Small estate checker (section 18(3))

This checker answers the first question the Master's office asks about any deceased estate: is it a small estate under section 18(3) of the Administration of Estates Act, or does it need an executor? The answer decides almost everything that follows. A small estate is wound up by a representative with letters of authority, no formal account, no advertisements and no executor's fee, and is usually finished in a few months. An estate above the line needs letters of executorship, a liquidation and distribution account, two advertisements, the Master's approval and, usually, an attorney, and takes a year or more. The threshold is R250 000, it is tested on the gross value of the assets, and the checker explains what each route involves.

It is for families reporting a death who want to know what they are in for, for a person named as executor in a will, and for anyone who has been told by a bank or an attorney that "you will need letters" and does not know which kind.

What this calculator works out and who it is for

You enter the gross value of all the assets, the debts if you know them, whether there is a will, whether the estate includes fixed property, and whether any heir is under 18. The checker returns the threshold test, the route that follows, whether a formal account is required, what the executor's remuneration at the tariff would be if the full process applies, whether security is likely to be needed, and a set of warnings about fixed property, minor heirs, insolvency and estates close to the line.

The checker does not replace the Master. The Master has a discretion under section 18(3), and the practice of individual offices differs, particularly where there is fixed property. It tells you what the Act provides and what to expect.

How the calculation works

The test in section 18(3) is on the value of the estate, which the Master applies to the gross value of the assets before deducting debts. The checker compares your gross assets figure with the threshold of R250 000. At or below it, the small-estate route is available. Above it, letters of executorship are required. Debts are shown for the net figure and do not change the answer: an estate with a R400 000 house and a R300 000 bond has a net value of R100 000 and is not a small estate.

Where the full process applies, the checker calculates the executor's remuneration at the tariff, 3.5 per cent of the gross value of the assets, plus VAT if the executor is a vendor, as the maximum the executor may charge without the heirs' agreement; the executor fees and estate duty calculator does the full costing. It notes whether security is likely to be dispensed with: a will usually exempts the nominated executor; without a will, a surviving spouse, parent or child is exempt by the Act, and anyone else must furnish a bond of security.

The warnings turn on your other answers. Fixed property in a small estate is flagged because the Master and the deeds office both look harder at it. An estate within ten per cent of the threshold is flagged because an undervaluation or a late-discovered asset will move it across the line. Liabilities above assets are flagged because an insolvent estate must be dealt with under section 34 and the small-estate route is not suitable. Minor heirs are flagged because of the Guardian's Fund.

The law behind the numbers

Every death must be reported to the Master of the High Court within 14 days, under section 7 of the Administration of Estates Act 66 of 1965, by the surviving spouse, the nearest relative or the person in control of the premises, using the death notice, an inventory under section 9 and the other prescribed forms. The guide to reporting an estate sets out the forms.

Section 18(1) requires the Master to appoint an executor by letters of executorship to any estate that must be administered under the Act. Section 18(3) is the exception: if the value of the estate does not exceed the amount determined by the Minister by notice in the Gazette, the Master may dispense with the appointment of an executor and give directions as to the manner in which the estate shall be liquidated and distributed. The amount was set at R250 000 by notice in Government Gazette 38238 of 24 November 2014 and has not been changed since. In practice the Master issues letters of authority to a person, usually the surviving spouse or an heir, directing them to collect the assets, pay the debts and distribute the balance to the heirs, without the formal account, the section 29 advertisement or the section 35 inspection period. The guide to section 18(3) estates covers the steps.

Above the threshold, the full process applies. The executor, once appointed by letters of executorship under section 13, must advertise for creditors under section 29, giving them not less than 30 days to lodge claims; open an estate bank account; collect the assets and pay the debts; lodge a liquidation and distribution account with the Master within six months of letters under section 35(1), with extensions on application; after the Master's examination, advertise the account to lie for inspection for 21 days under section 35(4); and distribute once the Master authorises it. The executor may charge remuneration under section 51 at the tariff, 3.5 per cent of gross assets and six per cent of income collected after death, and must furnish security under section 23 unless exempt. The guide to letters of executorship and the guide to the liquidation and distribution account cover the detail.

Magistrates' courts act as service points of the Master for small estates, but only where the deceased left no valid will and the estate is below a lower limit, which is why some families are sent from the court to the Master's office.

