According to the UN’s World Migration Report 2022, approximately 281 million people were considered international migrants globally by 2020 – and this number is increasing rapidly year-on-year – with nearly 10 million additional migrants added to the pool from 2019. These numbers exclude displaced people such as refugees and asylum seekers.
With so many people migrating from their homes across the globe, there’s also an increasing likelihood that inheritances will need to be administered and distributed across country borders. Rand Rescue takes a look at some trends and tips for cross-border inheritance.
Estate planning across borders is complicated
No matter how well you think you know the rules around estate planning, you’ll undoubtedly struggle to wrap your head around all the intricacies of international estate planning and administration.
The problem is not merely that rules differ in respective jurisdictions, but that certain parts of an estate may need to be administered by various jurisdictions. This could be problematic where the timelines, administrative processes and requirements from beneficiaries differ greatly.
There are numerous factors which can hamper the estate administration process. Please note, while we sought to cover as many intricacies and topics around inheritance and estates it is simply not possible to cover all aspects and factors in a single article. The laws and regulations applicable should be interpreted by an authorised legal entity in each jurisdiction.
Wills: the wishes of the deceased
Most countries want to honour the wishes of the deceased – which means inheritance law generally dictates that the stipulations in the deceased’s will be followed. But this isn’t always straight-forward.
Among other things, issues may arise where:
– The deceased didn’t have a last will and testament
– More than one instance of the last will and testament exists
– The will was drafted or recorded incorrectly
– The deceased left someone out of the will who would normally be deemed an heir
– The will is outdated and does not accurately reflect the deceased assets or heirs
– There are numerous wills applicable to different jurisdictions
– The will was not drafted in accordance to regional or international laws of succession and estate administration
Wills are usually established to ensure proper distribution of assets in terms of their monetary value after death, but they serve an additional purpose.
Most people own certain assets of sentimental value (whether movable or immovable) which they want to bequeath to particular individuals based on such emotive value. For instance – inherited furniture pieces, property in a particular location, books, equipment or technology.
While executors and courts will generally wish to honour the deceased’s wishes in the distribution of these assets, it’s not a given. Should there be significant debts, intestate succession or multiple claimants the courts may very well deem liquidation of assets to be more fair and logical than allowing transfer of ownership relevant to such assets.
Intestate death and laws of succession
Dying intestate simply means that the deceased did not have a last will and testament, or the will is deemed invalid in part or in its entirety. This could also be the case where a will exists but wasn’t signed by the deceased and other relevant parties, or if the will was not recorded correctly.
For instance, if the local law requires that a will be in a physical format (written/typed) and the deceased recorded their wishes in a recording or electronic format, such will could be deemed invalid.
The laws of intestate succession prescribe that the testator’s estate be inherited by their closest relations. In common law, the deceased’s heirs are generally their blood relatives, but most laws have stipulated that a surviving spouse also be classified as heir. If the deceased had a spouse only – this person would generally receive the full inheritance. If they are survived by descendants and predecessors (children and parents) as well, the inheritance would apportion shares to each of these heirs according to the applicable legislation. If there are no deemed heirs, the estate will devolve to the state.
In South Africa, this is determined by the Intestate Succession Act, 1987 (Act 81 of 1987).
In other countries such as Japan, the descendants of the deceased are allowed to discuss the division of inheritance among themselves in order to reach an agreement as to the dissolution of the estate and such agreement will be enforced unless there is a dispute. In the case of a dispute, individuals will need to approach the family court for conciliation and adjudication. Spouses are also not granted first or greater rights to an estate than other heirs as spousal property is considered separate property. That said, a surviving spouse is considered a legitimate heir along with blood relatives and shares to the estate are determined according to precedence (children, lineal descendants, siblings, etc).
The state imposes a statutory share of estate to heirs according to such succession precedence in Japan (½ to spouse and children, ⅔ to spouse and descendant’s parents, ¾ to spouse and descendant’s siblings). While someone may reserve a portion of their estate for a particular beneficiary, Japanese law stipulates that legally reserved portions only be enforced following claims for abatement by other heirs.
