An executor is a key player in any deceased estate. Consider your options and these practical considerations when nominating an executor in your will.
The role of the executor must be performed within the framework of the legislative requirements. It encompasses the following in an estate:
- Collecting and controlling assets
- Identifying heirs
- Identifying debtors and creditors
- Opening an estate late bank account to transact from
- Distributing the assets to heirs and creditors, including the paying over of taxes and duties.
A deceased estate may very well end up as an insolvent estate.
Identity of executor
The executor could be an individual such as your spouse or a particular attorney or an institution or a firm of professionals considered to be adept in the administration of estates. More than one executor can be appointed in a will.
Speak to the person you would like to nominate as executor at the time of drafting your will and request his or her willingness to act. A nominated executor may decline the appointment when the time comes.
If you nominate an individual as executor, it is vitally important that you always make at least one or two alternative nominations for the position of executor. This protects you, for example, should the executor be deceased or decline the nomination for whatever reason.
Security and assumption
To protect the estate, the law requires security to be lodged by the executor, but this would exclude executors who are parents, children and surviving spouses of the deceased. In practice, as this can be onerous for an executor, most wills dispense with the necessity of the executor furnishing security for his or her administration. This lies, however, with the choice of the testator. The reasonable cost of finding security is allowed by the Master. Most wills grant the executor sole discretion and complete powers, including that of assumption, which entitles the executor to nominate (assume) a co executor. This would be very useful where the executor requires assistance.
An executor is entitled to a fee for the administration of an estate. At present, the fee is fixed at a maximum of 3.5 per cent of the gross value (ie before liabilities) of an estate and six per cent of the income accrued after death (this is exclusive of VAT where relevant). If you nominate a spouse or heir who has no estate experience to be the executor of your estate, a professional can be engaged to assist the executor (the Master may require this) at a fee which can be negotiated at a fixed hourly rate or a percentage of the estate. The executor must then do the arithmetic to establish which will be the most economical in that particular estate. It is also possible to draw a list of the responsibilities the executor will undertake and those the professional must attend to.
Waiving of fee
The administration of an estate can involve many hours of work, be laborious, complicated and frustrating but it is open to an executor to waive his/her fees which qualifies as taxable income in his or her hands. If a parent, spouse or child is nominated as executor, the executor could waive the fee and conclude a deal with a professional. This, again, could potentially save an estate money but do be careful in doing the maths. Waiving the fee would make sense if the executor is also the sole heir.
Negotiating of fee
The testator can, at the time of drafting the will, negotiate the fees of the executor and record this in the will. Obviously the bigger the estate, the more negotiating power one has. Alternatively, if the estate is very straightforward, such as consisting mainly of cash, it will be easier to negotiate a fee reduction. Be warned, however, not to be too rigid as the executor may decline the appointment as not worth his or her while when the time comes.
Letters of executorship
Once the Master accepts the nomination of the executor, a letter of executorship, which is basically a certificate, will be issued and forwarded to the executor if he or she is competent to act. This will serve as the executor’s authority to act. It will be extremely time efficient to have sufficient certified copies made of the letter of executorship soon after receiving it.
Executors and maintenance
Bear in mind that, to alleviate hardship, the law allows the executor, with the consent of the Master, to provide for the subsistence of the deceased’s family or household.
Qualities of executor
Choose someone you trust, who is competent and diligent. Some estates can drag on for years due to inexperience and lack of application. Do not think that this cannot happen with some professional people and institutions. It does. You would be well advised to, once again, do your homework, seek personal recommendations and know the intended executor or his/her reputation.
Administration of Estates Act 66 of 1965, http://www.justice.gov.za/master/faq.html