This blog discusses executors' criteria for interim maintenance payments to families from inheritances or claims on a deceased's estate, using a case study. Upon death, a formal administration process is necessary before inheritances and claims can be directed to beneficiaries or creditors. This time-consuming process can cause financial difficulties for surviving family members due to delays.

Introduction

The death of a loved one can bring emotional and financial challenges, especially if the deceased financially supported the surviving family. The estate administration process and asset transfer to beneficiaries or creditors can cause financial difficulties due to time delays. This blog outlines the conditions for an executor to provide interim maintenance payments to a family member from an inheritance or a deceased's estate claim, using a case study. It explains the legal principles, the provisions of the Administration of Estates Act 66 of 1965's section 26(1A), and practical considerations for estate advance payments.

Case Study

The deceased was a wealthy man who supported his two daughters, M who is 30 years old and D who is 16 years old. In his Will, the daughters were nominated as legatees to inherit R1 million each in cash. The estate was delayed due to an objection made against the sale of the immovable property in the estate, which, according to the Will, was awarded to the residue heir. The daughters are experiencing severe financial hardship while waiting for the winding up of the estate and are pressuring the executor for payouts of their cash inheritance.

General Legal Principles

A competent heir, upon accepting their inheritance, gains the right to claim payment or delivery of their inheritance from the executor after all debts have been satisfied. According to section 35(12) of the Estate Administration Act 66 of 1965 (Estates Act), the beneficiary's claim is only enforceable when the Liquidation and Distribution Account (L&D Account) is free from objections after a 21-day inspection period.

Section 35(12) states, "...if an account has lain open for inspection...and—(a) no objection has been lodged...the executor shall forthwith pay the creditors and distribute the estate among the heirs in accordance with the account."

This means that payments to beneficiaries and creditors occur only after the Master has finalised the examination of the submitted L&D Account, is satisfied that it can be advertised for public objections, and when no objections have been lodged during the 21-day inspection period. Thus, the vesting of rights occurs on the last day of the inspection period, when the L&D Account was open for objections and none were lodged.

In practice, given the 6-month period for submitting the L&D Account to the Master, the Master's examination of the L&D Account, the advertisement of the L&D Account, and its 21-day inspection period, beneficiaries and creditors can anticipate payouts after a year at best. However, in most cases, the estate may take years to settle, depending on its complexity and any delays caused by objections and estate duty issues. This could lead to severe financial strain for the deceased's surviving family, who were financially dependent on the deceased and are now in hardship while awaiting their inheritance.

[See also Greenberg and Others v Estate Greenberg 1955 (3) SA 361 (A); Corbett, Hofmeyr and Kahn, The Law of Succession in South Africa (2001) 4-5; De Waal and Schoeman-Malan, Law of Succession (2015) 11-12.]

Interim Payments Allowed: Overview of Section 26(1A)

Section 26(1A) of the Estates Act instructs the executor to give an advance payment to a deceased's family member who is a beneficiary or creditor of the estate under certain conditions. This could include the surviving spouse, dependent child, or minor child, especially in situations requiring immediate financial aid or funeral arrangement payments.

Section 26(1A) of the Estates Act states: "The executor may, before the account has been opened for inspection under section 35(4), release such amount of money and such property from the estate as, in the executor’s opinion, are sufficient to provide for the subsistence of the deceased’s family or household.”
The executor can do this with the Master's consent and before the Liquidation and Distribution (L&D) Account is opened for inspection at the Master's and Magistrate's offices (if applicable)."

Court Decisions

In the case of D v T 2016 (4) SA 571 (WCC), the court ruled that the executor takes on the responsibilities of the deceased. In N B v Maintenance Officer, Butterworth & Others 2014 (6) SA 116 ECM para 17, the court agreed with the decision in the Banjatwa v Maintenance Officer case, stating that section 26(1A) of the Estates Act was specifically designed to alleviate family hardship during the liquidation process.

In Du Toit NO v Thomas and Others (22649/2014) [2015] ZAWCHC 80; 2016 (4) SA 571 (WCC), the court noted that the word “may” in section 26(1A) does not confer discretion on the executor. Rather, it suggests that the section empowers the executor to do what they would not otherwise be authorised to do. The court recognised that, under the Estates Act, maintenance may be claimed from the executor before the executor's L&D Account is opened for inspection. This power to release money or property for the deceased's family's subsistence is expressed in the Estate Act prior to, and independently of, the sections regulating the separate and second process of winding up the estate. The court also indicated that the executor may release money if they believe there are sufficient funds for the deceased's family and household's subsistence.

