Sunday Times Money: Reader’s query: 18 September 2011

Aaron Roup, Secretary of FISA and trust practitioner at BoE Private Clients, responded to a fiduciary question from a reader of Sunday Times Money, which was published on 18 September in print and online:

Q: My dad has appointed a bank as the executor of his estate. By law, estate duty is 3.5 % of an estate plus VAT. In addition, other costs are added such as master’s fees, bank charges, transfer costs and so on – although I would have thought that part of the additional costs would have been included in the amount charged of 3.5%. Please can you advise me, by way of comparison, whether the charges levied by the bank are the same as those he would incur if he decided to go to an attorney who specialises in the winding up of estates.

A:  Aaron Roup, trust practitioner at asset management company BoE Private Clients, responds:

To start out with, the fee of 3.5% (exclusive of VAT), referred to by the reader is not estate duty, but the legislated fee, allowed in terms of the Administration of Deceased Estates Act, to be paid to the executor in respect of the services rendered in administering an estate.

The additional costs referred to by the reader – the master’s fee and transfer costs – relate to expenses pertaining to the administration of an estate, but are not paid to the executor. In the case of a property transfer, only a conveyancing attorney may transfer estate property to a beneficiary, and his costs are determined by the value of the asset being transferred.

In terms of the correct reporting procedure, all costs and expenses need to be reflected separately in the liquidation and distribution statement submitted to the master of the high court.

In his question, the reader refers to the costs levied by the banks. It must be emphasised here that banks do not take up appointments as executors. Instead, most banks have a trust company in the group, and it is this company which takes up the appointment as executor.

Executors are usually appointed from the ranks of accountants, auditors and legal professionals, in addition to people working in the fiduciary environment in trust companies. Irrespective of who is appointed as executor, he or she may not charge more than the legislated fee.