The Costs of Deceased Estates Explained
An important function of an executor, the person who is appointed by the Master of the High Court to administer a deceased estate, is to account for the liabilities in the estate of the deceased. Keep in mind that only once the liabilities in the estate have been discharged can the heirs receive their inheritances. In this article, the various costs and expenses involved in administering a deceased estate are explained. Income tax One of the executor’s key functions is to ensure that SARS is paid what it is owed in respect of taxes. The executor will have to submit at least two income tax returns – the pre-date of death return is in respect of the income of the deceased up to the date of death, whereas the post-date of death return is in respect of income which accrued during the administration process up until submission of the liquidation and distribution account. Estate duty All property belonging to a person at the date of death, together with all property deemed to belong to that person, forms part of the estate for purposes of calculating estate duty. Estate duty is a tax payable on the dutiable estate of the deceased, with the first R3.5 million of the value of the estate not being dutiable. Estate duty is charged at a rate of 20% of the first R30 million, and 25% on anything over R30 million. Accrual claim If a person is married out of community of property with the accrual system, the accrual is calculated upon the death of the first-dying spouse. If the value of the deceased spouse’s estate is greater than that of the surviving spouse, the surviving spouse will have a preferent claim against the deceased’s estate for their share of the accrual. Maintenance claims If the deceased has maintenance obligations in terms of a divorce order, these obligations do not fall away on death and the executor will need to ensure that they are honoured, which is normally done in the form of a lump sum payment. Outstanding debt The executor must also settle all other debts of the deceased, such as outstanding balances on home loans and instalment sale agreements, and amounts owing to creditors e.g. medical bills and store accounts. Administration costs Funeral and burial costs: Funeral and burial costs are borne by the deceased estate although, normally, the deceased’s family covers the costs of the funeral, and then claims the costs back from the estate. Advertising costs: During the administration process two sets of notices must be placed in a local newspaper and the Government Gazette. Master’s fees: Estates with a value of more than R250,000 are levied Master’s fees at a sliding scale up to a maximum of R7,000. Bank charges: Service fees are debited to the bank account opened in the name of the estate. Provision of security: If the nominated executor is not exempt from lodging security, the premium payable on the bond of security is a charge against the estate. Maintenance costs: Costs incurred in respect of maintaining an asset in the estate, such as garden services and repairs, must be covered by the estate. Professional fees: The executor may need to use professionals to assist with the winding up of an estate, and these costs will be paid by the estate e.g. estate agent’s commission if immovable property is sold out of the deceased estate, or the fee charged by a tax practitioner completing income tax returns. Valuation costs: The account rendered by an appraiser for a valuation of assets for estate and estate duty purposes is a cost payable by the estate. Bond cancellation costs: The executor must cancel all bonds registered over immovable property once the outstanding balances have been paid, and the estate is liable for the bond cancellation costs. Transfer costs: If immovable property in an estate is transferred to an heir, the estate must pay the transfer costs, being the attorney’s conveyancing fees, in accordance with a sliding scale determined from time to time. Executor’s fees: The executor is entitled to remuneration for the work involved in administering an estate. The prescribed tariff is 3.5% (plus VAT) of the gross value of the assets in the estate. In addition, an executor can charge 6% on all income collected on behalf of the deceased estate from the date of death until the winding up of the estate. The costs, as set out above, will vary from estate to estate. It often happens that an estate is solvent, meaning that the total value of the assets exceeds the total value of the liabilities, but there is insufficient cash in the estate to settle the debts and expenses. If there is a cash shortfall in an estate, the executor will approach the heirs to the residue of the estate to establish if they are able to pay the cash shortfall into the estate to avoid a sale of assets. If the heirs are unable or unwilling to do so, the executor may have no choice but to sell assets. Reference List: https://timesnetwork.co.za https://eb.momentum.co.za https://www.fisa.net.za While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Can a Creditor Sell the Home of a Debtor to Recover Outstanding Debt?
