Estate Planning: Expenses to Be Considered for a Deceased Estate

 

By Bank Windhoek’s Trust and Estates Manager, Letitia Du Plessis.

A deceased estate refers to the property and money left behind by a person after they pass on. A critical part of estate planning is ensuring that there is sufficient cash in your estate to meet various obligations. Unfortunately, what seems like a straightforward process is actually a complex and time-consuming task that requires planning while you are still alive.

A deceased estate must be administered according to the provisions of the Administration of Estates Act 1965, irrespective of whether a person died with or without a will. It is the appointed executor’s responsibility to ensure that all outstanding debts and expenses in the deceased’s estate are paid and that the beneficiaries receive their inheritance. In this article, we explore the various costs involved in administering a deceased estate.

The Tax Process

One of the executor’s first functions is to ensure that all taxes due and payable to the Namibia Revenue Agency (NamRA) are paid and all mandatory tax returns are submitted.

NamRA will only deregister the deceased taxpayer’s account on ITAS (NamRA’s system) once the executor ensures all tax audits are complete and assessed on ITAS, all taxes due are paid or refunded to the taxpayer, and any penalties or interest liabilities are cleared.

When developing your estate plan, it is essential to consider any potential tax risk or liability that might be payable to NamRA. VAT-registered persons should consider and review possible VAT implications for the estate and the beneficiaries, focusing on going concern rules as per the VAT Act (10 of 2000) and capital goods declaration on the last VAT return of the deceased estate.

Estates in Namibia are currently not subject to estate duty. Some countries levy a duty, expressed as a percentage of the assets of the deceased estate, and it is payable to the relevant revenue authority.

Claim in Terms of Accrual System

When your marriage is subject to the accrual system, the growth of each spouse’s estate from the date of marriage is calculated upon the death of the first-dying spouse. Suppose the value of the deceased spouse’s estate is greater than that of the surviving spouse. In that case, the surviving spouse will have a preferential claim against the deceased’s estate. The same approach would apply if the surviving spouse’s estate grew since marriage.

Maintenance

A maintenance order that is still in full force upon the death of a parent/legal guardian provides a right against the deceased estate. Claims for arrear maintenance can be filed against the estate by the surviving parent to whom the maintenance was payable during the deceased’s lifetime.

In the event that no maintenance order is in place, a minor child of a deceased person, irrespective of whether born in marriage, out of wedlock, or legally adopted, can lodge a claim for maintenance against the estate of the deceased parent.

Divorce Orders

The rights and obligations provided for in divorce orders, unless specifically altered, remain fully effective and enforceable. The executor must adhere to maintenance claims or obligations towards the former spouse in terms of such an order.

Executor’s Fees

As currently prescribed, the maximum amount that an executor can charge is 3.5% of the gross value of the assets in the estate, plus VAT at 15%. In addition, an executor can charge 6% (excluding VAT) on all income collected on behalf of the deceased estate from the date of death until finalization of the estate. This includes rental, interest, dividend, trading, or farming income.

Funeral and Burial Costs

Funeral and burial costs are borne by the deceased’s estate. It is advisable to have alternative measures in place, such as a funeral policy, to cover funeral costs.

Master’s Fees

As currently prescribed, estates with a value exceeding N$100,000 will be levied Master’s fees at a rate of N$3.00 per N$100,000, with a maximum of N$3,000.

Estate Bank Account

To effectively manage the cash and assets within the deceased estate, the executor is obliged to open an estate bank account, which will attract bank charges.

Transfer Costs

Whether a person passes away with or without a Will, it is the executor’s responsibility to ensure that immovable properties registered in the deceased’s name are transferred to the beneficiaries at the cost of the estate.

If you have a Will, you can stipulate that the bequest is subject to the receiving beneficiary bearing the transfer costs, which will relieve the cash flow in your estate, but it does place a financial burden on the beneficiary.

No Estate Duty Is Levied in Namibia

Bond Cancellation Costs

The executor must cancel bonds over fixed properties, which are payable by your estate. Where a couple was married in community of property, the surviving spouse might take the bond over, subject to the bondholder’s consent.

Professional Fees

The executor may need to use professionals to assist with the winding up of your estate. For example, the executor may employ an accountant to help with the finalisation of the income tax, the calculation of accrual if you are married under the accrual system, the estate agent’s commission if required to sell any immovable property, and the fee of an actuary to calculate maintenance claims.

Advertising Costs

The two advertisements in terms of Section 29 and Section 35 of the Act cost around N$1,500 depending on the publication rates.

Maintenance of Assets

Any actual costs incurred for maintaining estate assets, such as plumbing, electrical costs, security, and short-term insurance, will be recovered from the deceased estate.

Valuation and Appraisal Costs

The estate pays the appraiser’s fees, including travel costs.

Rates and Building Compliance Costs

If you own immovable property, your estate is responsible for the rates and taxes due to the municipality.

The transfer of fixed property in Namibia is subject to a Municipality Building Compliance Certificate, the application of which and any adjustments to the building and architecture drafting is payable from your estate.

Land Tax

In respect of farming land, land transfer is subject to the Land Tax Clearance Certificate that the Ministry of Land and Resettlement must issue. It is the executor’s responsibility to prove that all payments made since 2004 are paid up to the date of transfer.

Translation Costs

In Namibia, all Wills filed with the Master of the High Court that are not in English must be translated by a sworn translator. It is always advisable to have a Will in your mother tongue to ensure that your Last Will and Testament reflect your true wishes.

To avoid the sale of assets or placing your beneficiaries in a position to raise funds to settle a cash shortfall in the estate to claim their inheritance, planning sufficient liquidity for your estate is a vital part of the estate planning process.

We advise working with an experienced estate planner to ensure all estate costs are calculated and adequately provided for in the event of your passing.

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Issued by Bank Windhoek: Marketing and Corporate Communication Services

Tel: (061) 299 1271

Fax: (061) 299 1287

www.bankwindhoek.com.na