Learning Module 8: Liquidation Executor's Accounts
1. The Law of Sucession
Individual estate = person's assets & liabilities
Initiate plan for management of assets = Estate planning
Consider following:
- Analyse your assets & liabilities
- Know your debts - paid 1st after death
- Consider maintenace claims for minor children & surviving
spouse
- Consider maritial regime - in or out communicty of property
- Plan to execute a will & nominate an executor
The law of Succession - what happens when person dies &
how assets & liabilities devolve.
2. Administration of deceased estates
a) Testate Succession
Requirements:
In writing & signed by Testator (16 yrs & older) or signed by
Testator agents signed with Testator being present.
Two or more competent witnesss (14 yrs & older)
Every page must be signed.
If Testator signs with a mark, mark should be certified at the
end of the Will
General Rules:
High court has overriding discretion to validate will if
requirements aren't met
Amendments after will is executed must be identified by
testator/agent with 2 or more witnesses
Revocations (cancelling past wills) only valid if Testator
indicates in writing
If person is married civilly (in court / church) on or afer 1 Oct No spouse or parents & parents survived by descendants then - Master's fee
1992, & marriage is dissovolved by divorce or death with 3
months prior to date of death, ex-spouse nt entitled to inherit
unless contrary indications appear in the will. If testator dies
after 3 months from dat of dissolution but does not amend a
will prior to dissolution, ex-spouse wil inherit unless contrary
indications appear in will.
Descendant fo testator (excl. minor & mentally ill person)
inherits together with a surviving spouse & descendant
renounces it, surving spouse will benefit.
If desendant is entitled to benefit, the desendants per stirpes
will benefit. (distribution by representation.
If a bequest is made per capita then persons whou are entitled
to inherit can take the benefit in equal share & no
representation takes plcace to the desendants.
Children under legislation 'illegitmate & adulterous children' &
adopted children regarded as children of adopted parent.
Disqualifications incl. person unduly influenced testator to give
them benefit, any person who is unworthy (killing testator),
person who concealted will of teastator.
In SA complete freedom of testation except with proceeds
from pension funders where if within a year of member's
death the fund discovers a dependant, the benefit has to be
paid to the dependant but if no dependant is discovered
benefit is paid to beneficiary.
Estates of deeased person are distributed by first giving
legacies eg 'I give the sum of X to my wife'
3. Estate Duty
b) Intestate Succession
Absence of valid will, estate will be distributed in terms of
Succession Act 81 of 1987.
General Rules:
Moveable property devolve where deceased was domiciled &
immovable property devolve where property is situated.
Competent heirs incl. those not disqualified but include
adopted / illegitimate children
Disqualification incl. unworthy person (killing testator)
Representation takes place if a child or predeceased blood
relation is called to be an heir in the place of relative that
would have been the heir.
Surving spouse will inherent the child's share as well not
exceeding R125 000.00
No spouse of children, the parents will benefit in equal parts.
Only one parent, the child of predeased parent will benefit.
half of estate is divident among descendants
No spouse, decendants or parents or desendants of parents
blood relantion in 3rd & 4th order will benefit.
4. Liquidation & Distribuion accounts
The Estate Duty Act 45 of 1995 (as amended)
Levying estate taxes. Dutiable amount of estate <
R3 500 000.00 at rate of 20%
The Administration of Estates Act 66 of 1965 (as amended)
Legal framework whereby estate is administered
Determine:
- form of death notice
- form of the inventory
- way liquidation * distribution account is explained
- method used to apply extension for submission of estate
account.
- executor's remuneration
Most important people involved:
- The Master of the High Court (staturory creation)
- The Executor (whom Master issues the letter of
executorship)
- Conveyancers & Registrar of Deeds responsible for transfer fo Accrual claims agaist estate in terms of Matrimonial Property
fixed property out of estate
- The Receiver of Revenue - collecter of estate duty, Master's
fee & other taxes
- Surviving spouse & beneficiaries
Steps in administration process
1. Consultation:
