Part 1:Process of Estate Administration Part 2: Summary of ...

Part 1:Process of Estate AdministrationPart 2: Summary of Final Tax ObligationsSeugnette Schwim - Fiduciary Specialist - Wealth Succession SA

Cheryl Howard – Consulting Specialist – Cheryl Howard & Associates

Process of Estate Administration

Death is followed by the time-consuming administrative process of winding-up the decedent’s affairs. We cover the various steps and obligations that follow.

Positioning of a Deceased Estate in the 4 Silo-view:

TRUST ASSETS

COMPANY ASSETS

PENSION AND LIFE

INSURANCE ASSETS

SILO 1: SILO 3: SILO 4:SILO 2:

ESTATE ASSETS

Deceased Estate Operates in Silo 2 and excludes assets in ALL other Silo’s, EXCEPT:

Loan Accounts between Trust and Deceased

Loan Accounts between

Companies and Deceased

Shares or Member’s Interest

held directly in Deceased’s own

name

Life Insurance payable to Estate

BEWARE: Estate Duty on Deemed

Assets

DOCUMENT:

WILL

Estate Administration Process

Death of a Loved One

Family Consultation

Master of the High

Court

Advertise to Creditors

and Debtors

Look for Assets and Liabilities

Processing and L&D

Master of the High

Court

Advertise to Interested

Parties

Distribute to Heirs (and take fee)

Transfers and Taxes Close File

Date of Death of a Client“DOD”

• Will or No Will?– Will determine Heirs and Process– Will determine Executor Appointment

• Cause of Death: Natural or Unnatural? – De Bloedige Hand Erft Niet– Additional Documents and Steps:

• Contact SAPS Investigating Officer for copy of Incident Report• Obtain Post Mortem Report• Assets involved in Death?

• Who is the Executor?– Company or Process may differ in style, not in substance.– Bond of Security – if not noted in Will or Intestate (exclusions: Parent,

Spouse or Child of Deceased)• Set up Initial Meeting with Stakeholders (family).• Start with Pre-preparation:

– What information do you have on File?– What information is available in Public Domain (Internet; Searchworks;

WinDeed; etc.)

Family Consultation• The most important step in Deceased

Estate– Establish trust and set concerns

aside• Unhappy Heir is the biggest risk in

Estate delays– Discuss Process; Manage

Expectations– Get “behind-the-scenes info” which

may help later on• Family conflict• Who is the decision-maker / contact

person?• Complete and sign Master’s Reporting

Documents• Discuss Insurance matters:

– Life Insurance (in Estate & out of Estate)

– Short term Insurance• Additional Info:

– Pending Litigation?– Major Creditors?– Offshore Assets?

DOCUMENTS:• Collect Original Documents:

– Deceased ID– Death Certificate– DHA-1663 (Notice of Death)– Marriage Certificate– Property Title Deeds

• Collect Copies of:– Spouse ID– Divorce Order / Settlement

Agreement– Municipal Rates Accounts– Firearm Licenses– Any other asset-related documents

Master of the High Court“MOH”

• Have to report within 14 days of DOD

• CARE in completion of MOH Forms –can cause delays

• All Documents must be Originally Signed and/or Originally Certified

• Lodge ALL Original Wills in existence –even those renounced

• Keep Duplicate Pack in Office File• Manage Family Expectation

– 14 working day turnaround is not practical

REPORTINGDOCUMENTS:

– Original Will (all of them)– Certified copy of ID of Deceased– Certified copy of Death Certificate– Certified copy of Marriage Certificate / or

Divorce Order– Certified copy of ID of Spouse (if married In

Community of Property – Death Notice (MOH Form)– Preliminary Inventory (MOH Form)– Declaration of Subsisting Marriages (MOH

Form)– Reporting Affidavit (MOH Form)– Executor Nomination (only if Intestate)– Acceptance of Trust by Executor (in duplicate!)– Certified Copy of ID of Executor– Certified Copy of CIPC Documents where

Executor is a Representative of a Company– Company Resolution to nominate

Representative Executor– Letter of Assistance by Attorney or Auditor

where appointed Executor is not professionally qualified to act.