Dying intestate can cause numerous headaches for heirs, as the state may deem certain persons rightful heirs to an estate whom the deceased or their loved ones may not consider valid beneficiaries. Where loved ones had their sights set on certain assets (such as property), their hopes of inheriting such assets could also be dashed by intestate succession as assets would generally be liquidated and all liabilities be recovered before the value is divided and distributed between beneficiaries.
But it’s not always the catastrophe it’s made out to be. Intestate succession can significantly speed up the estate administration process.
Certain countries which are governed by restrictive religious or political systems do not allow or acknowledge foreign laws or claims against estates.
Countries which impose Sharia Law require that male descendants receive twice the share of any female descendant, and allow male beneficiaries to override certain claims, rights or even the use of assets after the testator’s death. Furthermore, Islamic banking regulations will determine how any assets may be distributed and disposed of.
If the deceased owned any assets or interests in such a region, the only recourse would be to contact the legal entities and simply follow the rules imposed. Any claims or queries may very well just bar beneficiaries from any and all claims.
In Turkey the rights of succession differs from South Africa in that children have first claims to inheritance followed by parents and spouses deemed on the third tier in the rights of succession.
Updating documentation – verify the law of the time
Where many people fall short is in verifying whether their agreements, documents and interests are valid for a particular point in time.
In South Africa and abroad the legal system is fluid – rules and laws which were applicable in the past do not remain valid indefinitely and in many instances new regulations or laws have or can be imposed retroactively and retrospectively to agreements or statutes imposed in the past.
It’s not only crucial to establish the validity and application of previous determinations and agreements before death, but to plan for such changes in advance.
For instance – many countries have changed, relaxed or restricted the rights of heirs and claimants such as their autonomy or claims to an estate. In some instances beneficiaries (such as former spouses, multiple spouses or illegitimate children) have been granted rights which override the stipulations of a will, and conversely certain persons who previously held autonomy over the deceased’s estate are no longer allowed to act as proxy without the oversight of the courts.
In Canada, wills are generally considered invalid if unsigned and/or provided in electronic format, but certain provinces do accept unsigned wills and may choose to enforce these. Holographic (handwritten), notary deed and secret wills are all accepted – in the case of the latter, the will is certified by a notary public, but the stipulations of such will cannot be disclosed to anyone without legislative authorisation.
Probate – how estates are administered
When someone dies, the general process is that the person’s death is confirmed and paperwork to the effect acquired, the death (estate) is reported to the Master of the High Court and an executor will apply for probate which will initiate the process of unwinding the estate and distributing assets.
First steps
When a person dies, their estate must be reported to the courts within a certain timeframe. In South Africa, this must be done at the Master of the High Court within 14 days of the date of death.
A party privy to the deceased’s affairs (whether family member or attorney) will initiate the process:
1. Doctor/pathologist: obtain a Notification of Death (DHA1663) from a doctor/pathologist
2. Home Affairs: submit the notice to the Department of Home Affairs along with form DHA132 (application for death certificate) – an abridged death certificate is issued on the day of application
3. Master of the High Court: attend the court where the Master will approve an executor testamentary (an executor nominated in a will), or an executor dative (where no executor was appointed by the deceased). Should the nominated executor not feel equipped to manage the estate, the Master will appoint an agent pending power of attorney.
4. Master of the High Court: the nearests surviving relative/spouse or person who manages the premises where the death occurred must report the estate to the Master in the district where the death occurred.
Documentation required
There are numerous documents required during the administration of a deceased’s estate:
– DHA 1663 – Notification of Death
– DHA 132 – Application for Death Certificate
– Form J294 – Death Notice Form
– Certified copy of deceased’s ID
– Certified copy of marriage certificate or proof of marriage
– Declaration of marriage by surviving spouse or family member
– All original wills, codicils or documents claiming to be such
– Form J192 – Completed Next-of-Kin Affidavit
– Form J243 – Completed inventory form (proof of value of assets)
– List of creditors of the deceased
– Declaration confirming the estate was not previously reported at any other Master
– Form J190 – Completed acceptance of Trust as Executor form and certified copy of executor’s ID
– Form J262 – Undertaking and bond of security (not applicable where the nominated executor is exempt or if they are a parent, spouse or child)
– Certified copy of the person appointed as the Master’s representative
– Letter of Executorship/Authority obtained from the Master
There are numerous other forms and documents required depending on the nature of the deceased’s estate such as estate duty forms obtained from SARS (REV 267, REV 246, REV 268, REV 16, REV 224), form J28 should the estate be insolvent, trust forms such as J405 (acceptance of auditor) or J450 (beneficiaries declaration form), guardian’s fund forms, curator and tutor forms, and so forth.
