Losing a loved one is not only a traumatic experience but being faced with what to do when a loved one passes on can be quite daunting. Families might not know where to start when a loved one dies regarding whom the death needs to be reported, as well as what happens with a home loan and how assets in the estate are distributed.
The deceased estate and homeownership are the most misunderstood concepts, as is the inheritance of a home after death. Even the simplest of estates can take up to a year to be finalised, and more complex estates have been known to take many more years, which is why it is highly recommended that an estate planning expert is consulted to ensure that in the event of death, there is sufficient cover for debt and that a Will exists that directs how assets and the distribution thereof are dealt with.
To provide clarity and clear up any misconceptions, is Anelda Coetzee, Absa Retail Deceased Estates Secured Lending.
“Every person who has assets, children, is married and/or even has pets should have a Last Will, and it is important to make these decisions whilst you are alive. This includes, for example, who will take care of your dependents upon your passing, who will inherit from your estate, and how your debts are to be settled,” she says.
“A crucial first step is to nominate an executor in your Will, who will be responsible for winding up your estate. The law requires that a deceased estate must be reported to the Master of the High Court, who in turn will appoint an executor/Master’s representative to wind up the deceased person’s estate. The appointed executor is the only person who has the authority to deal with the assets within the estate and does so in line with the provisions of the Administration of Estates Act.” explains Coetzee.
Whilst any person can be nominated as an executor in the Last Will, the administration of a deceased estate is a highly administrative and legislative process that requires the person nominated for this role to be well aware of the requirements and the processes to be followed. “A nominated executor either of their own accord or as suggested by the Master of the High Court, may appoint an attorney, Trust company, or auditor/accountant to assist with the administration of the estate,” says Coetzee.
She also says that as part of the administration process, the executor needs to establish the assets and liabilities of the estate. The liabilities of the estate are determined based on the claims submitted by creditors in response to the executor’s notices and adverts as required by the Act. “If there aren’t sufficient funds to settle debts, the executor has to consider selling assets to settle the claims against the estate, and if such debts exceed the value of the assets, and the cash shortfall cannot be settled by the heirs, the executor will have to administer the estate as insolvent in line with the applicable legislation. “
Winding up the estate requires the executor to take all assets in the estate under his/her control, pay all debts of the estate, and distribute any remaining balance to the heirs. “The executor must establish whether there are any bonds registered over the property, if there are any outstanding amounts due in terms of the home loan and whether there are sufficient funds within the estate to settle the outstanding balance on the home loan. “It is important that the executor establishes if there is Life Insurance to cover any outstanding amounts due on the home loan and to get in touch with the insurance company for the claim process to commence,” says Coetzee.
Another of the most important initial steps the executor takes is to inform service providers and financial institutions of the death of a client as soon as possible. “One of the options that is frequently considered in respect of a home loan where there is a surviving spouse or heir is for an application to be made to take over the bond. This is, however, subject to affordability, and once the endorsement process of the bond is completed, the substituting party will continue with the repayments. This process is called the substitution of debtor process,” explains Coetzee.
“On joint home loan accounts, the portion of the property that falls within the deceased estate will be dealt with in terms of the requirements of the Administration of Estates Act. Where the joint account holder is the surviving spouse of the deceased, the portion of the property which falls within the estate will be dependent on the marital regime.”
Joint account holders on a home loan are jointly and severally liable for the outstanding amounts due on the account, and in the event of the death of one of the participants, it is advisable for the remaining participant to continue with the monthly repayments until such time as the debt is settled or the substitution process is concluded.
“Absa clients have access to experts within its estate planning division, who provide support and guidance with estate planning,” Coetzee says. “The Bank has also developed a guide on Deceased Estates specifically aimed at the next-of-kin/spouse, outlining what needs to be done when a loved one passes away. The guide provides useful steps on the processes, whom needs to be notified, as well as dealing with the specifics related to home loans, and it can be accessed on Absa’s website.”
The final piece of advice from Coetzee is: “Ensure your will is up to date, relative to life events, such as the birth of children, or the acquisition of new assets, and to ensure you have sufficient estate protector insurance for interim cover so that there is enough money to cover running costs between the date of death and the appointment of an executor.”