Most South Africans today, are overburdened and overwhelmed with debt and are struggling to repay creditors. According to recent statistics, a third of people in South Africa with credit are struggling to repay their debts. This means, there are approximately 10 million people who are three months or more behind on debt repayments. This article will explore under what circumstances can a creditor (someone to who you owe money) have your residential home or immovable property sold in execution to obtain payment of an outstanding debt after judgment has been granted in their favour. The case of Jaftha v Schoeman and Others, Van Rooyen v Stoltz and Others (Jaftha) concerned a person who was overburdened with debt and was unable to repay her creditors. The facts of the case were as follows: Ms Jaftha was unemployed, ill, and poor. She only had standard two education. In 1997, Ms Jaftha was granted a state housing subsidy with which she bought a home where she lived with her two children. In 1998, Ms Jaftha borrowed R250 from Ms Skaarnek which was to be repaid in instalments. Ms Jaftha was unable to repay the amount owed and Ms Skaarnek approached a law firm to enforce payment. In March 2001, she was informed by Markotter Attorneys that she would need to pay R5,500, including accrued interest, otherwise, her residential home would be sold. Ms Jaftha was unable to pay this amount and was forced to vacate her home following its sale in execution for R5,000 on 17 August 2001. The Constitutional Court in the Jaftha case, clearly outlined the legal process which ought to be followed before a creditor can have the residential home of a debtor sold in execution to recover payment of an outstanding debt. In principle, the court held that a creditor after obtaining judgement, must first resort to attaching the movable property of a debtor to enforce payment of an outstanding debt. It is only once there is insufficient movable property to satisfy a debt, then a creditor may proceed to apply to the court to request the immovable property or residential home of a debtor to be sold to obtain payment of the debt. Therefore, a creditor cannot, as a first resort, have a debtor’s residential home sold to obtain payment when the debtor has not paid their debts. The court introduced in this case the mechanism of “judicial oversight”, which means, that before the residential home of a debtor may be sold to satisfy a debt, the court must grant permission to do so. The following factors will be taken into consideration by the court before permitting such an order: the circumstances in which the debt was incurred; any attempts made by the debtor to pay off the debt; the financial situation of the parties; the amount of the debt; whether the debtor is employed or has a source of income to pay off the debt and any other factor relevant to the particular facts of the case before the court. However, recent case law developments have indicated that it may be possible for creditors, in specific circumstances, to have the immovable property of a debtor sold to obtain payment of a debt as a first resort. Effectively, this opens the possibility of creditors being able to bypass the requirement of attaching the movable property of a debtor first. The Supreme Court of Appeal in the Mapea v M.A Selota Attorneys and Another case has recently endorsed the decision of Silva v Transcope Transport Consultants and Another in which the court held that where a debtor acts in a tricky manner and deliberately frustrates the creditors’ efforts to obtain payment. The court can exercise its discretion to allow execution against the debtor’s immovable property without resorting to the attachment of movable property first. The implication of this case is that a court can order the sale of immovable property to obtain payment in instances where a debtor is wilfully and intentionally acting in a way that frustrates the creditors’ right to obtain payment. For example, if the debtor has fled the country to avoid payment, or the debtor is hiding their movable property from the creditor. In conclusion, a creditor cannot, as a first resort, have the residential home of a debtor attached to recover payment of an outstanding debt. The creditor is first required to enforce payment by attaching the movable property of a debtor. However, there may be instances where a creditor can surpass/bypass attaching the movable property of a debtor and could have the immovable property of a debtor sold as a first resort. Reference List: https://www.theoutlier.co.za/economy/2024-04-08/87042/south-africans-debt-problem (accessed: 19-07-2024). Jaftha v Schoeman and Others, Van Rooyen v Stoltz and Others (CCT74/03) [2004] ZACC 25; 2005 (2) SA 140 (CC). Mapea v M.A Selota Attorneys and Another [2023] ZAGPPHC 437. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Complex Living: Be Aware of the Hidden Costs
When considering the purchase of a unit within a complex, it’s crucial to look beyond the surface-level expenses such as the advertised levies. Without thorough research, potential buyers may find themselves facing unexpected financial burdens. The structure of sectional title schemes In sectional title schemes, you own your unit but share ownership of the property’s common areas with other unit owners. This collective ownership, known as the body corporate, is responsible for the maintenance of exteriors, gardens, security, and the overall upkeep of the complex. These responsibilities are funded through monthly levies, which can be more complex than they first appear. Monthly administrative levy The administrative levy is the primary fee in sectional title schemes, varying based on your unit’s size, which means that larger units contribute more. This levy covers not just the utilities—such as electricity and water, billed collectively to the scheme and then apportioned to units based on usage—but also the maintenance of common areas, operational expenses, and building insurance. Reserve funds and special levies Since 2016, a law has mandated that a portion of levies be allocated to reserve funds for long-term maintenance, guided by a 10-year capital expenditure plan. This fund, typically no less than 15% of the administrative levy, is designed to prevent the sudden imposition of special levies for major maintenance projects. Despite the reserve fund’s intent to cover large expenses, unforeseen costs like significant repairs or utility billing errors can necessitate special levies. These are decided by the trustees and can represent a significant additional cost. CSOS levy The Community Scheme Ombud Service (CSOS) levy, another cost in sectional title schemes, is the lower of R40 or 2% of an owner’s levy when it exceeds R500, with no levy charged for amounts under R500. This is collected quarterly by managing agents. The risk of non-paying owners Non-paying owners in sectional title schemes pose a significant risk, which can strain the scheme’s finances. Trustees can address late levies by seeking an adjudication order from the Community Schemes Ombud Service (CSOS) or taking legal action through an attorney to enforce payments. However, these steps can take time, and in the interim, compliant owners may face unexpected special levies as the scheme manages these financial shortfalls, directly impacting your budget and financial planning. Make an informed decision Before committing to a purchase, prospective buyers should request the latest levy statement to fully understand monthly charges, particularly since utilities are included in sectional titles. The actual cost, including utilities, can far exceed initial quotes. It’s also vital to review the most recent AGM pack, current budget, and financial statements to understand the financial health of the scheme and avoid investing in a poorly managed, financially unstable scheme. While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.
