Deceased Estates Eleventh edition B de Clercq MC Schoeman-Malan P de W van der Spuy

Members of the LexisNexis Group worldwide South Africa LexisNexis (Pty) Ltd DURBAN 215 Peter Mokaba Road (North Ridge Road), Morningside, Durban, 4001 JOHANNESBURG Building No. 9, Harrowdene Office Park, 124 Western Service Road, Woodmead, 2191 CAPE TOWN First Floor, Great Westerford, 240 Main Road, Rondebosch, 7700 Australia LexisNexis, CHATSWOOD, New South Wales Austria LexisNexis Verlag ARD Orac, VIENNA Benelux LexisNexis Benelux, AMSTERDAM Canada LexisNexis Canada, MARKHAM, Ontario China LexisNexis, BEIJING France LexisNexis, PARIS Germany LexisNexis Germany, MÜNSTER Hong Kong LexisNexis, HONG KONG India LexisNexis, NEW DELHI Italy Giuffrè Editore, MILAN Japan LexisNexis, TOKYO Korea LexisNexis, SEOUL Malaysia LexisNexis, KUALA LUMPUR New Zealand LexisNexis, WELLINGTON Poland LexisNexis Poland, WARSAW Singapore LexisNexis, SINGAPORE United Kingdom LexisNexis, LONDON USA LexisNexis, DAYTON, Ohio © 2017 ISBN 978 0 409 03887 3 E-Book: ISBN 978 0 409 03890 3 First Edition 1989 Seventh Edition 2008 Second Edition 1991 Reprinted 2009 Third Edition 1993 Eighth Edition 2010 Fourth Edition 2000 Ninth Edition 2011 Fifth Edition 2003 Tenth Edition 2015 Sixth Edition 2007 Reprinted 2016 Copyright subsists in this work. No part of this work may be reproduced in any form or by any means without the publisher’s written permission. Any unauthorised reproduction of this work will constitute a copyright infringement and render the doer liable under both civil and criminal law. Whilst every effort has been made to ensure that the information published in this work is accurate, the editors, publishers and printers take no responsibility for any loss or damage suffered by any person as a result of the reliance upon the information contained therein. Editor: Lisa Sandford Technical Editor: Maggie Talanda v Foreword Due to changes in several of the Acts that deal with the administration of deceased estates, we found it necessary to update the previous volume on deceased estates. As in previous editions, a practice-orientated approach has been followed. It is not only administrators of deceased estates who will find this book indispensable, but other business people as well. This publication will enable the reader to interpret and apply the laws and procedures relating to the winding up of a deceased estate. Administrators, attorneys, accountants, investment advisors, insurance advisors and students in this subject will find this publication useful. We follow the approach of referring only to an author’s name in the footnotes. Full details appear in the bibliography. vi Deceased estates More about the authors De Clercq, Bernadene BCom (UP), DCompt (Unisa), CA (SA), CFP® Prof De Clercq is an associate professor in the Department of Taxation at the University of South Africa where she lectures estates and other tax courses. She is also co-author of other publications. As a Chartered Accountant and a certified financial planner, she has practical experience in the planning and administration of estates. Schoeman-Malan, Magdalena Carolina BA LLB, LLD (UP) Prof Schoeman-Malan is a professor in the Department of Private Law at the University of Pretoria where she teaches the Law of Succession, Trusts and Estates. She is also an Advocate of the High Court of South Africa. She regularly writes articles for legal publications and is also co-author of other textbooks. Van der Spuy, Pieter de Wet BA LLB (US) Mr Van der Spuy is a senior lecturer in the Department of Private Law at the University of Pretoria where he teaches the Law of Succession and Advanced Law of Succession. He is an attorney of the High Court of South Africa and has also been admitted as a notary and conveyancer. He acquired practical experience in the planning and administration of estates while practising his profession as an attorney. He regularly writes articles for legal publications and is also co-author of other textbooks. vii Contents Page Foreword ................................................................................................................... v More about the Authors .................................................................................................... vi Chapter 1 Introduction ............................................................................................... 1 Chapter 2 Types of marriages .................................................................................... 9 Chapter 3 Intestate succession .................................................................................. 19 Chapter 4 Testate succession ..................................................................................... 47 Chapter 5 The Master ................................................................................................ 81 Chapter 6 The executor .............................................................................................. 87 Chapter 7 The executor’s account ............................................................................ 125 Chapter 8 Estate duty ................................................................................................ 145 Chapter 9 Examples of executor’s accounts .............................................................. 183 Chapter 10 Income tax & capital gains tax ................................................................... 223 Chapter 11 Donations tax ........................................................................................... 263 Acts, regulations and tables Schedule 1 Intestate Succession Act ............................................................................ 277 Schedule 2 Wills Act ..................................................................................................... 281 Schedule 3 Administration of Estates Act .................................................................... 288 Schedule 4 Regulations ................................................................................................ 329 Schedule 5 Estate Duty Act .......................................................................................... 337 Schedule 6 Extracts from regulations Table A and B ................................................... 359 Schedule 7 Consumer Price Index ................................................................................ 363 Examples of documents Schedule 8 Death notice ............................................................................................. 369 viii Deceased estates Page Schedule 9 Inventory ................................................................................................... 370 Schedule 10 Acceptance of trust as executor ................................................................ 374 Schedule 11 Letter to financial institution ..................................................................... 375 Schedule 12 Letters of executorship .............................................................................. 