One of the main reasons people appoint a relative as an executor and use an attorney, a trust company or an auditor as an agent is to save on costs.
Institutions such as trust companies, banks and life assurers offer to draft a will free of charge if you appoint them as the executor of your estate. However, they will charge the maximum executor’s fee of 3.99 percent (3.5 percent plus VAT) on the gross value of assets in your estate.
They will also claim the maximum six percent of income that accrues to the estate while it is being wound up.
Your heirs may be able to negotiate a discount on the executor’s fees, but they will not be in a strong position to do so if the institution has already been appointed as the executor.
If a relative or friend has been appointed as executor, he or she can negotiate a reasonable fee before appointing an attorney, trust company or an auditor as an agent. Nevertheless, your heirs should still expect that an attorney will charge a large portion of the maximum fees that an executor can charge, particularly if the estate has many different assets, Laurianne Hollings, a wills and estate specialist with Hollings Attorneys, says.
For example, Hollings recently reviewed an estate with no property; the only assets were unit trusts and shares worth R1.5 million, which were left to the surviving spouse. A trust company charged R56 000 to wind up the estate even after the heir asked for a discount because of the simplicity of the estate.
Hollings says that if she had been contracted to help a family member appointed as an executor wind up the estate, she would have charged about R30 000 because of the time involved in transferring the assets in the estate. Still, a saving of R26 000 might be very meaningful to a surviving spouse or heir.
Angelique Visser, the chairperson of the Fiduciary Institute of Southern Africa, says that when you draw up your will, you can negotiate a fee with the executor you nominate, even if you nominate a professional.
A professional executor will take into account:
* The complexity of the estate – the nature of the assets, any maintenance or accrual claims, taxes that have to paid, and so on;
* The risks involved – for example, business entities, offshore assets or litigation;
* The liquidity of the estate – whether assets will have to be sold to generate cash in the estate to meet all the liabilities, taxes and administration costs; and
* The value and type of assets in the estate. For example, an estate of R100 million might consist of one simple cash investment, whereas an estate of R2 million might consist of a number of assets and include assets that are difficult to deal with, such as firearms.