With deceased family & obtain original will/ANC
Details necessary to complete government forms
Immediate finacial needs of dependants
List of assets with indication of value
Firearms, licences of in whose possession - arrange safe
keeping
5. Tutor's accounts & curator's accounts
Who is liable to pay estate duty?
Executor
Property of the deceased
All assets (moveable & immovable, corporeal & incorporeal)
All rights to property such as fiduciary, usufructuary or other
like interest in property
Any right in or to an annuity
Ordinarily resident in SA, his/her foreign property subject to
certain deductions
General deduction to which deceased estate is entitled
Set out in Section 4 of the Act:
Funeral, tombstone & death bed expenses
Debts of deceased at time of death
Admin cost of estate
Act 1984
Bequest to public benefit organisation
All property incl. in estate which accrues to surviving spouse
Valuation of property
If specific valuation not provided it must reflect market value
Payments of estate duty & interest
Estate duty assessment issued within 1 year, estate duty paid
within 30 days of date of assessment
Estate duty assessment not done within 1 year, payment must
be made within 1 year after date of death to avoid interest
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Some ways to reduce estate duty: S83 = tutor / curator must serve final account in required form. What is an insolvent estate?
Transfer assets to trust or the company Must be handed to Master within 3 months of reported period Liabilities exceed assets
Donation of assets to childers of the planner Techincally / factually insolvent
Use of deductions permitted in S4 of Estate duty Act Account subdivision Creditor seeking pmt can use the following:
Donation of usufruct to spouse & bare dominium to another Must include the following: - Summons - no response take judgement & then issue
person. warrant of execution
1. Heading - Garnish proceedings or proceeding for payment of debt
installments
The Executor's account Include ID & period covered by account - Provisions of Insolvency Act 24 of 1936 as amended by Act 69
of 2002: Insolvency Second Amendment Act:
Consists of: 2 Income & Expense account i) Sequestration to advantage of creditor
Heading Each item accounted for ii) After insolvency proceeding, debtor can be released for his
or her debts by becoming rehabilitated
Liquidation account 3. Statement of financial position iii) Creditors are protected agianst possible greed & mendacity
of other creditors
Recapitulation returns Show all assets + proof
Distribution account 4. Bank reconciliation statement To protect insolvent & creditors concerned, estte can be
sequestrated at High Court & fair distribution of assets can be
made among creditors. Two forms: Voluntary & compulsory
Income & expense account Bank statements accompany account & must cover full time 1. Voluntary Surrender
period of account
Asset account Balance of bank statement correspond with balance in acc. Proof:
Estate tax-addendum Explanation on o/s deposits Taken steps to notify creditors & enable them to object
application of sequestration. Publish notice of surrender
within not less than 14 days & not more than 30 days before
court date of application. Government Gazette
Executor certificate Paid cheques sent back handed to Master The debtor's estate is insolvent. Statement of affairs
submitted to Master by affidavit & lie for inspection for 14
days @ Master's Office
Big balance in current acc. not needed must be invested. Advantage of creditors if estate is sequestrated i.e must be
assests & cash that can be realised to pay creditors all or part
of the claim. Creditor can petition the court but must proof:
creditor has valid claim more than R100.00 & debtor has
committed an act of insolvency (intentionally delaying or
evading payment & reason to believe sequestration will be to
advantage of creditors.
Master's fees - for individuals calculated on gross estate Sufficient assest to cover costs of sequestration
2. Compulsory sequestration
Remuneration of tutors & curators - 6% gross income for time Application by way of notice of motion & affidavits filed in High
account is covered Court by creditors with liquidated claim of not less than
R100.00 or 2 or more creditors .
Order granted provisionally on rule & if no objection is
received the final order granted.
5. Certificate by tutor or curator Sheriff makes inventory of moveable property which can be
removed for storage & safekeeping if requested by creditor.
 Learning Module 8: Liquidation Executor's Accounts