Advertise in terms ofSection 29

• Once Letters of Executorship has been issued, first steps:– Obtain Power of Attorney from Executor (if applicable)– Open Estate Late Bank Account– Place Advertisement in Local Newspaper and Government

Gazette in terms of Section 29 to invite all Creditors and Debtors to contact the Executor to lodge a claim against the Estate

– Advertisement will run for 30 Calendar Days

Look for Assets and Liabilities

• Navigate between 4 Silo’s to obtain relevant information from parties within the Deceased’s Wealth Structure:

– Trustees – Directors / Co-Shareholders– Financial Planners

• Send Key Documents and Enquiries to every major financial institution, especially those identified by family during first consultation.

• If Married in Community of Property: Always request info on both Deceased and Spouse.

• ALWAYS attach Key Documents:– In 1 PDF;– Small in Size;– Good quality copies;– Certified not older than 3 months.

• NB: Follow up on all enquiries telephonically, more than once

• Diarize Auto-reply timelines.• NB: Accuracy of Enquiry = Accuracy of

Result (e.g. Asset Houses)• Build Relationships• Support, Support Staff!

KEY ESTATE DOCUMENTS: (All Certified Copies)

– ID of Deceased;– Death Certificate;– ID of Spouse (If married In Community

of Property);– Letters of Executorship;– ID of Executor;– Proof of Address of Executor (not older

than 3 months);– Power of Attorney (if person other than

Executor does enquiries);– ID of Agent (in Power of Attorney);– Estate Late Bank Account Details on

Bank Letterhead

Processing and Drafting of L&D

• Draft L&D shortly after Family Consultation to create the To-Do List and Identify Pitfalls early on in order to remediate:– Cash Shortfalls;– Abatement – where Deceased gave away more than he has

(due to ignorance of the 4-Silo’s)– Redistribution Agreement

• Cash Reconciliation (Cash Assets – Liabilities – Expenditure + Income = Cash in Bank)Income and Expenditure Account!

• Deemed Assets can cause awkward family scenario’s –therefore, highlight ASAP.

Lodge L&D at MOH• If all previous pitfalls to this

point have been avoided, you should receive little to no queries from the MOH.

• Reply to queries ASAP –before the file travels too far.

• Do not lodge if everything is not 100% - confusion at MOH can greatly delay GREEN LIGHT.

• Read Query Sheet correctly: A; B; C.

• Do NOT distribute before MOH Green Light!

LODGEMENT PACK:

– L&D in duplicate;– Estate Duty Return;– Proof of Payment of

Master’s Fee;– Proof of S29

advertisement;– Full pack of Estate Late

Bank Account Statements.

Advertise in terms of Section 35

• On receipt of MOH Green Light – move fast. Timeline!• Advertisement to run for 21 Calendar Days.• REMEMBER to send L&D to Magistrate’s Court in area where

Deceased lived prior to his/her death.• After 21 Calendary Days – if no obtjection has been raised,

remember to request Certificate from Magistrate’s Court that the L&D has lain free from objections.

Distribute to Heirs (and take fee)

• Pay over cash to Heirs / Legacies– NB: Updated FICA– Retain funds for final Tax Clearance

• Transfer Ownership in– Vehicles– Shares

• Instruct Conveyancer to transfer Property• Your Fee:

– 3.5% on Assets as at Date of Death • CARE: Proper valuation of assets

– 6% on Income post death• CARE: Transfers between accounts

– Joint Estate (In Community of Property) = Full fee on full estate– No advance fees, progress payments, etc.

Final Taxes

• Beware of Timeframe• After Final Taxes have been taken care off; apply for

Compliance Certificate

Close File

• After Final Taxes have been paid or refunds received; distribute remainder of funds to Heirs.

• Close Bank Account.• Send final pack to MOH and

request a Filing Slip as proof that the Executor’s Duties have been completed and the file is officially closed.

ESTATE CLOSURE PACK:

– Any outstanding items in terms of Query Sheet (C);

– Magistrate’s Certificate that L&D has lain open for inspection;

– Complete set of Bank Statements;

– Conveyancer’s Certificate that property has been transferred to Heir

– Executor’s Affidavit i.t.oSection 35(12)(c)(ii)

Wealth & Family Business Advisory

Cheryl HowardPart 2 – Summary of Final Tax Obligations15 April 2020

Summary of Final Tax Obligations

• Reporting / registering a deceased estate to SARS– Income tax return – pre-death (final year)– Income tax return – post death for deceased estate– Income tax return – obligations on the beneficiaries– Provisional tax return – pre-death (final year)

• Deemed death event:– Capital gains tax– Section 9HA and section 25 – deaths post 1 March 2016

• Estate duty procedure• Process and practical issues that could delay the finalisation

of the estate

Reporting / registering a deceased estate to SARS

• Applies to estates after 1 March 2016

• Even if Estate Duty is not payable SARS must be informed that the person is deceased.