If the estate has a cash value of more than R1 000, the deceased is also required to open a bank account in the name of the deceased and deposit any cash amounts into this account.
Parties involved in the administration of a deceased estate
The parties involved in the process (in South Africa), include:
– The Master of the High Court
– The Executor/agent
– The Conveyancer
– The Registrar of Deeds
– The South African Revenue Service
– The heirs and legatees
– The creditors
Determining assets, liabilities and process
Where an estate is not sizeable or complex (gross value less than R250 000), the Master will appoint an executor known as the Master’s representative under Section 18(3) of the Administration of Estates Act and the estate is generally administered quite swiftly.
The rules of probate relevant to the estate will generally require a full assessment of the deceased assets and liabilities via an appraiser or court-appointed assessor for the executor who must determine the full scope, value and domicile of the deceased’s interests. In South Africa, this follows on the Letter of Executorship, and the appraisal of fiduciary liabilities and asset values will be submitted to the Master of the Court. Locally, this process will be in the prescribed form of the liquidation and distribution of the estate.
In South Africa, there are the value and distribution of assets are outlined in a
– liquidation account – assets and liabilities at the time of death, fair market value, sale proceeds (if any)
– cash recapitulation statement – liabilities, legacies and estate duty
– distribution account – heirs, inheritance and what amounts or portion this entails
– income and expenditure account – interest, dividends, rental and other income and expenditure such as service fees and executor remuneration after death
– fiduciary assets account – deceased’s value of assets and liabilities where the deceased is a middle man and indicates whom these devolve to
– estate duty account – estate duty tax due to SARS, gross and deemed assets, deductions and rebate (dutiable amount)
– executor’s certificate – confirmation of all the steps taken, all that has been disclosed, collected and expenditure incurred after death.
Though this is not necessarily the same format elsewhere, you can expect something similar.
Where assets are immovable, the Conveyancer will liaise with the Registrar of deeds to facilitate the transfer or sale of deeds – depending on whether these assets are due to heirs or third parties. Tax payments don’t merely occur in transfers but are undertaken via an estate duty tax return.
The process is not always straight-forward, as it may not be easy to trace assets or creditors. Executors will therefore advertise the estate in local newspapers and the L&D account notice will later be published in the government gazette.
Timeframe of estate administration
– Notice of death and estate: 14 days
– Advertising the estate and creditor claims: 30 days
– Master’s queries: 15 days
– Advertising L&D account: 21 days
After these steps, SARS will ensure that liabilities were paid and release the estate for distribution. The executor can claim a prescribed fee of no more than 3.5% of the gross value of the estate (excl. VAT) as well as 6% of any income incurred (dividends, rent, interest)
Remaining assets can then be distributed to heirs by transfer or realising assets and paying out proceeds.
Lastly, the executor can apply to the Master for discharge of responsibilities as executor.
Be aware that the process of estate administration can be a rather lengthy process further afield. In the UK, for instance, individuals have rights to claim against the deceased estate under Bona Vacantia division (BVD) for a period of 12 years following their death.
Death and taxes
Inheritance tax is comprised of various forms of tax as relevant to the deceased’s estate, including:
– Income tax (for the deceased)
– Capital Gains tax
– Estate Duty tax
– Donations tax
In South Africa the inheritance tax is not due by beneficiaries and instead recovered from the deceased estate itself.
While the thought of ceding taxes to the state from a deceased’s estate fills many with dread, it’s important to note that there are exemptions and limitations applicable to such monies.
