The importance of providing accurate, detailed information on the death of a family member and the effect of marital status

To assist in doing so it is very important to consider two points when an estate is reported to the administrator/executor: -

1. The first being that the family need to ensure that the administrator is thoroughly updated and provided with all information related to assets and liabilities of the deceased.
2. The second being the marital status of the deceased on death, which plays an integral part in the process.

In terms of South African law there are 3 possible marital regimes (exclusive of customary marriages or religious marriages):-

• Married in community of property,
• Married out of community of property by way of Antenuptial Contract (without accrual);
• Married out of community of property (with accrual).
• If married in another country, the regimes may be completely different to that in South Africa and thus one would normally simply state that the parties are married in terms of the laws of the country in question.

When married in community of property the estates of both the deceased and surviving spouse are considered as jointly held and thus the assets and liabilities of both parties are considered in the estate administration with ½ share of the joint estate awarded to the surviving spouse by way of the marriage and the other ½ share of the joint estate being awarded by way of the provisions of the Will of the deceased.

With an out of community of property marriage (without accrual) the estate of the deceased and survivor are held separately and only the assets and liabilities held in the name of the deceased will form a part of the estate administration process. Where immovable property was owned proportionately by the deceased and surviving spouse, then the portion owned by the deceased will form a part of the estate, to be dealt with in terms of the provisions of the Will. Any income earned and expenses related to that property would have to be apportioned between the estate and surviving spouse based on the ownership percentage. In this particular instance it is also important to consider when drafting your Will, how the property share held will be dealt with. One would ideally not want to leave that share to heirs other than the surviving spouse as that could potentially leave the surviving spouse owning the property with other heirs, which could cause administrative and practical problems along the line, especially after the estate is finalised. There are various ways of dealing with this scenario, which we will not be discussing in detail in this article.

In an out of community of property marriage (with accrual) it would still only be the assets and liabilities of the deceased to be included in the estate, but the surviving spouse or the estate as would be applicable in that particular matter, could have a potential accrual claim in favour of or against the estate depending on the content of the Antenuptial Contract and whether the deceased or survivor’s estate accrued the most value during the subsistence of their marriage. If such a claim is to be instituted by the surviving spouse against the estate or the estate against the surviving spouse, the claim amount would have to be calculated by either an actuary or accountant based on the legal calculation method prescribed by law and the claim would then have to be submitted to the executors for consideration and approval. If approved, the claim would form a part of the liabilities of the estate.

As it relates to the provision of information to the administrator, the marriage, especially if in community of property would play in integral part in what information must be supplied to the administrator on reporting of the estate. Due to the fact that it would be regarded as a joint estate, information with regards to all assets and liabilities of both the deceased and the surviving spouse would have to be provided to the administrator/executor as they would have to ensure that the information related to both parties assets and liabilities as it relates to the estate and income tax are accumulated for purposes of the completion and submission of the joint income tax (to be apportioned for estate purposes by SARS on submission) as well as for the Liquidation and Distribution Account. It is also important to consider in this instance when the Will is drafted that the assets are not allocated to either party irrespective of whose name they are registered in, it is simply a joint asset with ALL assets and liabilities being regarded as part of the joint estate and split accordingly. Therefore, if the Will awards assets from the 50% share of the joint estate of the deceased to individuals other than the surviving spouse and it does not specifically indicate that the assets held in the name of the surviving spouse on death will be awarded to them as part of their portion of the joint estate by marriage, it could lead to a potential situation where assets in the name of the surviving spouse would potentially have to be awarded to other heirs, which can cause practical problems in the estate administration. Whilst this can be addressed in a Redistribution Agreement to be drafted after death, it would be preferable to avoid the problem altogether by making it clear in the Will, should the deceased not be awarding their half share of the joint estate to the surviving spouse, that the surviving spouse shall at least be entitled to retain the assets held in their own name (at least as it adds up to their 50% share of the joint estate) as part of their half share. If the value of the assets of the surviving spouse exceeding the value of 50% of the joint estate, adjustments would have to be made if they do not inherit by way of the Will of the deceased.

With regards to the provision of information to the estate administrator or executor irrespective of how the deceased was married, the information would include but not be limited to immovable property, furniture and household effects, vehicles (including caravans, trailers, boats etc), shares, whether held by way of a portfolio or via a company such as Computershare or JSE Investor Services, Investments such as unit trusts, bank accounts, policies and annuities, offshore assets, if not administered by way of a separate Will (and even if there is a separate offshore Will, if the deceased was tax resident in South Africa they could still be liable for tax out of a worldwide estate point of view – thus the information could still be applicable).

The administrator or executor would also need to be informed of all estate liabilities, which would range from creditors payable, such as bonds, credit cards, store accounts, cell phone accounts, TV license, Multichoice, medical and funeral expenses, monthly debit orders and any other items that may have to be dealt with to ensure that no allowable claim remains unpaid at finalisation of the process. One would also require proper information with regards to all heirs in the estate, such as full names, ID numbers and their marital status and regime to allow a proper, legally required description in the Liquidation and Distribution Account.

Where the deceased was a beneficiary of a Trust, whether Testamentary or Inter Vivos, it could have implications for their estate in that any loan account due to or by that deceased would form either an asset or liability in their estate. Any potential ceasing limited interest (where an estate duty deduction was claimed in the estate of the first dying based on income from that Trust flowing to the surviving spouse at the time) would also have to be considered for purposes of estate duty and in certain instances, even Capital Gains Tax. Therefore, it is imperative that the administrator or executor is also informed of these interests and provided with the contact details of the Trust accountants at the time that the estate is reported. It is also important that they be provided with the information related to the estate of any predeceased spouse, as they would have to obtain copies of the Will and Liquidation and Distribution Account of the predeceased spouse(s) for purposes of the administration of the last dying’s estate.

The administrator/executor is legally obliged to submit an Inventory to the Master of the High Court on reporting of a new estate and in this Inventory document it is undertaken that they are informing the Master of all assets held by that deceased at the time of reporting and based on this legal obligation alone the importance of the family providing detailed and through information at the time of reporting is imperative. One way of assisting the family at the difficult when this information would become applicable forthe deceased estate administration, would be for the deceased (during their lifetime) or their financial advisor, to keep a proper record which should be reviewed and updated regularly, of assets, liabilities, familial and beneficiary information and all other important information listed above, which could simplify the process of reporting and administration.

Author

Anica Ungerer - Director - Estates & Trusts

4 September 2023