Two further points. A section 18(3) representative is not an executor and does not have an executor's powers in law; a bank, an insurer or the deeds office may ask the Master to confirm the representative's authority for a specific act, and the Master can revoke letters of authority and require the full process if an asset emerges that takes the estate over the line. And an estate that is insolvent, where the debts exceed the assets, must be administered under section 34, with notice to creditors and the option of surrender under the Insolvency Act, whatever its size; the guide to insolvent estates deals with that.

Worked example

Nomsa's father dies leaving a bank balance of R45 000, a car worth R80 000, a pension fund that pays directly to beneficiaries, and furniture worth R15 000. He had a funeral policy that paid the funeral and owed R12 000 on a store account. He left a will naming Nomsa as executor.

The gross assets in the estate are R140 000; the pension fund pays outside the estate under the Pension Funds Act and is excluded. That is below R250 000, so the checker reports a small estate. Nomsa reports the death to the Master with the death notice, inventory and will, the Master issues letters of authority to her under section 18(3), and she closes the bank account, sells or transfers the car, pays the store account, and divides the rest as the will directs. No account, no advertisement, no executor's fee. The checker warns her only that the estate must still be reported within 14 days and that the Master can require the full process if an asset was missed.

Change the facts: her father also owned a flat worth R350 000 with a bond of R300 000. The gross assets are now R490 000. The net estate is R190 000, but the test is gross, and the checker reports that letters of executorship and the full process are required, with executor's remuneration at the tariff of up to R17 150 plus VAT, and a liquidation and distribution account within six months. Had the flat been worth R240 000 with no bond, the gross would be R380 000 and the answer the same. Had the father owned only the car, the furniture and a flat worth R100 000, the gross would be R195 000, a small estate, but the checker would warn that fixed property near the threshold often draws the full process anyway, and that the deeds office will want the Master's endorsement for the transfer.

What the calculator does not include

It does not value the assets. Use market values, not municipal or insured values, and include everything: policies payable to the estate, loan accounts, shares, vehicles, jewellery and the balance of every account.

It does not identify assets that fall outside the estate, such as pension and provident fund benefits paid under section 37C of the Pension Funds Act, life policies with a nominated beneficiary, and property held in a trust, which are excluded from the gross value.

It does not apply the Master's discretion or the practice of a particular office.

It does not calculate estate duty, which only arises above the R3 500 000 abatement, or the costs of transferring fixed property.

It does not deal with the position where the deceased was married in community of property, where the joint estate is wound up and the gross value is the whole joint estate, not the deceased's half.

When to get advice

A small estate with no fixed property can be reported and wound up by the family without an attorney, and the Master's office will give the directions. Get advice if the estate is close to the threshold, if there is fixed property at any value, if the deceased was married in community of property, if there are minor heirs or a dispute among the heirs, or if the debts may exceed the assets. For an estate above the threshold, a nominated executor who is a family member can appoint an attorney or fiduciary firm as agent to do the work; the guide to whether you need an attorney explains when that is worth the fee and when it is not.

Frequently asked questions

What is a small estate? An estate whose gross assets do not exceed R250 000, where the Master may under section 18(3) dispense with an executor and issue letters of authority to a representative to wind it up without a formal account.

Is the R250 000 before or after debts? Before. The Master tests the gross value of the assets. An estate with a R400 000 house and a R300 000 bond is not a small estate.

What is the difference between letters of authority and letters of executorship? Letters of authority appoint a representative under section 18(3) to deal with a small estate on the Master's directions, without an account or advertisements. Letters of executorship appoint an executor to administer the estate under the full Act, with a liquidation and distribution account, advertisements and the Master's approval before distribution.

Can a small estate include a house? It can, but the Master and the deeds office look closely at fixed property, and many Master's offices require the full process where a house is involved near the threshold. Expect to need the Master's endorsement for the transfer.

Does a representative get paid? The tariff executor's fee of 3.5 per cent applies to executors under letters of executorship. A section 18(3) representative has no tariff fee; the heirs may agree to pay one, and an attorney assisting will charge.

What if the estate is insolvent? The debts must be dealt with under section 34 of the Act, with notice to creditors and possibly surrender under the Insolvency Act, whatever the size of the estate. The small-estate route is not designed for it.

What happens if an asset turns up later? The Master can withdraw the letters of authority and require letters of executorship and the full process if the estate turns out to exceed the threshold.