In South Africa, a tax exemption (abatement) of R3,5 million is allowed on the overall estate before estate duties are calculated. The duties imposed thereafter are also capped at a certain percentage per portion of estate thereafter. Duties are capped at 20% on the first R30 million and 25% on the balance of the value over R30 million. Should the total value of the estate be below R3,5 million, SARS will still need to be notified of the deceased’s death, even though duties cannot be recovered. (Note: if the surviving spouse dies, the primary abatement is carried over which doubles the non-taxable amount to R7 million).
Taxation is also applied differently on the value of the estate before and after death which means that income accrued after death is not taxed the same way.
As with all other matters, estate duties must be paid within a certain timeframe. In South Africa, duties must be paid within 12 months of the date of death and will incur an interest of 6% per annum thereafter.
There are also certain allowable deductions applicable to estate duty tax to reduce the taxable amount. These include administration costs, liabilities, funeral and death-bed expenses, property transfer costs, debts, and so forth.
Other ‘assets’ which aren’t considered taxable. This includes retirement annuities, pension and provident funds or living annuities. Life insurance is, however, considered part of estate duty if the nominated beneficiary of the policy is the deceased’s estate. If the proceeds of such policy are payable directly to a beneficiary, the executor must recover estate duty
It’s important to note that estate duties may be levied on deceased assets in a foreign country by the country in which the deceased resided. In this instance, a double taxation scenario may unfold. South Africa has entered into Estate Duty agreements with several countries, including the USA, UK, Zimbabwe, Botswana, Lesotho, Zimbabwe and eSwatini. Relief on double taxation can be requested from SARS and/or the foreign tax agency.
Tax residency versus Residency for Financial Surveillance (EXCON) purposes
Certain problems may arise where the deceased wasn’t aware of the manner in which their residency is determined (i.e. physical presence test, natural person ordinarily resident in the Republic, etc.).
Some South African emigrants aren’t aware of the factors which determine their financial obligations to a certain jurisdiction and may not be aware that their tax residency has ceased or that they still have obligations to their previous domicile.
South Africa’s rules around tax residency have changed in the past three years, but it should be noted that certain assets accrued before the new rules were implemented are still governed by previous legislation.
Additionally, South Africans have annual allowances of R1 million (discretionary allowance) and R10 million (investment allowance) which they can rightfully spend abroad while they are still deemed tax residents.
Cross-border succession
As noted, the steps above are relevant within South Africa, but matters can be rather complex when the deceased resided in a different jurisdiction or had interests and assets which span numerous jurisdictions.
Cross-border succession will include elements from different countries. This means that several countries may have legal authority to manage the succession and administration of the estate or parts thereof. There are various drawbacks to cross-border succession. The administrative procedures and timeframes may, for instance, differ between jurisdictions which could hamper the administration of the overall estate. It could also be a costly affair as heirs may need to acquire the services of specialised lawyers to advise or undertake certain duties on their behalf.
In some regions there are specific procedures and rules in place which safeguard heirs and deceased estates from such complications and protraction. In the EU, for instance, there are regulations which determine which Member State’s authorities will deal with the succession and which national law takes precedence. A European certificate of succession (ECS) will be issued to heirs to prove their status and exercise their rights in the various EU states. This does not apply to Denmark and Ireland who do not participate in that regulation.
Domicile – the law of habitual residence
For the most part, succession will be determined by the country of the deceased’s habitual residence at the time of death. This is not always straight-forward, such as where the deceased lived in several countries without a permanent residence, or if they’d been posted temporarily abroad for work, studies or other purposes. Authorities may also consider in which country the deceased’s family were located or which country they had the closest social links to.
In exceptional cases, the deceased may have had more connection to a country where they did not regularly reside, and the law of this country may take precedence even if the deceased had not resided there. It’s important to determine how tax residency and residency for financial surveillance (EXCON) purposes are determined between different countries.
When drafting one’s will before death, you could indicate your preference for which country’s legislation should apply – especially if you have more than one nationality. This may not always be honoured, but if it’s deemed a valid request it can significantly simplify matters.
Where a person owns assets in different jurisdictions they may also draw up a will specific to each region’s assets.
Executor power per jurisdiction
In general, foreign executors do not have jurisdiction to manage assets of the other country. This means that an agent will need to be appointed within each country to manage the respective estate affairs which fall within each of these countries.