• There are two options at this stage to report a new Estate Case to SARS:

– By sending an email to:

• For Tax Practitioners: [email protected]• For Taxpayers: [email protected]

OR

– by sending it through on the new query type: Report new estate case on the SARS Online Query System(https://www.sars.gov.za/Contact/Pages/Send-us-a-Query.aspx)

mailto:[email protected]


https://www.sars.gov.za/Contact/Pages/Send-us-a-Query.aspx


• In order to report a new Estate Case to SARS, it is important that

the correct Supporting Documentation be submitted to SARS.

• In both instances the following supporting documentation is

required:

– An image of tax practitioner holding proof of identity – important that

both the face and proof of identity are clearly visible in the photo

– Supporting documents as per list available

• Detailed list of supporting documentation -sars.gov.za/FAQs/Pages/2573.aspx


What supporting documents must I submit to report a new Estate Case?• Copy of the inventory (Form J243)• Copy of the last will and testament• Copy of the Acceptance of trust as Executor (Form J190) or Copy of the Letter of executorship

(J238)• Copy of the Undertaking and acceptance of master’s directions (Section 18(3) Estates – Form J155)

or Copy of the Letter of authority (J170)• The name, email address and telephone contact details of the executor or agent• Certified copy of the deceased and executor’s ID documents• In the case of an Agent, a Power of attorney and certified copy of ID of the appointed person• Copy of the signed final liquidation and distribution accounts when they become available• REV267 form - Return of information required in terms of section 7of the Estate Duty Act, Act 45 of

1955• Names, ID numbers and tax reference numbers of the heirs and legatees• The full names, ID number/date of birth and address of the surviving spouse• If any trust has been created in terms of the deceased's will, furnish the name, address and contact

details of the administrator• Copy of death notice of deceased (J294) issued by the Master’s Office or death certificate• Power of attorney.


• On death of an individual the executor must file returns for TWO

SEPARATE taxpayer entities:

– The deceased PERSON up to date of death;

– The deceased ESTATE after death until finalisation of estate

(could cover several years)

• Each separate taxpayer entity will be registered for its own

taxpayer reference number

• Deceased ESTATE – referred to as second registration


• Second registration is NOT required if there is no taxable income

accrued to the estate

• Deceased PERSON’s income tax number must be registered and

coded as a deceased ESTATE before the second registration can

be done

• SARS will issue a new number to the deceased ESTATE which will

be linked to the Deceased PERSON’s number


Deceased PERSON versus Deceased ESTATE

Person dies 31 August 2019 (tax year 2020):

Deceased PERSON: file return of income reflecting all world-wide

income received by or accrued for period 1 March 2019 to 31

August 2019

Deceased ESTATE: file return of income reflecting all world-wide

income received by or accrued for period 1 September 2019 to

28 Feb 2020


Deceased PERSON

• May not carry over an assessed loss or capital loss to the

deceased ESTATE

• Interest exemption – below 65 years even though deceased

may be older


Deceased ESTATE

The following may not be claimed:

• Medical and travelling costs

• Provisional tax

• Any rebates

• Estate duty


Provisional tax – pre-death to date of death:

File the provisional tax return for the deceased PERSON as per

normal rules, i.e. February (02) and August (01) and top up –

September

Provisional tax – post-death to finalisation of final L&D:

No returns are required

Deemed Death Event

• Section 9HA comes into effect for deaths post 1 March 2016

• Para 40 and 41 of the 8th Schedule apply to estate pre-1

March 2016

• Section 9HA applies only to the deceased PERSON

• Section 25 applies to the deceased ESTATE, the surviving

spouse and the heirs

• A person is deemed to have disposed of all of his assets at

the date of death for an amount equal to the market value

Section 25 – income after death

• Income received by the executor of the deceased ESTATE (S25(1)) – up until final L&D ready for distribution

• Assets acquired by the deceased ESTATE from the deceased PERSON (S25(2)) – market value at DoD

