have executed a valid Last Will and Testament that clearly sets out your instructions regarding the devolution of your assets upon your death to your heirs. Your Will is probably one of the most important documents you will sign during your lifetime and it is essential to ensure that your instructions are clear and concise.
Upon your death, the person nominated as the executor in your Will takes legal responsibility for the winding up or administration of your estate. This process can be quite stressful for family members so it is vital that they understand exactly what it entails and how long it is expected to take. While the actual estate administration process is not typically overly complex, it is administratively intensive and the law stipulates certain timelines, which have to be adhered to.
The estate administration process in a nutshell
While the above process may not seem unduly onerous on the face of it, there are many factors that can cause delays and complications. These are briefly outlined below.
Capital gains tax
Death triggers a capital gains tax event i.e. the deceased is deemed to have sold all of his/her estate on the date of death and a complex capital gains tax calculation therefore ensues. There are, however, exemptions or rollovers when a deceased leaves the entire estate to a spouse.
Liquidity is vital as liabilities in an estate include income tax, estate duty, executor’s fees, Master’s fees, valuation fees as well as any other liabilities the deceased may have incurred during his/her lifetime. Currently estate duty is 20% of the gross asset value of your estate up to R30 million and 25% of the gross asset value in excess of R30 million. A well-drafted estate plan by a financial adviser will alert you to any liquidity issues your executors and heirs may face after your death.
Tax return submissions
The submission of tax returns in estates has become far more complex than it was previously as the deceased’s tax practitioner has to continue submitting returns for the deceased until the Liquidation and Distribution has been finalised. An after date of death tax reference number has to be applied for and generated from SARS.
Executors are facing numerous challenges with the Master’s Offices around the country and as a result, undue delays are being experienced.
A final word
In conclusion, it is highly recommended that you appoint an independent and professional executor to attend to the administration of your estate. While it is useful for the professional executor to act with a co-executor who is part of the family, the stress of estate administration for a family member who is not familiar with the process could be overwhelming. This could lead to unnecessary delays and queries. Each person’s situation is unique, and one needs to