Winding up an estate when a loved one dies
While most people understand how and why a Will is needed, very few know what happens when it comes to administering and executing that Will in an increasingly complex modern economy.
The importance of knowing about estate planning
"The administration of an estate follows closely on what is a terribly traumatic event in the lives of all of those affected. This is why it is extremely important that the beneficiaries are aware of how the process will unfold and we at Standard Trust Limited can assist in ensuring the entire administration of the estate runs smoothly," says Jacinta Bassuday, Legal Manager at Standard Trust Limited.
While the administration of a basic estate of under R250 000 would often be fast tracked to be completed within a week of letters of executorship having been lodged (which is normally within six months of the winding up process beginning) by the Master of the High Court of the relevant metro, Bassuday says there are practical considerations that cause complications in practice with larger estates.
Divorce orders and maintenance claims in favour of an ex-spouse whom the deceased did not make provision for in his or her Will, for example, is a common example of a complication that arises often. "The problem is the Executor could suddenly be faced with a massive claim that can quickly eat up the residue in an estate," says Bassuday.
This is why testators need to ensure their Wills cover for these eventualities as litigation is often the only avenue left to resolve these types of disputes – but this costs money and can push out the process for many months. "These types of cases often need to go to the legal route and ultimately further impact the residue of the estate," Bassuday adds.
Another complication in modern economies relates to life policies – generally these proceeds would accrue outside of the estate unless the estate itself is a beneficiary of the policy.
"We would recommend that testators think carefully when they nominate who benefits from these policies. Pension funds have their own rules when there is a conflict and it is important to ensure this discretion does not see money going somewhere the testator may not have wished in his will," Bassuday explains.
Know your funds
According to Standard Trust Limited it is important to understand the difference between pension fund nominations and wishes in terms of a Will. "A lot of people don’t fill in nomination forms for pension funds, or never update them, as they think they are taken care of in a Will – but a pension fund will apply their own rules in terms of what is fair and equitable and that money may end up elsewhere," cautions Bassuday.
As pension fund beneficiaries don’t pay estate duty, the tax considerations of who is nominated also needs to be considered. Standard Trust Limited says the nomination of an Executor is very important, but this is often a failing of many Wills and their consequent execution in practice.
If adequate and skilled executors are not appointed, the Master of the High Court will make an appropriate appointment. While small estates of under R250 000 would often not require a special Executor appointed by the Master – estates of R500 000 and more would mostly be required to appoint a specialist as an Executor.
When appropriate provision has not been made in a Will, family members can complete what is known as a Nomination of Executor to perform this function. They would submit that nomination to the Master, who has the power and authority to make such appointment.
The importance of a Will in Estate Planning
"Estates are getting more complex and it is always better if the testator, in his Will, ensures that he has the right Executors in place," says Bassuday. Standard Trust Limited says the entire execution process begins with a Will, and so it is also very important to ensure the Will can be quickly and easily retrieved so that the process can begin promptly.
"It is important to give a copy to relatives and the executor so in the event of someone’s death it can be easily retrieved. This is the best possible start to ensuring everything else can happen within a reasonable timeframe," Bassuday says.