2. Administration of deceased estates (cont.) 3. Estate Duty (cont)

Certificates of fixed deposits, shares, investments etc. If estate admin not finalised within 1 year, executor may
request Commissioner to grant extension, request will be
consider on condition:
Available info on insurance policies - written request prior to expiration

Outstanding accounts - payment of reasonable deposit against duty made prior to

expiration

2. Administration of deceased estates (cont.) 3. Estate Duty (cont)

Funeral costs, funeral policies

Income tax (person handling family's tax affairs)
Ask if spouse wants a new will & take instruction
Collect deceased id, bank cards, statements, medial aid details,
motor vehicle insurance details & registration & employers
details
2.Government forms
Complete death notice & certificate
3. Power of attorney
If attorney isn't appointed executor
4. Correspondence
Write letters to banks, creditors & debtors requesting
accounts be frozen & send certificates of balances &
certificate reflecting interest earned.
5. Received of Revenue
Write to SARS & request IT12 & attach death certificate.
Send letter to bookkeeper to finalise final tax return
6. Employer
Request letter of unpaid salary, IRP5, pension benefits & o/s
leave pay
Objection & appeal procedure
Executor or any person liable to pay estate duty may in terms
of Section 24 fo the Act object & appeal against tax board or
tax court
Calculation of the dutiable amount & the estate duty
payable
1. Determine gross value of estate (incl property & property
deemed as property)
2. Deduct gross value of estate the amounts allowed as
deduction (funeral, tomb stone, death bed, admin expenses,
surviving spouse claim, education or charitable institutuions,
primary rebate)
= NET VALUE
3. Deduct abatement of R3.5 mil
= DUTIABLE AMOUNT
Less further deductions (donations tax, transfer duty)
= NET DUTIABLE AMOUNT
4. x 20% of net dutiable amount to calculate amount of estate
duty payable.
5. Deceased qualify for tax rebates, estate duty as calculated
must be reducted by amount of rebate
6. Executor to determine whether any person is liable for any
portion of the estate duty as calucalted & recover.
Donations tax
Value of all gifts, other than those specifically exempted, made
by a donor who is a resident.
Tax calculated at flat rate of 20%

7. Insurance
Reques details of insurance policies, discuss & decide on short
term insurance with heirs

8. Letter of executorship
On receipt of letters of executorship from Master:
- Letters to debtors/bank etc request funds held to be paid to
estate
- Open estate bank account
- Advertise for debtors & creditors in local news paper &
Government Gazette
- Obtain valuations of assets
- Pay o/s accounts
- Forms from SAPS to trf firearms to appointed heirs
- draft liquidation & distribution acc. (L & D acc.) on approval
by Master:
* Assets incl. immovable & movable property, cash assets
* Liabilities incl. admin of estate expenses, banking fees,
transfer fees, valuaiton fees, funeral expenses, VAT & claims
agaist estate eg bonds, overdrafts, arrear maintenance
* Cash recapitulation statement
* Distribtuion Account incl awards made
* Income & Expenditure acc. incl income received & expenses
paid
* Estate Duty Addendum (Estate duty based on) covers
property of deceased (moveable & immovable), property
deemed to be property LESS allowable deductions LESS
primary rebate on estate (R3.5 mil)

- fwd copy of L&D acc to Magistrate court & advertise that acc.
will lie for inspection for 21 days
- Pay Master's fee & estate duty at SARS & executors fees &
VAT

9. Lodgement with Master

Proof of advertisments
Receipts for Master's fees
Conveyancers certificates
Final bank statement