376 Schedule 13 Executor’s power of attorney .................................................................... 377 Schedule 14 Government Gazette – Notice to creditors in deceased estates .............. 378 Schedule 15 Notice in a newspaper ............................................................................... 379 Schedule 16 Example of Master’s memorandum ......................................................... 381 Schedule 17 Liquidation and distribution accounts in deceased estates lying for inspection ............................................................................................ 382 Schedule 18 Application for endorsement .................................................................... 383 Schedule 19 Undertaking and acceptance of Master’s directions ................................. 384 Schedule 20 Affidavit ..................................................................................................... 385 Schedule 21 Redistribution agreement ......................................................................... 387 Schedule 22 Estate duty ................................................................................................ 388 Schedule 23 Income Tax Return .................................................................................... 396 Bibliography and selected reading .................................................................................... 423 We only refer to an author’s name and the year of the publication in the footnotes. Full details appear in the bibliography. Word register .................................................................................................................. 425 1 1 Introduction 1.1 Concepts ................................................................................................................. 1 1.2 Applicable law ........................................................................................................ 2 1.3 Uniform system of administration of estates ......................................................... 2 1.4 Legislation concerning the administration of estates ............................................. 3 1.5 Assets excluded from the usual administration process ........................................ 6 1.5.1 General ...................................................................................................... 6 1.5.2 Administration in terms of section 18(3) .................................................. 6 1.5.3 Foreign assets ............................................................................................ 6 1.6 Summary of the administration process ................................................................. 7 1.7 Use of computer programs ..................................................................................... 8 1.8 Effective administration of estates ......................................................................... 8 1.1 Concepts A deceased estate consists of all the assets and liabilities which a deceased person leaves behind at his death.1 The administration of an estate can be briefly defined as the process by which a deceased person’s debts are paid and the balance of his estate is awarded and transferred to his beneficiaries. This process takes place in terms of the law and under the supervision of the Master of the High Court.2 A beneficiary is someone who receives a benefit from the deceased estate in terms of the will of the deceased or in terms of the law of intestate succession. ___________ 1 See Erasmus & De Waal 1989, p 2. De Waal & Schoeman-Malan 2008, p 3. We only refer to an author’s name and the year of the publication in the footnotes. Full details appear in the bibliography. 2 S 1(c) and 1(d) of the Administration of Estates Laws Interim Rationalisation Act 20 of 2001 defines “Court” and “Master” as of the High Court. 2 Deceased estates The person who is usually responsible for the administration of the deceased estate is known as the executor.3 He is appointed by the Master of the High Court,4 who keeps a watchful eye over the executor during the performance of his duties. The office of the Master and his most important functions are discussed in Chapter 5 of this book. The person who actually performs the administration of an estate is known as the administrator. The executor can act as the administrator himself, or he may appoint an agent to act as administrator. The office of the executor and the entire administration process is discussed fully in Chapter 6. 1.2 Applicable law The administrator must have a thorough knowledge of all the different aspects of the applicable law. It was stated above that a beneficiary will receive his benefits either in terms of the provisions of a will, or in terms of the law of intestate succession. Both the law of testate succession and the law of intestate succession are therefore of major importance to the administrator of an estate in determining how estate assets should be distributed. The law of intestate and testate succession are discussed in Chapters 3 and 4 respectively. The most important aspects of these branches of the law are regulated by legislation. There are, however, aspects of the law that are based on common law and that are not governed by legislation. These matters, such as the interpretation of wills, aspects regarding the capacity to inherit, accrual and massing, are also discussed in Chapter 4. The administration process remains essentially the same, irrespective of whether estate assets are distributed according to a will or according to the rules of intestate succession. This process does not depend on the preferences of the administrator, but is prescribed by law, principally the Administration of Estates Act 66 of 1965. 1.3 Uniform system of administration of estates At present all testate and intestate estates of members of all population groups are administered under the supervision of the Master of the High Court in terms of the provisions of the Administration of Estates Act 66 of 1965. All intestate estates are now also distributed in terms of the Intestate Succession Act 81 of 1987. The latter Act is supplemented by the decision in Bhe and Others v Magistrate Khayelitsha and Others5 in cases where the deceased was married in terms of customary law.6 The system by which the intestate estates of black persons were administered by a magistrate in terms of section 23 of the Black Administration Act 38 of 1927 and its associated regulations has therefore been abolished.7 ___________ 3 S 14 and s 18 of the Administration of Estates Act 66 of 1965. 4 S 13 of the Estates Act 66 of 1965. 5 2005 (1) SA 580 (CC). 6 See Bhe and Others v Magistrate Khayelitsha and Others 2005 (1) SA 580 (CC) 630D–G [par 125]; Meyer & Rudolph 2007, 1 and the discussion in 3.1 below. 7 See Bhe and Others v Magistrate Khayelitsha and Others 2005 (1) SA 580 and the Repeal of the Black Administration Act and Amendment of Certain Laws Act 28 of 2005.