An application will need to be lodged with the court of each respective country for certified copies of the deceased’s will(s) and other documents relevant to the estate. This kicks off the probate process as mentioned above.
Both South African and foreign appointed executors have an obligation to determine the scope of foreign assets as well as the requirements for probate in that jurisdiction before proceeding with estate administration. They cannot merely deem other interests as ‘external’ to their own duties offhand or based on stipulations of a will – as the deceased may not have been aware of the state and value of their offshore assets either.
Where an executor issues a declaration making claims around an estate which seems rather swift and without proper investigation, beneficiaries are advised to approach the courts and request sufficient oversight and feedback by the state or executor themselves.
Curatorship & power of attorney
This is a murky matter and is dealt with quite divergently in different countries. Power of attorney is usually dictated before death or determined by the courts to appoint someone who can act on behalf of another party in their absence or where an individual is not capable of managing their own affairs.
Problematically, many deceased may have granted power of attorney to certain individuals before death without stipulating conditions or limitations to such power of attorney. Where an estate is complex and drags on indefinitely, such person may no longer act in the best interest of the deceased or their beneficiaries after a prolonged period. Furthermore, where the curator or proxy’s interests, mental capacity, locality or relationship with beneficiaries changes over time, it may no longer be viable for them to act on the deceased or heirs’ behalf.
Some countries have restrictions on curatorship and power of attorney for this very reason. In South Africa, however, there are legal shortfalls. Although the Law Commission has put forth recommendations to guide an ‘enduring power of attorney’, this has not yet been ratified in law. The only recourse available to beneficiaries is to request curatorship.
Executor misconduct
As with power of attorney, it also happens that executors appointed by the deceased in their will don’t act in the interest of beneficiaries or wilfully obstruct the administration of the estate.
This is often the case where the executor has:
– an intricate understanding of the law which isn’t shared by heirs and knows how to play the system to their advantage
– had personal dealings with the deceased and a vested interest in how the estate is administered
– can gain financially through the protraction or insufficient enquiries into the deceased’s assets (thereby obscuring the total assets from the courts, heirs or creditors)
Problematically, it can be difficult for beneficiaries to address misconduct when the executor has personal knowledge and affiliation with the courts. Laymen will find it hard to argue their point against someone who is deemed an agent of the law.
Executor withholding inheritance
There are valid instances where an executor may withhold an inheritance, but the key is that any such matters need to be communicated to the courts and beneficiaries alike.
Some executors may simply inform beneficiaries that an estate was insolvent and that there are no assets to be distributed. This may be hard to argue, but it’s crucial that proof of such insolvency be provided to the court and communicated to heirs. Any estate which takes longer than 12 months to administer should be questioned and the court has an obligation to investigate and provide feedback to beneficiaries.
Even in the case of an insolvent estate or where the value is below R250 000, the executor will still have been required to submit all the necessary affidavits and proof of assets to the courts before such insolvency administration can proceed. A simple disclosure to beneficiaries is not considered lawful.
Executor withholding information
Executors are appointed by the court with the specific purpose of undertaking administration of an estate and communicating the process and progress to all beneficiaries.
This doesn’t mean that beneficiaries must be consulted to explain each step or action, but they have the right to expect communication along the way. Where beneficiaries have attempted to gain feedback over an extended period, they have the right to contact the estate attorney and approach the Master of the Court or – in other jurisdictions – request documents from the court itself.
In some US states, for instance, wills, asset ownership and estate affairs are a matter of public record and can be accessed by beneficiaries on request. This is not the case in South Africa and other countries where a court order will need to be granted for access to documents.
Breach of fiduciary duty
Executors take on significant responsibilities when accepting executorship and are required to act in the interest of the deceased in the execution of their will as well as the best interest of parties to the will.
Such duties include keeping records of all financial transactions, acquired and submitted documents, dates and locations/media where advertisements or notices were issued, proof of enquiry into asset value, shares, trusts, liabilities and so forth.
Executors who renege on their duties can not merely face removal from their roles, but also be charged with theft and made liable for any penalties, incurred costs, prematurely liquidated or disposed assets and expense claims made against the deceased’s estate.
