What Does an Executor Actually Do?
Key Takeaways:
Executors play a vital role in managing a deceased person's estate.
Their responsibilities include locating assets, paying debts, and distributing the estate.
Legal support from an attorney ensures effective and compliant execution of the deceased's wishes.
The duties and responsibilities of being an Executor of a Deceased Estate.
I’m thinking wrestling!
It’s funny, whenever the term ‘Executor” comes up, I am immediately transported back a few years to the world of WWE (World Wrestling Entertainment) when The Executioner would come on stage. Dark and foreboding music played on the arena speakers as he entered the stage and suddenly all hell broke loose. The Executioner had arrived and no one else stood a chance. He pummeled his way through the “wrestling” matches and ultimately won just about every match. At least to my recollection.
The Executioner was the best!
But, I digress because that’s not (really) the same thing.
Although….
An Executor is appointed to represent a deceased estate and in a sense, will wrestle issues to the ground in defence of your last wishes. At least in theory (there is no actual wrestling that happens).
So let’s think of the Executor as a protector. Your champion beyond the grave who will thrash any resistance that gets in the way of the proper administration of your estate.
But what does being an Executor entail?
Not really a pro-wrestler
In our article, It Costs How Much To Die?, we discussed the basic principles around the appointment of an Executor –
Firstly (and in essence), it’s important to think of an Executor as a “shield”. Someone who will act against the complexities and intricacies that make up a deceased estate. Someone who will pummel any resistance and protect your Will at all costs.
I guess they could (sort of) be likened to The Executioner in WWE. Just with less foreboding….
This shield, this pro-wrestler is normally nominated by the deceased in the Will and then appointed by the Master of the High Court to undertake his/her duties. Amongst other things, it is the Executor’s responsibility to report the death to SARS, pay any tax or Capital Gains Tax, and calculate any Estate Duty owing. The Executor’s Fee is calculated at 3.5% of the estate’s assets (excluding VAT) – as a FYI.
Importantly and as we advised in the above-mentioned article, it is prudent to have an experienced Executor who is familiar with the mechanisms and procedures of winding up deceased estates and who will act to the benefit of family left behind and beneficiaries nominated in the Will. Not someone who is emotionally invested in the passing of the deceased – it is already an emotional and difficult event, having someone who is personally affected by the passing of the deceased is not the best appointment. It is therefore always best practice for an Executor to be impartial!
As a reminder - an estate refers to everything of value that someone owns—such as all property owned, in and outside of South Africa (in cases where someone was ordinarily resident in the country), art collections, antique items, investments, certain insurance policies, annuities, intangible assets such as a patent or trademark and any other asset or entitlement. And a deceased estate is therefore all the assets (and liabilities) that are gathered or accrued by the deceased during his/her lifetime.
The official appointment and discharge of the Executor
The appointment of an Executor is formalised after registering the deceased estate. The Master of the High Court will, once registered, issue a Letter of Executorship which effectively authorises the Executor to represent the deceased estate. And the Executor’s powers, duties and responsibilities commence once the Master of the High Court has issued this Letter of Executorship. Once authorized, the Executor will then have the authority to open an estate late bank account, notify third parties of the death, collect all assets, advertise for creditors and settle liabilities.
The Executor’s term of office is terminated automatically if he/she dies, or when the Master (or a court), relieves him/her of the office (for whatever reason). But the duties and responsibilities of an Executor only end when the estate has been finalised and the Master has issued a filing note. The Executor must then apply in writing to be discharged from his/her duties, and his/her office ends once the Master has discharged him/her in writing.
All very formal.
But what does an Executor actually do?
Depending on the types of assets, an Executor’s duties remain the same, regardless of the size of the estate. Only in the case of estates (including joint estates) with a gross value <R250 000 for which no Executor was appointed, does a Master’s representative have fairly few duties.
First off, the Executor needs to have access to the will.
Why? Well they need to check its validity, establish who the beneficiaries are and get a rough idea of the assets and liabilities of the estate (according to Section 26 of the Administration of Estates Act 66 of 1965, the Executor is actually charged with the custody and control of property in the deceased estate).
To do this (in any way accurately), the Executor will need access to bank accounts, title deeds to property, insurance policy documents (if the beneficiaries are named in a life insurance policy, the proceeds can be paid directly to the beneficiaries, providing cash to dependents while the estate is being wound up) and any other documentation that the Executor can find pertaining to the financial affairs of the deceased.
But this “inventory taking” can only be done by obtaining an official form from the office of the Master of the High Court or from legal stationers.
And that sounds like a lot of work. Seemingly overwhelming.
Take a deep breath, we can provide a summary of what the duties of an Executor actually are -
In a nutshell
An Executor, who as we already know, is tasked with the winding up of a deceased estate is essentially responsible for protecting the assets of an estate, making distributions of property to beneficiaries according to the Will and paying the debts and various taxes of the estate.