Contractual Consequences of Breaking Off an Engagement
Contrary to popular belief, an engagement is not a mere social agreement. South African common law recognises an engagement (or promise to marry) as a contract from which some contractual remedies may flow. The engagement contract is, however, a contract sui generis (of its own kind). Therefore, it gives rise to certain contractual remedies. If a party to an engagement refuses to marry or unduly delays the marriage, their conduct may constitute a breach of promise. Lawful termination of an engagement When an engagement is terminated lawfully no claim for damages will arise. An engagement can be terminated lawfully through the death of either party, mutual agreement to terminate, withdrawal of parental or ministerial consent (in the case of minors) and unilateral lawful repudiation. Unilateral lawful repudiation allows an innocent party to withdraw from the engagement if there is iusta causa (just cause). Just cause is present when there is a sound reason, which renders the prospect of a happy marriage unlikely, such as material misrepresentation or wrongful conduct. Unlawful termination and its consequences Unlawful termination is termination without just cause. A party who terminates an engagement unlawfully may be held liable for damages (based on the law of contract) and satisfaction (based on the law of delict). What are the contractual damages for unlawful termination? The wronged party will have a claim for breach of promise, which gives rise to claims for real damages and claims for prospective loss. A claim for real damages allows the wronged party to claim all reasonable expenses that they have incurred as a result of the proposed marriage. The Supreme Court of Appeal (SCA) has, however, stated in an obiter remark in Van Jaarsveld v Bridges 2010 4 SA 558 (SCA) (herein after referred to as “Van Jaarsveld”) that the basis for such expenses “do not flow from the breach of promise per se but from a number of express or tacit agreements reached between the parties”. It still remains that the wronged party is entitled to such a claim. Claims for prospective loss are more controversial. The starting point for such a claim is positive interesse, meaning that the wronged party must be placed in the position they would have been in, had the contractual obligation been fulfilled. When this principle is applied in an unqualified way the wronged party may have a claim for half of the estate of the defendant and maintenance that would have been received during the marriage if they are able to prove that the marriage would have been in community of property. This is extremely speculative, and the court will not make such an award. Therefore, positive interesse is tempered by factors such as the expected length of the marriage, the age of the wronged party and the possibility of remarriage. The SCA is critical of these claims. In the case of Sepheri v Scanlan 2008 1 SA 322 (C) (herein after referred to as “Sepheri”) the court questioned the constitutionality of these claims and whether it is rational for an engagement to have consequences seemingly more severe than divorce seeing as the fault system is still applied. In Van Jaarsveld the court mentioned in its obiter that the calculation of prospective losses is “not capable of ascertainment…remote and speculative”. The SCA also confirmed in Van Jaarsveld that “the current approach to engagements does not reflect the current boni mores or public policy considerations based on the values of our Constitution”. The Effect of Cloete v Maritz on Future Contractual Claims for Breach of Promise In Cloete v Maritz 2013 5 SA 448 (WCC) (herein after referred to as “Cloete”) the plaintiff inter alia claimed damages reflecting her prospective loss. The defendant raised a special plea in which he claimed that this is no longer a valid cause of action in South Africa. The High Court found the previously mentioned obiter in Van Jaarsveld to be highly persuasive (although it was not binding on the court) and agreed that the Constitution requires a reconsideration of claims for prospective loss in light of the public’s prevailing mores. The special plea was accordingly upheld, and the court held that claims for prospective loss as a contractual remedy are no longer permissible under South African law. This new approach is in line with the notion in Van Jaarsveld that “an engagement is… more of an unenforceable pactum de contrahendo providing a spatium deliberandi – a time to get to know each other better and to decide whether or not to marry”. The decision in Cloete v Maritz is not currently binding on courts for future cases of breach of promise, because it is merely a High Court decision and must be confirmed. However, the decision remains strongly persuasive alongside the obiter remarks of the of SCA in Van Jaarsveld. It is therefore unlikely that courts will allow claims for prospective loss in the future, especially considering Section 39(2) read with Section 173 of the Constitution and their mero motu duty to develop the common law which is in this case clearly outdated. References: Cloete v Maritz 2013 5 SA 448 (WCC). Constitution of the Republic of South Africa, 1996. Sepheri v Scanlan 2008 1 SA 322 (C). Thabane T “A Contract of Engagement as an Unenforceable Pactum de Contrahendo under South African Law: Distilling Lessons for Lesotho Courts” (2018) 32 Speculum Juris 54-65. Van Heerden B, A Skelton & Z du Toit (eds) Family Law in South Africa 2 ed (2021), Cape Town: Oxford University Press Southern Africa (Pty) Ltd. Van Jaarsveld v Bridges 2010 4 SA 558 (SCA). While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither the writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.