WHAT IS THE PROCEDURE FOR ASSETS REGISTERED IN THE NAME OF THE DECEASED?
When a person passes away, his assets and liabilities form part of his deceased estate. In the administration of deceased estates, we have found that many clients who are the beneficiaries in an estate, believe that if the Will and Testament names them as beneficiary they are automatically the owner of the bequest. This is however not the case. For instance, where the bequest is immovable property (such as a house) or a motor vehicle which is registered into the name of the deceased, certain steps must be taken before the transfer of ownership is complete and the beneficiary can be said to be the owner.
An estate administration process is complex and can take several months to finalise. Only once the Master of the High Court is satisfied that all the debts in an estate have been paid and the rightful heirs identified, will it direct that the immovable property can be transferred to the heirs. Only then can the official transfer of the property take place in the Deeds Registry and will the heir be the owner of the property.
- WHAT OTHER FACTS SHOULD BE KEPT IN MIND WHEN DEALING WITH FIXED PROPERTY IN A DECEASED ESTATE?
- IS THERE A BOND REGISTERED OVER THE PROPERTY?
- A bond is usually registered against a fixed property as security for a loan taken out by the deceased when purchasing the property. Where there is a bond registered against the property, it must first be established if there is life cover on the life of the deceased to settle the outstanding loan. If so, a claim can be registered against the life insurance policy and, once payment is made and the bond settled, the bank can issue the bond cancellation instruction. If there is not life cover in place to settle the debt, the executor will need to deal therewith. The executor and/or the heirs will usually have any of the following options available to them:
- If there are sufficient funds in the estate, the executor can settle the bond from the surplus funds in the estate;
- If there are insufficient funds in the estate itself, then the heirs can either make a cash payment to settle the bond or they can apply to a financial institution for a loan to settle the bond, which will usually mean that the financial institution will register a new bond over the property once it is transferred into the names of the heirs. Whether the heirs qualify for such a loan will depend on their financial position and the value of the property.
- If there are insufficient funds in the estate and the heirs cannot settle the bond, then the property will most likely be sold in order to settle the bond. The balance of the purchase price, after settling the bond and paying for the other costs and liabilities of the estate, will then be distributed to the heirs in the estate.
- THE PAYMENT OF MUNICIPAL RATES AND TAXES
- Any fixed property which forms part of a deceased estate will still be subject to rates and taxes being levied against the property as well as consumption charges for water and electricity. It is therefore advisable for the executor and the heirs in the estate to ensure that these accounts are kept up to date as far as possible during the estate administration process, to avoid legal steps being taken against the estate or the services being disconnected. Who will be liable for these costs, will depend on the facts of the matter and whether or not the property is occupied and by whom.
- Rates clearance figures must be requested from the local municipality before registration of transfer can take place, since the Registrar of Deeds will not effect transfer unless it is satisfied that the rates and taxes have been discharged. This is proved by providing a municipal clearance certificate.
- The clearance figures will provide for the payment of all outstanding amounts due to the municipality for the previous 2 years, as well as about 6 months’ worth of charges in advance. If there are sufficient funds in the estate to make payment of these amounts, it generally does not delay the estate too much. If, however, there are no cash funds available for payment, the heirs will need to pay such cash shortfall in order to effect transfer of the property into their names.
- SALE OF PROPERTY OUT OF A DECEASED ESTATE
- Where the heirs decide to sell the property, or where there is insufficient cash to pay all the debts in the estate, the appointed executor may decide to sell the immovable property from the estate. The first step in this process is that the executor must sign the offer to purchase in his capacity as executor together with any other co-owners of the property.
- Where immovable property is sold from a deceased estate, an application to the Master of the High Court must be lodged in order for it to approve the sale of the property in terms of Section 42(2) of the Administration of Estates Act, 66 of 1965. The application is made by the executor by completing form JM33 and annexing all the required documents, such as the deed of sale and the consent of the heirs.
- It must be noted that all heirs in the estate must consent to the sale of the property and the consent must also be submitted to the Master of the High Court with the Section 42(2) application. Where one of the heirs is a minor, the guardian of the minor may consent on the minor’s behalf, but in such instance the Master of the High Court may require a formal valuation as proof that the property is being sold for market value and that the sale is in the best interest of the minor.
- After registration of transfer of the property into the name of the purchaser in the Deeds Office, the proceeds of the sale are paid into the deceased estate’s bank account, to be dealt with by the executor and ultimately distributed to the heirs in accordance with the approved Liquidation and Distribution Account.
Should you further be uncertain about your estate planning, please feel free to contact our office to consult with one of our experienced fiduciary specialists.
LLB; LLM (Estate Planning)
Fiduciary and Commercial Department
Phone: 012 361 9823