[See also the unreported case CASE NO: 3326/2022].

Conditions and Requirements involving section 26(1A)

If any movables (including cash) are delivered to a legatee or heir before the L&D Account has been opened for inspection, ownership passes to that heir or legatee immediately upon delivery if done in accordance with the Will. An executor intending to release certain assets or a part thereof from the deceased estate before the L&D Account has been opened for inspection may do so with the Master's consent.

The executor may only release a sum of money from the deceased estate with the Master's consent and before the L&D Account has been opened for inspection. The executor must also ensure enough cash is available to cover all the estate's debts and administration costs. However, the executor should avoid overpayments, as they will be personally liable if unable to recover the overpayment.

Section 26(1A) of the Estates Act only provides for an advance payment of a deceased family member's inheritance or claim on the estate. This provision aims to assist the family with an advance payment for basic necessities like housing, food, clothing, education, and medical care. Typically, the need for an advance payment arises because the family member was financially dependent on the deceased.

Practical Considerations

The executor may only release a sum of money from the deceased's estate with the Master’s consent and must properly apply to the Master. The following practical considerations should be taken into account:

Ascertaining the Cash Position of the Estate

If there isn't enough cash to cover the estate's debts and administration costs, the executor runs a high risk of making overpayments and will be held personally liable if they cannot recover the overpayment.

It's recommended to draft an informal L&D account, based on the following:

• Identify the deceased's assets, including all money received, as well as all known debts and administration costs.
• Ensure that all tax assessments have been received and that the estate can pay all taxes

Determining Eligible Applicants

The executor can make advances to heirs or legatees on account of their inheritances and legacies, provided the beneficiaries are the surviving spouse, minor, or dependent child.

Before making an advance payment, the executor should ensure the following:

• Does the deceased's family require maintenance payouts from their inheritances or claims against the estate?
• Is the advance for a family beneficiary on account of their inheritance?
• Or is the advance for a family creditor on account of their claim against the estate?

Adhering to Correct Procedure

To secure the Master's written consent for an advance payment to a family member, the executor must follow these steps:

• Ask the family member to submit an application (addressed to the Master) for the advance payment on account of the inheritance or claim.
• Submit the family member's application along with supporting documentation to the Master.
• Wait for the Master's consent for the advance payment. If granted, proceed with payouts and record the details in the L&D Account for later submission to the Master during the estate's winding-up report.

Family Application

In the family member's application letter, they should explain their circumstances and justify their need for an advance payment for housing, food, clothing, education, and medical care.

The family member should provide documentation supporting their financial situation, such as income and expenditures, using the J101 E form.

Master’s Requirements

The executor should draft a letter to the Master, accompanied by the following documents:

• the family beneficiary's application letter,
• the completed income and expenditure confirmation by the family beneficiary, and
• supporting documentation such as bank statements.

The executor must receive written consent from the Master to make the advance payment, as stated in section 26(1A) of the Estates Act. After securing the Master's approval and finalising the payouts, the executor must record the details in the Liquidation and Distribution (L&D) account regarding the family beneficiaries' inheritances and/or accepted claims against the estate.

Recommendation Based on the Case Study

In terms of the presented case study, the executor may consider allowing advance payouts to the deceased's dependent and minor daughters as per section 26(1A) of the Estates Act. It's vital for the executor to ensure the estate has sufficient funds to cover all debts and administration expenses before authorizing any interim payouts. The release of a portion of the inheritance or claim can only be made to a family member who is either a beneficiary or creditor of the estate, which applies in this scenario. The Master must give written consent before the executor can make an advance payment. To avoid overpayment, the executor should ensure that any advance payouts are accurately recorded in the L&D account.

Conclusion

The Administration of Estates Act 66 of 1965 empowers the executor to make advance payouts to the deceased's family members who are either beneficiaries or creditors of the estate. 

This provision, stipulated in section 26(1A), aims to alleviate the family's financial hardship during the estate's winding up. The executor must ensure there is enough cash to cover all debts and administration costs of the estate and must obtain written consent from the Master of the High Court before making any advance payment. It's important to follow the correct procedure, including making proper applications and providing supporting documentation, to prevent overpayment and potential personal liability. 

By adhering to the guidelines outlined in this blog, the executor can provide much-needed relief to the financially strained family members of the deceased.