Bequeathing a home? Take care of all costs and eventualities
Would you rather have a root canal treatment? Abstain from sex for a month? Or draw up or update a will? According to an American study most people would do, or give up, almost anything to avoid the business of an up-to-date will.
It doesn’t matter how old you are or what type of assets you own, you need a signed and witnessed will. According to the Department of Justice and Constitutional Development, the following needs to be kept in mind when making a will:
- All wills must be in writing. It can be written by hand or typed.
- The testator/testatrix must sign the will at the end of the document.
- The signature of the testator/testatrix must be made in front of two or more competent witnesses.
- The witnesses must attest and sign the will in the presence of the testator/testatrix and of each other.
- If the will comprises more than one page then each page must be signed by the testator/testatrix.
Of course having a will is only the beginning and the big question has to be what happens when your estate includes a large fixed asset such as a property. We spoke to Kerry Loukakis from Kerry Loukakis Attorneys to find out more about the ins and outs of dealing with an estate:
“I need to stress that although it is not something people like to think about, it is vitally important to have a properly drafted valid will in place. However, it is just as important that you (the testator / testatrix) put measures in place to try and ensure that your wishes are capable of being fulfilled. Liquidity in an estate is so very important if you don’t want the executor to have to dispose of assets in order to settle debts and cover administration costs.”
In other words it’s important to ensure, if possible, that insurances are in place to cover an outstanding bond and that money is available in the estate to pay rates and taxes and any outstanding utility bills.
“Although there is not a one size fits all approach to an estate, there are basics that need to be considered and certain costs are involved when property is inherited,” says Loukakis.
What is the difference between transfer duty and transfer fees, and are both due by an heir who inherits immovable property?
“Transfer duty is a tax payable to SARS on the transfer of a property. It is payable by the purchaser prior to taking transfer of the property. Transfer fees are the other costs associated with the transfer of the property which include the attorney’s fees, deeds offices fees, and rates and levy clearance certificates.
“Transfer duty is not paid when a property is inherited, but while the transfer is exempt, transfer fees are payable. Generally the transfer fees are paid by the estate, unless the will states otherwise.”
In the specific context of inheritance, are duty fees fixed or capped at a certain sum?
“The transfer fees (attorney fees/deeds office fees and other charges) are generally charged on a sliding scale depending on the value of the property.”
What happens to the rates and taxes while ownership of the property is being passed to the heir?
“Unless the will stipulates otherwise and on condition that there are sufficient funds in the estate, the rates and expenses in respect of the property will be paid from the estate.”
How can the heir rent out the property before it’s been transferred into his name?
“Any lease agreement would have to be entered into between the executor and the tenant. The rent would be payable to the estate and should then be used to pay the rates and other property-related expenses.”
What happens if the property is being leased at the time of death? Can the heir cancel the lease agreement?
“That would depend on whether the lease agreement binds the estate or not. If the lease agreement is binding then the heir will not be able to cancel unless the tenants agree to cancel.”
What happens if there is a bond on the property and the deceased did not have settlement insurance?
“The bond will have to be settled prior to the heir being able to take transfer of the property. The heir could pay any cash shortfall into the estate to ensure that he or she could take transfer of the property. Again this would depend on how the will is structured and the heir would have to consult with the Executor as to his or her options.”
In your general experience, will the bond holder suspend bond payments in anticipation of an insurance payout into the deceased estate?
“Not necessarily. With regards to policies the following could apply:
- When the deceased registered the bond the bank could have required that the deceased obtained and ceded a life insurance policy to the bank to secure payment of the outstanding amount of the bond in the event of his death. In this case the insurance company will pay directly into the bond to settle same and should there be any excess, this would be paid into the estate to be distributed in terms of the deceased’s will.
- The deceased had a life policy that was not ceded to the bank. This policy would then pay to the nominated beneficiary or possibly to the estate if the estate was nominated or if payment to the beneficiary cannot be effected (for example the beneficiary is deceased). In this case the bond repayments would have to be kept up.”
Are you aware of any other potential hidden expenses that could impede an heir from inheriting a property and which might necessitate the property being sold?
“Again this depends on the will as well as what assets and liabilities there are in the estate. There are so many variables. The deceased may have owned a number of immovable properties but there may not be sufficient liquidity in the estate to meet expenses such as estate duty, executors’ fees, tax and other liabilities and this could result in the executor being forced to start selling assets in order to settle the debts.”
What can an heir do to facilitate the winding up of the estate and the transfer of property into his name?
“The administration process is just that – a process. Generally an estate can take eight months to a year to finalise but again it is important to bear in mind that all estates are different. However, heirs can ensure the process is not delayed by providing any required information by the executor timeously.”
Note: Beneficiaries need to note the property will only be transferred to an heir once the liquidation and distribution account has been accepted by the Master of the High Court and lain open for inspection without any objections being lodged.
National Will Week will be running from 11 September to 15 September. During this time participating attorneys will draft basic wills free of charge. For further information on attorneys offering this service visit the Law Society of South Africa site for more details.