Absa Trust Fiduciary Consultant, Daron Gardiner LLB, presents and answers the most frequently asked questions about inherited property. In Part One, Gardiner covers the need for a Last Will and Testament, what it entails, the executor’s role, and implications on inheritors. See Part Two in which he explains the implications of a trust, taxes, the costs associated to an inherited estate and insurance policies.
Q: What is the official definition of 'inherited' property?
A: Inheritance refers to property acquired through the laws of descent and distribution. Though sometimes used in reference to property acquired through a will, the legal meaning of inheritance includes any property that descends to an heir through intestacy, which is when a person has died without a valid Last Will and Testament.
Q: What does a property owner need to do/specify in terms of his/her Last Will and Testament for a property to be bequeathed to someone?
A: The only route that allows for specific bequeathing of fixed property is through a valid Last Will and Testament. In terms of the Last Will and Testament, a clause is inserted, issuing the executor with the instruction that a specific property, with full registration details, is bequeathed to a specific person with/without certain conditions. An example of this particular clause would be: “I bequeath my fixed property, known as ERF 123, Randburg to my son, John Doe (ID:XX)”.
Q: What are the obligations of the executor in terms of the property asset?
A: Section 26 of the Administration of Estates Act states that it is the executor’s duty to take control of the estate assets. The executor needs to preserve the estate assets until delivering the same to the rightful heir.
In terms of insuring estate assets whilst the estate is being administered, and whilst there is no legal obligation imposed by statute on the executor to insure the fixed property, a prudent executor will insure the estate assets.
Rates and Taxes payable on any property will be paid by the estate, provided there is sufficient liquidity in the estate, as a current expense until the property is transferred to the relevant heirs.
Q: Please explain the ways that property is disposed in terms of the wishes of a deceased?
A: There are several ways that property can be disposed of in terms of an estate. These mimic normal transactions that take place.
A. The property can be mandated to estate agents to market and sell the property on the open fixed property market.
B. The property can be sold on auction, which will normally include a reserve being placed on the minimum amount the executor is willing to receive for the property. This is determined by valuations concluded.
C. An heir in the estate can choose to purchase the property from the estate. This can entail a “buy-out’ of other heirs who are to also to inherit a portion of the estate.
Q: How and when is the property valued, and why is an appraisal required?
A: The Master of the High Court recently issued a regulation requiring all fixed property to be valued by an accredited fixed property valuation practitioner. This has been instituted to ensure that the value reflected in the estate, is in line with the market value of the property. The property’s valuation will normally be carried out whilst the executor is drafting the Liquidation and Distribution account of the estate, which lists and describes all Assets and Liabilities in the estate.
Q: Can family members that have been excluded from a will, claim against the person who has benefited from a property inheritance?
A: Spouses and children of the deceased can lodge maintenance claims against a deceased estate. This is defined as “reasonable maintenance needs until death or remarriage insofar as he/she is not able to provide for his/her own means and earnings”.
However, Freedom of Testation, which is one of the founding principles of the law of testate succession, provides that testators have the freedom to direct how their estate should be distributed upon their death. This circumvents any situation where an heir who obtained property by virtue of bequest, can legally be approached by a claim against the said property.
Q: What happens if there are claims on the estate, and why are these recovered from the property?
A: Should a claim against a deceased estate be instituted, these claims must be investigated by the executor and if accepted, included in the Liquidation and Distribution Account. The executor must determine the solvency of the estate and, if provided for in the will, liquidate the estate in order to provide for payment of the creditors.
However, should there be sufficient liquidity in the estate, fixed assets will not be sold in order to settle the relevant debts. The fixed or movable assets are only sold should there be insufficient liquidity in an estate, or the Last Will and Testament specifically instructs the executor to liquidate certain fixed or movable assets.
Q: How long, and what are the different processes, of an inherited estate property transfer into the heir’s name?
A: In the case where a property is being transferred into the name of an heir from the deceased estate, usual legal transfer costs are applicable. In terms of the fees payable, these are predetermined and are carried out by conveyancing attorneys for the estate. The relevant rates and tax clearances are also applicable, as well as any other certificates required for transfer. Should the heir carry the mortgage bond over onto his/her name, the relevant bond registration costs will also be applicable.
The process involved is that the estate will call upon a conveyancing attorney to administer the transfer of the property onto the name of the applicable heir. The transfer will then take place, which usually takes two to three months.
It is important to note that Transfer duty is explicitly excluded by virtue of bequest by the Transfer Duty Act.