10. Receive confirmation

From Master estate is satisfatory

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6. Administration of insolvent estates of natural persons other than juristic entities
The Role of the trustee in both voluntary surrender &
compulsory sequestration
Estate of insolvent vest in Master until trustee is appointed.
Elected by majority of creditors who proved their claims &
confirmed by Master.
Trustee must arrange for sale of assets as quickly as possible.
Property not part of insolvent estate:
- Remuneration & earning for work done after sequestration
- Pension monies
- Compensation & award for personal injury or damages for
defamation
- Clothing & other means of subsistence
- Insurance policies in ltd amounts
- Compensation under Compensation for Occupation Injries &
Diseases Act.
- Benefits under the Unemployment Insurance Act
- Property excluded in terms of the Land Bank Act
- Trust monies of an attorney, notary & conveyance
- Property acquired with money received by insolvent from
property which does not fall into insolvent estate
Impeachable transactions
Trustee must collect all assest & if necessary & acting on
instructions of creditors must take steps to set aside
transactions entered into by insolvent before sequestration
such as:
- Disposition withou value
- Voidable preferences
- Undue preferences to creditors
- Collusive dealing before sequestration
- Voidable sale of a business (within 6 months of
sequestration, trustee can render sale void)
- Set-off
3. Unsecured creditors: Death expenses of insolvent, cost of
sequestration, cost of execution, monies owed by insolvent,
portion of salary owned, personal incom tax + interest,
unsecured claims general mortages, unsecured claims from
creditors
After payments of dividens has been made to creditors,
insolvent may after expiry of certain periods apply to court for in insolvent, indicate assets being dealt with, Master's ref nr.
rehabiliation (period of 10 yrs unless other stated by court)
Effects of sequestration of the insolvent's property
Deputy sheriff attache & macke inventory of moveable
property of insolvent & submit full report to Master & copy to whom assest was shold, date on which assest was sold,
Trustee.
Effect of sequestration on property on the solvent spouse
Section 21 of Insolvency Act solvent spouse married out of
community of property must proof is their property . Married
in community of property - entire estate insolvent.
Farming operation
Fair market value must be obtained
Rights & obligations of the insolvent
May not dispose of any property of insolvent estate or enter
into adverse contract
May caary on any profession or occupation but needs written
consent from trustee to be employed or have dealing with
business of trade
May sue or be sued in his own name in matters relating to his
status
Must preserve his estate for equal distribution to creditors
Must keep detailed recored of all assets
Must before the 2nd meeting of creditors assist trustee in
realsing any property belonging to estate
Must attend each meeting of creditors or failing may result in
prison time
Accounts used to adminster the insolvent estate
Trustee 1st step to liquidate assets & pay cost of
sequestration. Distribute net available proceeds among
creditors. Actions will reflect in account trustee must prepare
Learning Module 8: Liquidation Executor's Accounts
Layout:
Heading
Indicate status of acc, describe acc, disclose fact that account
Liquidation account
Record of all money received by trustee & money disbursed.
With respect of property must incl.:
description of property, name of person or institution to
method of disposal (public auction), proceeds from sale
With respect to disbursement must incl.:
details of the nature of disbursement, date of payment,
amount of disbursement
If not final liquidation account, trustee must disclose all
property not yet liquidated, all o/s debtsstill due to estate &
reason property haven't veen realised. Trading account
drafted & must incl. Record value of stock on hand at date of
sequestration, record of value of the stock on hand on date on
which account was prepared, daily total of business receipts &
payments & result of trustee's conduct of business
Distribution account
Must provide following info:
a) Amount of every claim or part thereof against estate:
secured of otherwise preferent
b) amount of every claim or part thereof against estate
concurrent
c) amount awarded to every creditors of estate as well as
previous distribution acc
d) defincienty in respect of each claim
Certificate
Trustee must sign every account which is submitted to Master
& he must verify by means of affidavit that account if full &
true account of administration of estate in question inquestion
up to date of account & that all assets of estate have been
disclosed in account.
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 Learning Module 8: Liquidation Executor's Accounts

Order of preferece for secured creditors: Subdivisions incl: Liquidation account, distribution account &
contribution account

1. Immovable assets: Enrichment lien, Mortgage bond,

Debtors & Creditor lien
2. Moveable assets: Enrichment lien, Statutory installment
sale hypothec, Pledge, Landlords tacit hypthec, Debtors &
creditor lien

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