Nothing cheap about dying
Expenses to be considered for a deceased estate
A deceased estate refers to the property and money left behind by a person who died.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 a complex and time-consuming process that requires planning while you are still alive.
A deceased estate must be administered by the provisions of the Administration of Estates Act 1965, irrespective of whether a person died with or without having a will. It is the appointed executor’s responsibility to ensure that all outstanding debt 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.
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 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.
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, the latter 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 where no maintenance order is in place a minor child of a deceased person, irrespective of whether born in the marriage, out of wedlock, or even legally adopted, can lodge a claim for maintenance against the estate of the deceased parent.
Divorce orders
The rights and obligations as provided for in divorce orders unless specifically provided for, 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 the finalisation 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 per N$100 000, to a maximum of N$3 000.
Estate late bank account: To effectively manage the cash and assets within the deceased estate, the executor is obliged to open an estate late 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 the 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 bequeath is subject to the receiving beneficiary bearing the transfer costs, which will relieve the cash flow in your estate, however, 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 a 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, calculation of accrual if you are married with the accrual system, 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, of which application and any adjustments to the building and architecture drafting are 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 testament reflects your true wishes.
Liquidity
To avoid the sale of assets or to put 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.
* Letitia du Plessis is Bank Windhoek’s Trust and Estates Manager.
** Opinion pieces and letters by the public do not necessarily reflect the opinion of the editorial team. The editors reserve the right to abridge original texts. All newspapers of Namibia Media Holdings adhere to the Code of Ethics for Namibian Media, a code established jointly with the Media Ombudsman.