As soon as a person dies, his deceased estate comes into existence regardless of whether he left a will or not. Immediately after a death, the process of liquidating the estate begins, and this process can be very difficult for the family of the deceased. Real estate liquidation is a complex and lengthy process that can take from 5 months to several years. Having an experienced executor who is familiar with the mechanisms and procedures for liquidating the estate of the deceased, for the benefit of the family and beneficiaries. The time it takes to liquidate an estate depends largely on the size and structure of the estate, and we’ve outlined general timelines for each stage of the process below. Be aware that the process may also be affected by the level of service at MA, SARS, banks and other financial institutions. In general, the liquidation process includes the following:

  1. Preliminary interview

After a person’s death, an appointed executor must meet with the deceased’s family to obtain the documents needed to register the estate with a High Court magistrate. The death notice must be completed and sent to the Magistrate within 14 days from the date of death. The appointed executor must then draw up an approximate inventory of the deceased’s estate, which must be sent with the deceased’s will to the magistrate’s office. In addition to this, the appointed executor must apply to the Magistrate for a letter of executorship. It is important to bear in mind that all powers of attorney in respect of the deceased end at the time of their death and that banks must immediately freeze any accounts that are part of the deceased’s estate. Assets such as vehicles, property and furniture must be valued by a sworn appraiser.

note: The most important documents in this process are the death notice, original will, death certificate, inventory and execution. This process usually takes about 2 weeks.

  1. Appointment of an executor

After the property is registered, the master will issue a writ of execution, which effectively authorizes the executor to represent the deceased’s property. An executor has the power to open a bank account late for the estate, notify third parties of the death, collect all assets, advertise to creditors and settle liabilities.

note: This process can take anywhere from 2 weeks to 3 months, and any delays can cause incredible frustration for the family.

  1. Advertising for lenders

Once an executor has been formally appointed, they must open a bank account for the estate and place a Section 29 notice in their local newspaper and Government Gazette. The purpose of this notice is to notify debtors and creditors of the decedent’s estate and to give them a 30-day period to file any claims against the estate.

note: The placement of the ad about debtors and credits will take about 2 weeks depending on the speed of the Contractor.

  1. Prepare a liquidation and distribution account

After the 30-day period has expired and all claims have been submitted, it is the Executor’s function to prepare a Liquidation and Distribution Account (L&D Account). The L&D account reflects all the assets and liabilities of the estate and determines its solvency. If there is a will, the executor will use this document to determine how assets will be distributed. In the absence of a will, assets will be distributed according to the Intestate Succession Act. Once the L&D account is completed, it is submitted to the Master with all supporting documentation as well as the will, where it will lie for 15 days to allow for enquiries. Anything relating to the L&D account can be requested via the request letter and the Contractor is responsible for providing responses to the Master. If the Master is satisfied, he will sign the L&D account.

note: The L&D account can take anywhere from 2 weeks to 2 months to prepare, depending on the complexity and size of the property. The contractor must have good administrative skills and a good understanding of accounting. In the event of a complex asset structure or tax issues, multiple accounts may need to be drawn up before the estate can be finalised.

  1. Advertise a liquidation and distribution account

Once the L&D account has been signed, the executor is required to place a section 35 advertisement in the local newspaper and Government Gazette and the account will be open to Magistrates’ Court inspection for 21 days. This process provides an opportunity for any objections, along with reasons, to be submitted to the Master. If no objections are filed, the court issues a certificate of no objections. This certificate must then be filed with the Master’s office to give the executor the right to distribute the assets.

note: The executor is responsible for reporting the death to SARS, paying any taxes or CGT and calculating estate duty. The executor’s fee is calculated at the rate of 3.5% of the property’s value (excluding VAT). It can take 1 to 2 months to promote your L&D account.

  1. Distribute assets

Once the executor is empowered, they can begin distributing assets against the L&D account. This includes paying property duty, tax and CGT where applicable. During this process, the assets are either awarded to the heirs (for example, the property is transferred to the heir’s name) or the property is realized and the proceeds are paid out according to the will. After the heirs have received the inheritance, they are required to sign a receipt as proof of receipt.

note: Again, depending on the complexity of the estate, distribution of assets can take anywhere from 1 to 6 months.

  1. Sign and close

The final step in the process is for the executor to provide evidence that the property has been disposed of in accordance with the will. He is required to provide the Master with copies of acquittals, evidence that creditors have been paid and that the property has been properly transferred. Once he is satisfied, the master will issue a deed and officially close the estate. The executor shall retain all records relating to the property for the prescribed period.

note: Closing on an estate takes about 2 weeks.

As you can see, the process of liquidation of the estate is long, time-consuming and administrative. It also requires the Contractor to be well versed in accounting, finance and taxes. It is advisable that family members and heirs be prepared for delays in the liquidation process and make sure that they can support themselves financially during this period.

Have a good day.

Sue

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