What goes into winding up an estate?
In our previous blog post, we touched on the importance of appointing someone you trust as executor of your will. Here’s exactly what executorship entails, and why you should leave it in the hands of someone experienced.
All your assets and debts are what’s called your ‘estate’. When you die, the executor of your will winds up (in other words, sells assets that need to be sold, takes charge of and protects assets that are to be retained and distributed, collects money in your bank accounts and other debts due to you, and finalizes your tax affairs) and distributes your estate according to your will.
The risks of not appointing an executor
If you don’t name an executor in your will, the Master of the High Court will appoint one for your estate. This will usually be a family member. Because they may be distracted by the tragedy of your death, and because administering an estate can be a complex, time-consuming task, someone who does not know how to do this properly may make mistakes or omit to do important things. The results of this are serious: Not only do they mean that your wishes in your will may not be adhered to, but the executor may be penalised or even imprisoned if he or she doesn’t abide by the laws as set out by the Administration of Estates Act.
The duties of an executor
There are many duties an executor of a will must attend to.
Gathering important documents
The executor must obtain all relevant information and documents required for executing your will, including the death certificate and an up-to-date record of your assets (everything you owned) and liabilities (everything you owed).
Notice of the deceased estate
Even though a death certificate has been issued, the executor must report the deceased estate to the Master of the High Court in the area in which you lived. A number of documents, including your will, are lodged with the Master, who then issues your executor with letters of executorship.
The executor must also provide notice for debtors and creditors to come forward. The notice, which must be published in the Government Gazette and a local newspaper in the area in which you lived, must include a request for creditors to lodge any claims against the estate within a period between 30 days and 3 months following notice being given. The purpose of this is that if there are people to whom you owe money or who owe you money but there is no record of this in the papers that your executor finds, these people have the opportunity to have their claim paid or to pay what they owe.
Administering bank accounts
The executor must close all of your bank accounts, and open a separate account in which they keep all money forming part of your estate.
Managing assets, liabilities and accounts
The executor must then determine whether you had left enough assets in your estate to cover your debts, also called liabilities. If there is not enough cash in your estate to pay off your debts, the executor must, after careful consideration, sell assets in order to raise the necessary funds. If there are not enough cash and assets to cover your debts, your estate is wound up as an insolvent estate. All assets are then sold and the proceeds distributed proportionately among your creditors, with your loved ones getting nothing (but if they have received proceeds of insurance policies as nominated beneficiaries, they do not have to pay any of that money toward your debts).
The executor must set out your estate’s assets and liabilities – as well as how your estate will be divided and distributed – in a formal account. This account is lodged with the relevant Master of the High Court for approval. Once approved, the executor must advertise the account to lie for inspection. This is so that interested parties (creditors or beneficiaries) may check to see that their claims and rights have been dealt with by your executor. If not, they can lodge an objection with the Master of the High Court. In practice, objections are rare.
After the account has lain for inspection with no objections having been received, the executor must pay the creditors and then distribute the remainder of your estate according to your will.
Communicating with the family
Because the process is so complex and can often take longer than expected, the executor communicates regularly with the will’s beneficiaries to keep them informed, allowing them to stress less. As you can see, responsibility such as this is best left in the hands of a professional. You still have time to draw up a free will as part of the Law Society of South Africa’s ‘Wills Week’ initiative. Contact us on 011 347 0300 or email@example.com before 30 October to make your appointment.