If the estate has a financial liability or debt, executors may need to dispose of assets to settle such liabilities, but this disposal cannot be undertaken without the consultation of heirs. For instance, in the case of property the heirs should be granted the opportunity to settle liabilities before such property can be disposed of. Should they not take responsibility for such debt, the executor must obtain written consent to dispose of their interests in such asset before it is disposed of. Heirs must also provide written consent regarding the sale price and the executor is only allowed to sell what is necessary to settle debts, with the least ‘valuable’ assets disposed of first.
Rash selling of assets could incur prejudicial Capital Gains Tax which unfairly undermine heirs.
Stealing from an estate
Executors with a personal interest or relationship with the deceased are prone to dipping their hands in the estate before others can access it.
Some executors are aware that their chances of getting away with it are significantly increased the longer the administration of an estate drags on, and will delay certain matters in instances where assets, interests or rights will automatically cease after a certain period has lapsed.
Beneficiaries can request their lawyer to issue a letter of demand requesting the executor’s financial transactions and actions relevant to the estate.
While the courts don’t like removing an executor to an estate, they will consider this if the beneficiaries’ concerns are valid. In general, the longer the executor acts inappropriately, the easier they will be to remove.
What is considered executor misconduct?
The following points are all considered executor misconduct, with varying levels of significance (from mere oversight to criminal conduct):
– losing an original will or other documentation in their possession before submission to the court
– Failing to publish first or secondary estate notices in the government gazette and newspapers
– Failing to show published notices to the Magistrate’s Court for scrutiny
– Receiving objections or claims after the estate has been finalised
– Failing to follow correct instruction or procedures or communicate queries, concerns or contested claims to the court
– Failing to attend to objections or correct procedures before finalising the estate
– Temporarily investing estate funds in investments
– Using estate funds for personal or other purposes
– Late payment of interests or funds or inaccurate representation of interest
– Personal gain or benefit from liquidation of assets (i.e. such as auctioning of assets under a insolvent estate)
– Failing to verify the full scope of the deceased’s estate as well as that of their predecessors to determine right limitations or ignoring such rights
– Dealing incorrectly with donations in antenuptial contracts or divorce order deeds and settlements.
– Ignoring legal actions or claims involving the deceased at their time of death
– Personally deciding on the validity of contracts and claims on behalf of the courts and/or beneficiaries
– Signing contracts or approving sale of immovable property without legal oversight or before asset value has been determined
– Ignoring claims in favour of the estate or allowing prescription of claims
– Not submitting claims or enquiries to financial institutions such as medical aids, insurers or mortgages and allowing them to lapse
– Not determining the nature and state of the deceased’s complete business dealings such as their shares, immovable property, sole proprietorship, shareholding, partnerships, private companies or sponsored undertakings or acting out of ignorance or without consulting those with knowledge into these dealings.
– Failing to submit tax returns or late submission
– Failure to obtain tax clearance and finalising estates without these
– Failure to determine VAT implications relevant to assets due to heirs
– Interpreting the will to their liking and imposing Intestate Succession or share of heirs incorrectly.
– Incorrect payouts or transfer of assets, including shares or fixed property (where the Deeds Office was not involved) which can’t be recovered
– Failure to obtain written proof of asset transfer
– Failure to ensure that transferable assets were correctly transferred to heirs.
– Cancelling mortgage bonds on behalf of the deceased when it is prejudicial
– Giving partial, once-sided or no feedback to clients or beneficiaries
– Prompting beneficiaries to act in ways which would result in loss of claims or assets for them
– Premature transfer of assets and advances
– Deliberately delaying the estate administration in order to favour the executor or allow for the lapsing, insolvency or liquidation of assets in a particular party’s favour.
The rule of law is clear for executors across the world – they must act impartial, prudent, diligent, transparent and in the best interest of the deceased and their heirs in accordance with the law.
Trusts, private corporations and more
Trusts and shares are governed differently to other assets in a deceased estate. While shares are deemed assets, their treatment after death differs from other assets. Trusts, on the other hand, can either be used to safeguard assets or set down clear rules for how a deceased’s interests are to devolve.
