The Costs Associated With Winding Up An Estate
When a person dies there are several costs associated with the winding up of the estate other than settling the debts and liabilities of the deceased. These costs are paid by the estate from the assets in the estate.
All estates are subject to Estate Duty. Estate Duty is set at 20% (or 25% of estates over R 30 million) of the value of the dutiable amount of the estate and is payable to SARS. The dutiable amount is determined by deducting all liabilities together with certain other deductions contained in section 4 of the Estate Duty Act No. 45 of 1955 from the gross value of the estate. Some relief is given through the ‘primary rebate’ which provides that an amount of R3.5 million can be deducted from the value of the estate. Testators can also leverage the section 4q deduction which provides that the amount bequeathed to the surviving spouse is to be deducted from the value of the estate (eg: if the whole estate is left to the spouse then no estate duty is payable).
All estates must be reported to the Master of the High court. The Master charges a fee on a sliding scale which starts at R 600 for estates over the value of R 250 000, thereafter for every R 100 000 a further R200 is added to the fee which is capped at the total of R7 000.
The process of administering estate requires the executor to perform certain tasks that bring general costs levied against the estate. These tasks include:
– Advertising the estate and drafting the Liquidation and Distribution account
– Evaluation of assets
– Opening a bank account and settling the bank fees
– Transferring of any immovable property to the beneficiaries.
For more information on the process of administration of an estate please read this article.
The executor is entitled to a fee for tending to the administration of the estate. The minister has set the amount in which the executor is entitled to at 3.5% of the gross value of the estate as well as 6% calculated on the income of the estate. The executor’s fee covers all the consultations related to winding up the estate, all the attendances required by the law, and the Will of the deceased. The fee amount is to compensate the executor for the amount of time spent and the number of attendances which winding up the estate requires. Further, the fee compensates the executor for the risk stemming from the fiduciary duty towards the estate, which could result in their liability for any negligent conduct. For our view on executor fees please read this article on the Executor.
The costs related to winding up an estate is unavoidable. However, with a valid Will and some estate planning, you can minimize unnecessary costs. If you would like guidance on who to leave your estate to please read this article or choose package 3 to arrange a consultation with an attorney.