Executor fees and duties explained

If you have property, deemed property, or debt, you will have a deceased estate when you pass away. The person who is appointed to oversee the administration of your deceased estate is known as the executor. An executor is appointed by the Master of the High Court in terms of the Administration of Estates Act, 66 of 1965.

Remuneration:

The executor of your estate is entitled to remuneration of up to 3,5% plus VAT of your gross estate, and 6% plus VAT on income accrued and collected after your death. This might not seem like a lot of money, but if you do the maths, you will find that just the 3,5% on an estate worth R4 million, equals R140 000 (the VAT inclusive fee will be R161 000).

(Spoiler alert: If you have Capital Legacy’s Legacy Protection Plan^TM, your estate won’t pay any executor fees. Capital Legacy also never charges the 6% collection commission on income, regardless of whether there is an LPP^TM or not).

Yes, R140 000 seems like a lot of money to wind up an estate. But when you look at the duties of an executor of a deceased estate you realise that for the amount of work and the responsibility that comes with the job, it is appropriate. But if you are a beneficiary, it is still a lot of money to be taken out of the estate.

The duties of an executor of a deceased estate:

• In estates where the assets are valued at more than R250 000 or where the estate is insolvent, an executor is appointed by the Master. This is normally the person named in the will as executor, or if there is no will, the person nominated by the heirs. It should be noted, however, that the executor, if a layperson, should be assisted by an attorney, trust company or accounting firm. The executor must also lodge security to the full value of the estate unless he or she is exempted by the will, or is the parent, spouse, or child of the deceased.
• After the appointment, this person must administer the estate in terms of either the will, or if there is no will, the Intestate Succession Act.
• One of the first things the executor must do is to open a bank account in the name of your deceased estate.
• The executor has six (6) months after the date of appointment in which to lodge a full liquidation and distribution (L&D) (account) with the Master. This account is a detailed report on his/her administration of the estate.

The liquidation and distribution account:

• The executor must advertise for creditors in the Government Gazette and in a newspaper that is circulated within the area where the deceased lived, giving them 30 days to lodge any claims against the estate.
• He/she then drafts an L&D account that complies with the formalities as set out in the Administration of Estates Act.
  • The L&D account consists of:
    • a section showing all the assets of the deceased,
    • a section showing all the liabilities of the deceased,
    • the cash of the estate (this is called the cash recapitulation statement and reflects the cash position in the estate),
    • the distribution of the assets,
    • the income and expenditure after death,
    • a section showing any fiduciary assets,
    • a section in which estate duty payable is calculated.
• This account is then lodged with the Master for examination. If the Master is satisfied with the contents of the account, he gives the executor permission to advertise the account in terms of section 35 of the Administration of Estates Act. This means that the executor again advertises in the Government Gazette and in a newspaper that is circulated within the area where the deceased lived, informing any interested party that the account is lying open for inspection for a period of 21 days, at the office of the Master as well as a copy at the office of the Magistrate in whose jurisdiction the deceased resided.
• Interested parties can then peruse the account to make sure that their interests are protected in it. If not, they may lodge a complaint within those 21 days with the Master, who will then take it up with the executor. The executor must then reply to the Master within 14 days, giving his comments on the objection. If, after consideration of such an objection, the Master is of the opinion that such objection is well-founded or if, apart from any objection, he is of the opinion that the account is in any respect incorrect and should be amended, he may direct the executor to amend the account or may give such other directions as he may think fit.
• Any person aggrieved by any such directions of the Master or by a refusal of the Master to sustain an objection so lodged may apply for an order to set aside the Master’s decision, and the court may make such an order as it may see fit.
  After the account has been amended, it must again lie open for inspection as explained above.
• When the account has lain open for inspection without any objections being lodged and the Master has also received the certificate from the Magistrate where the account has lain open for inspection, confirming that no objection was lodged with his office, the Master will give permission to the executor to distribute the estate as indicated in the account.
• If the executor has satisfactorily complied with all the requirements, the Master will reduce the security filed by the executor to nil and release him from his duties. 

How Capital Legacy ensures the smooth winding up of a deceased estate

When Capital Legacy is appointed as the executor of an estate, we go to the Master’s offices countrywide on a daily basis to check on the progress of all the estates we administer. Our designated Masters’ liaisons or correspondents go to the examiners at the Master’s offices, who print out and supply them with a query sheet on each estate that Capital Legacy handles.

The query sheet indicates the status of the process and what information is lacking and/or what steps need to be taken.

Capital Legacy then supplies the additional information and its Masters’ liaisons provide the examiner with the necessary information.

The secret is good old footslogging and speaking to the examiners at the Master’s Office on a daily basis. This is how we at Capital Legacy precisely track the progress of the estates under our care. We literally go the extra mile (well, thousands of them per year) for our clients.

When are beneficiaries paid?

Heirs/legatees are paid their allotted share when the assets and liabilities have been dealt with. The liabilities are paid before the inheritance is distributed. This is only after the L&D account has lain open for inspection without objection. 

How long should winding up an estate take?

That depends on the complexity as well as the number and different types of assets there are in the estate. Other factors which could influence the winding up of an estate include if the estate holds assets and intellectual rights in other countries. In our experience, estates with no delays can be wound up in under 12 months, whereas if there are any delays, for example with outstanding taxes, we have seen some estates take 18 to 24 months.

Indemnify your estate against legal fees

Remember the spoiler alert at the beginning of this blog? Well, the LPP^TM is the secret ingredient in Capital Legacy’s recipe for your estate not having to pay legal fees when you pass away.

Rather than being burdened with executor, conveyancing, trust, and trustee fees, among other costs, the LPP^TM covers these costs and ensures that there are no delays in starting the administration process.

Contact your financial advisor or chat to Capital Legacy if you would like your will drafted for free, or if you would like to find out more about the LPP^TM.