Inter Vivos Trusts
Inter vivos trusts serve numerous purposes in terms of estate planning, including:
– saving on estate duty
– safeguarding assets from creditors
– safeguarding assets from relational claims
– provide continuity after death
– protect assets for minor/disabled beneficiaries
Because they offer such protections not pertinent to other assets, many authorities – especially revenue services – are rather critical of these and prone to scrutinising trusts to deem the validity and treatment of trust assets after death. In particular, authorities may claim that the trust’s methods of incorporation or applied laws are outdated and make claims to the deceased’s interests.
It’s important for this reason that individuals perform frequent legal audits as part of estate planning to ensure that the trust is legally sound.
Testamentary Trusts
Testamentary trusts are specified in a deceased’s will and only come into effect on their death. In such instances the will itself will operate as a trust deed to determine the terms of the trust. Such trust dictates specific circumstances and requirements for beneficiaries to benefit from the trust and a termination date (following sequential administration of the trust).
While such trusts were considered rule of law in the past, authorities are sceptical of testamentary trusts which are too restrictive and where they irrationally obstruct beneficiaries or creditors from assets or financial recompense.
In general, however, such trusts are considered valid where, at the time of death, the testator’s beneficiaries are minors, lack the necessary insights to manage their inheritance, where they are disabled, or where part of the estate is apportioned to a subsequent generation (to grandchildren).
In the case of minors, the estate is usually transferred to the surviving spouse with practical execution of the trust is managed with the help of an estate planner. This is also where abatement could apply under the ‘portable spousal deduction’ amendment in the Estate Duty Act which would roll over the abatement on the deceased’s estate should the spouse also die (providing for the R7 million tax exemption).
Trusts acting as executors
In some countries like New Zealand the deceased may have nominated a Public Trust to act as their executor.
This has pros and cons. Many individuals choose this route to save their beneficiaries the administrative hassle of administering their estate, or where they believe certain individuals will make claims to their estate unlawfully.
Such a Public Trust executor operates similar to a testamentary trust, except that the entities managing the Public Trust will have more oversight over the administration of the estate and it is executed in accordance with the Trust’s rules and with the trustee’s input – not merely according to the stipulations in a will.
It should be noted that such trust executorship can levy significant costs against an estate, especially where there are disputes in complex family settings or in determining succession and distribution of assets. The necessity and feasibility of a trust executorship should be carefully considered during estate planning.
Trusts for conflicting claims
Trusts are also used in the instance where the deceased had anticipated conflicting claims against their estate before death.
Such conflicts often arise where the testator had an extended or blended family, or where they had business dealings with family. The trust may then operate to safeguard beneficiaries from exclusion or prohibit undue transfer of assets to a singular entity.
While trusts can be highly beneficial to ensure the financial wellbeing of all beneficiaries after death, they can also significantly hamper the administration of an estate if they’re not correctly structured, or if the trustees don’t have the wherewithal to act in accordance with the relevant laws or deeds. By appointing someone as trustee or proxy who has a personal stake in the estate, has bias against claimants or who does not understand the rule of law, the entire aim of establishing a trust could be subverted and leave beneficiaries with even less than what will have been due to them without a trust.
Private corporations
Shares are deemed assets under a deceased estate, but how these are treated will depend on the deceased’s interests in the corporation. Private corporations act as individual persons and distinctly from the shareholders (owners of the corporation).
If the deceased was a sole shareholder, the deceased’s representative (a proxy they appointed before death or the executor) may be required to maintain the company until the distribution of assets, depending on the rule of law of the country. The company shares may then be transmitted to the representative which does not always require a grant of probate unless requested by a third party (such as a financial institution).
If the deceased gifted shares in their will to a beneficiary. Such gift does not extend to the asset or entity the deceased invested in but merely to the shares itself. If they held shares in a property, for instance, the beneficiary can merely take over the shares. If the deceased did not gift the shares, these will be deemed part of the residue of the estate and be divided between heirs as determined by the accounts submitted by the executor.
Where other shareholders have a significant interest, it’s commonplace for them to buy out the shares in the deceased’s portfolio. Where the deceased signed a Shareholder’s Agreement, such agreement would supersede the process described above. A Shareholder’s Agreement would generally outline the steps triggered by a shareholder’s death. Most agreements dictate that a death would trigger a mandatory sale of shares with a portion of this value transferred to the deceased’s estate. would also prohibit beneficiaries from entering into business with shareholders.
