One of the biggest misconceptions about estate administration is that it's only relevant to a small minority of people. Many believe they can avoid it, but the reality is that it always catches up to you.
Whether you are dealing with the estate of a parent, spouse, or sibling, proper administration is essential, not just for legal compliance but to protect your inheritance and avoid costly mistakes.
Scenario 1:
No Will = No Executor = No Legatees = No Voice
Client X’s mother passed away, leaving behind a house registered in her name. Client X now wants to sell the property and consults with an attorney. Here's what unfolds:
- No Will: The deceased mother died intestate (without a will).
- Marital Regime: She was married in community of property to Client X’s father (also deceased).
- Children: She had four children. One of them is also deceased, who was married in community of property and had three children.
Before anything can happen both estates (the mother’s and the father’s) must be properly administered. Firstly, administer the father's estate to transfer his share of the property to the mother. Secondly, administer the mother’s estate to then transfer the property to the rightful heirs. Lastly, without a will, an executor must be appointed by the Master of the High Court.
Once the property is transferred, proceeds from the sale will be distributed according to intestate succession laws. And that is to divide everything equally among the four children.
This process is complex, time-consuming, and often emotionally draining—all of which could have been avoided with a simple, valid Will.
Scenario 2:
STOP !! DEEMED PROPERTY = DECEASED ESTATE = ESTATE DUTY
In this case, a client’s husband passed away with a valid Will. He left behind a wife and two children, and the estate included:
- A car in his personal name
- A bank account
- A life insurance policy (R3 million)
- A retirement annuity (R500,000)
The client received the insurance payout and annuity and assumed there was no need to administer the estate. This is a common misunderstanding.
While it's true that life policies and retirement annuities are not subject to estate duty and are often paid directly to nominated beneficiaries, the rest of the estate still requires formal administration.
- Deemed Property: Certain assets (like life policies) are considered for estate duty calculation.
- Estate Tax: SARS requires that the estate be assessed for tax purposes—even if some assets pass outside the estate.
- Bank Accounts: Must be frozen and properly distributed.
- Vehicle Ownership: The car must be transferred from the deceased’s name, requiring Letters of Executorship.
Failure to administer an estate properly can result in penalties from SARS, frozen assets, and unresolved ownership disputes.
Remember: The first R3.5 million of an estate is exempt from estate duty—but you still need to administer the estate to finalize it legally.
Why estate administration matters for you:
- Protecting your inheritance
- Ensuring tax compliance
- Transferring assets properly
- Avoiding legal disputes
- Honoring the wishes of the deceased
You might not think estate administration affects you until you find yourself stuck in a situation where you need to sell a house, access funds, or transfer a car.
Ensure that you:
- Draft a valid Will.
- Understand the costs and process of administering an estate.
- Avoid complications and reach out to professionals early to protect yourself and your family.