According to the Administration of Estates Act, the duties of an Executor can be summarised as follows –
The Executor must meet with the family of the deceased in order to obtain all the relevant information and documentation needed, such as the death certificate and a list of the deceased’s assets and liabilities;
The deceased estate must be reported to the Master of the High Court in the area where the deceased lived;
The Executor must provide notice to the creditors (persons or entities the deceased owed money to) in order to inform them of the death of the deceased. The notice will also request the creditors to institute their claims against the deceased estate within a period of not less than 30 days or more than 3 months after publication of the notice. The notice must be published in a local newspaper and the Government Gazette;
All existing bank accounts of the deceased must be closed and a separate bank account (estate late bank account) must be opened where all money that forms part of the deceased estate must be kept;
The Executor must determine if the deceased estate has enough assets to pay for the liabilities that forms part of the deceased estate. If there is not enough money to pay some or all of the liabilities, the Executor must consider selling some of the assets that form part of the deceased estate;
The Executor will be responsible for drafting accounts that must be advertised for the public to inspect. These accounts must then be lodged at the offices of the Master of the High Court. These accounts will set out the assets and liabilities, as well as how the deceased estate will be divided and distributed between the heirs of the estate, and
After the accounts have been approved by the Master of the High Court, the Executor must pay the creditors and distribute the deceased estate accordingly.
Once step 7 is done (meaning the estate has been effectively wound up), the Executor can be discharged from his/her duties.
All done.
But wait, there must be some risks involved by being someone’s Executor?
Just like pro-wrestling there are immense risks that come with being an Executor. And one should take serious note of them…
If more than one Executor is appointed, all are subject to the same risks, even if only one of them administrates the estate. When an agent is appointed to act on behalf of the Executor, it does not mean the Executor is relieved of his/her responsibilities or risks.
An Executor can be penalised and/or imprisoned if he/she does not abide by the laws as set out in the Administration of Estates Act.
He/She can also be held personally responsible for, inter alia, the following:
Losing an original will that was in his/her possession and not yet lodged with the Master as a result of negligence, resulting in heirs possibly suffering damages, or resulting in wasted costs;
Failing to publish the first estate notice in the Government Gazette as well as a local newspaper, or publishing it in the wrong newspaper. The same applies to the second notice of the estate account being open for inspection, or failing to arrange for it to be open for inspection in a Magistrate’s Court;
Receiving objections or submitting claims after the estate has been finalised;
Failing to follow the correct instructions and procedures if a claim (including a maintenance claim) is not accepted, or is contested, ignored or submitted late, and the claimant insists on payment after the finalisation of the estate;
Failing to attend to an objection or following the correct procedures before finalising the estate;
Temporarily investing estate funds in a risky investment, and/or speculating, and/or using the funds for personal or other unauthorised purposes. The beneficiaries may hold the Executor accountable for loss of income on funds, or other assets not generating any income over a reasonable period of time, or for the late payment of interest-bearing claims against the estate when funds yielding a lower rate of interest than the claim were available;
Failing to check the estate(s) of a predeceased spouse or spouses to determine whether limited rights had been created or not, and if it is the case, ignoring them or dealing with them incorrectly;
Dealing incorrectly with donations in an ante-nuptial contract, or with claims in terms of a Divorce Order or deed of settlement or calculating accrual claims incorrectly;
Ignoring pending legal action and matters that originated during the deceased’s lifetime, or making incorrect decisions regarding settlement or continuation of such legal action;
Signing incorrect or invalid contracts (for example the sale of immovable property in the estate);
Ignoring claims in favour of the estate (debtors), or allowing claims to become prescribed;
Not submitting claims to a medical fund, or short-term mortgage or credit life insurance in time and letting them lapse;
Dealing incorrectly with existing businesses (including farms), whether a sole proprietorship, partnership, sole member of a closed corporation, or shareholder (director) of a private company (especially because of a lack of knowledge of a business), and in particular those that have ongoing commitments to meet;
Failing to submit outstanding SARS returns or to submit them in time;
Not obtaining any clearance certificate (including for Capital Gains Tax and VAT) and finalising the estate;
If the deceased was registered for VAT, failing to determine whether or not assets may be transferred VAT free to the heirs;
Interpreting the will incorrectly, or applying the Intestate Succession Act or the substitution of heirs incorrectly;
Incorrect payouts or transfer of assets (such as shares, but excluding fixed property, which will probably be noticed by the Deeds Office) that cannot be recovered;
Failing to make sure that when assets such as shares, unit trusts and loans are transferred, they are done so with written proof;
Failing to make sure that transferable assets that were bequeathed to heirs are indeed transferred correctly;
Cancelling mortgage bonds in favour of the deceased when it is prejudicial to do so;
Giving one-sided advice/instructions to a client, especially in the case of the massing of estates;
Giving advice/instructions on VAT registrations that could later result in losses for heirs, and
Providing advances to heirs and/or transferring assets prematurely.
And that is an extensive list of risks!
We therefore reiterate that the appointment of an Executor is not something to be taken lightly. An Executor should be armed with sound knowledge of and be familiar with the mechanisms and procedures of winding up deceased Estates. This could be someone with either a financial or legal background. Or both. Remember there is a fiduciary responsibility placed on an Executor and it is not always easy sailing….
Whilst the above outlines, at a high level, the basic rights and responsibilities of an Executor, it is not all encompassing. There are various technical issues which we have not discussed that may be important when considering who to appoint as an Executor and why. Knowing who will act according to your exacting requirements and administer your estate appropriately often takes an unbiased view and professional knowledge.
So please seek professional guidance when finalising your will and appointing your Executor. Ensure that your last wishes will be taken seriously and that any resistance to those wishes will be throttled to the ground. Sometimes it’s good to have a WWE wrestler on your team, ey? (Well, sort of).
We may not be in the WWE but the attorneys at Benaters are poised to guide you through the process of administering a deceased estate. Get in touch with Benaters here for peace of mind and the assurance that you are appointing the right people.
Written by Alicia Koch on behalf of Benaters