• Assets disposed by the deceased ESTATE to the heir (S25(3)) - market value at DoD

• Assets disposed by the deceased ESTATE to a resident spouse (S25(4)) – same cost and same date as deceased acquired asset

Deemed Death Event

• The following assets are excluded:

– Assets disposed to a surviving spouse (a non-resident

surviving spouse may not benefit from the roll-over relief on

SA immovable property)

– A long-term SA policy (para 55 of the 8th schedule)

– Any preservation funds / pension / provident / retirement

annuity

Deemed Death Event

• Capital gains tax event is reflected in the deceased

PERSON’s return of income

• Annual exclusion on death – R300 000

• Inclusion rate – 40%

Estate Duty Procedure

• Executor is responsible for paying Estate Duty (ED);

• ED is payable within ONE YEAR of the date of death (pay a

sizeable deposit) or within 30 days from DATE OF

ASSESSMENT if issued before 1 year from date of death;

• Interest is levied on late payments (currently 6%)

• Complete and file the Estate Duty Return (REV267) as well

as L&D account to Master of High Court and SARS


• Ordinarily resident – worldwide assets (subject to certain

exclusions) is dutiable

• Not ordinarily resident – assets held in SA will be subject to

ED in South Africa

• Excluded asset – any benefit payable to the deceased from

an approved retirement fund as a result of death


Double taxation on estate duty

• Double taxation may arise if the same assets of the deceased person are

subject to Estate Duty in South Africa as well as the equivalent thereof in the

foreign country.

• South Africa has entered into Estate Duty agreements, to avoid double taxation

on Estate Duty, with the following countries: The United States of America, the

United Kingdom, Zimbabwe and the BLS Countries (Botswana, Lesotho,

Swaziland).

• Where double taxation on Estate Duty arise and no Estate Duty agreement

exists between South Africa and the foreign country, relief for the double taxation

must be sought under domestic rules.


• Once tax liabilities settled the Deceased Estate Compliance

(DEC) letter and Estate Duty clearance letter can be issued

• The DEC and Estate Duty clearance letter to be submitted

to the Master before the executor will be granted the

discharge letter from the Master

Process and practical issues that could delay the finalisation of the estate

• 2021 Return of income & forward – deceased ESTATE – IT

for 2021 cannot be filed until opening of tax season. The 2020

IT can be filed after 1 September 2020 – no work around for

practitioners wanting to file early for a deceased ESTATE

• 2020 Pre-populating pre-death third party data on post

death records – 3rd party data can be amended on PRE-death

but not POST–death IT, therefore delay in filing deceased

ESTATE IT. Interest container unlocked but 3rd parties to issue

certificates to correct tax number PERSON versus ESTATE


• Challenge in the turnaround time for the registration of a

deceased ESTATE as well as updating contact details

• Delay in updating of contact details leads to delay in

transferring tax type (OTP’s for representative taxpayer)

• NB – contact details and email addresses of representative

tax must be up to date for direct communication (including

employee representatives


• Updating banking details – estate banking account details is

considered 3rd party banking details and therefore cannot

be systemically verified

• Manual verification is required – no need for visit – can be

submitted electronically via eFiling

Estate Duty- - SARSWhat’s new

• 19 February 2021 - Estate Duty Implications on Key Man Policies - External Guide

• 6 August 2020 - Frequently Asked Questions (FAQs) for deceased estates have been compiled based on questions that executors and the public at large have about the tax treatment of deceased estates.

• SARS contact for Estate Duty Division –[email protected]

https://www.sars.gov.za/AllDocs/OpsDocs/Guides/GEN-ED-01-G02%20-%20Estate%20Duty%20Implications%20on%20Key%20Man%20Policies%20-%20External%20Guide.pdf

https://www.sars.gov.za/AllDocs/OpsDocs/Guides/LAPD-IT-G31%20-%20FAQs%20on%20Deceased%20Estates.pdf


Estate Duty- - SARSWhat’s new

• Creation of a dedicated webpage for Estates:

https://www.sars.gov.za/ClientSegments/Businesses/Pages/Es

tates.aspx

• Dedicated e-mail address - [email protected] for

escalations from Registered Controlling Bodies (RCB’s)

• Dedicated resource to assist with legal interpretations on

Estate-related matters – email -

[email protected]

https://www.sars.gov.za/ClientSegments/Businesses/Pages/Estates.aspx