Local schemes, rights and protections
Certain countries impose protections or restrictions on estates as a rule in order to manage the financial impact of a deceased’s estate on both the state and beneficiaries.
The Dependants’ Protection Scheme (DPS) in Singapore, for instance, prohibits or limits actions of trustees relevant to a deceased estate. They also restrict certain claims to movable assets such as commercial vehicles.
In South Korea, an estate is generally transferred to heirs upon death, and in the case of multiple heirs, such co-ownership status requires that the heirs themselves agree among each other to exit co-ownership by applying for a court order. Such exit does not require title registration or other legal steps as in other countries. The law also prohibits exaggerated or imbalanced apportionment of the estate to particular beneficiaries. Heirs have a significant period to file lawsuits to correct infringements spanning 3 to 10 years.
Heirs don’t have such a long time to question or challenge executor decisions in South Africa, unless the executor willfully obstructed their access to information and acted unlawfully.
Contrarily, South Africa has made certain concessions for claims of civil partners, divorcees or polygamous relationships which aren’t relevant in other jurisdictions. In New Zealand an ex-spouse or civil partner is generally not considered to have any claims to an estate, but this is not the case in other jurisdictions.
In the UK, individuals have a right to challenge the stipulations of a will and succession under the Inheritance (Provision for Family and Dependants) Act 1975. Such claims are generally made by spouses, civil partners, former spouses or civil partners, individuals who lived with the deceased at the time of their death, descendants and even those who were treated as children or financially maintained by the deceased prior to their death. The courts may very well deem that the deceased had committed to financial responsibility of an individual before death which implies a commitment to continued financial care after death. In general any claims to the effect will need to be filed within 6 months of the death. This issue is complex, as UK law generally only deems non-blood related heirs legitimate claimants had they been adopted by court order under the Adoptions Act.
In some instances the courts in the UK, South Africa or further afield may prohibit the liquidation or eviction of a person or persons who resided with the deceased on their property at the time of their death and any laws of estate administration will function in accordance to other legislation (such as those of residence and eviction and so forth).
Many countries have also altered their definitions and rights in terms of illegitimacy – especially in the case of intestate succession. This means that illegitimate heirs have progressive rights worldwide which can only be affirmed or rejected by the local court system. In the UK, for instance, the bar on intestate succession for illegitimate heirs was lifted by the Family Reform Act 1987. This means that any illegitimate heirs have a claim against an estate from 4 April 1988 and that their estate will be shared between all descendants and the Crown.
Consult the local courts
While it is expensive to appoint a solicitor – whether foreign or local – most countries offer free services and access to governmental bodies and information.
Before deciding on a course of action, it’s crucial that you acquaint yourself with the law – as far as any layman could – and ask local authorities about your recourses, rights, obligations and next steps available to you in the administration of a deceased estate.
Most countries do not levy any charges for general enquiries – save where certain documents need to be prepared, registered, printed or sent to various parties – but they can give you an idea of how processes work.
It’s also important to note that most lawyers and even the courts themselves aren’t necessarily clued in on the various rights and legal implications or regulations relevant to cross-border estates. Their ignorance doesn’t necessarily mean that they’re acting illegally or deliberately seeking to undermine heirs or claimants – but where an executor or attorney either expedites or protracts the execution of estate administration this is a clear red flag which warrants investigation and intervention.
In lieu of legal representation, another recourse is to contact tax authorities who are obliged to investigate illicit or questionable management, transfer, distribution and ceding of assets. Such recourse is not necessarily the best step where beneficiaries were hoping to gain from an estate where assets are safeguarded by trust rules or powers of attorney, but it is one of the only ways to impose governmental intervention and scrutiny into the local and cross-border interests of a deceased and their heirs.
Need help?
While Rand Rescue is not authorised to deal with estate administration, we are affiliated with various legal, financial and taxation authorities across the globe and can point you in the right direction when seeking advice on the administration of such estate.
Should the estate be at its completion, we can also facilitate transfer of assets across borders and explain the process, financial implications and requirements for transfer and encashment.
