The winding up of estates in SA is in shambles

The entire system dealing with deceased and insolvency estates is broken. Most of the finger-pointing is at the Master of the High Court, though that is but the tip of the iceberg.

Billions of rands are tied up in deceased and insolvent estates because of the brokenness of government entities such as the Government Printing Works, the Department of Home Affairs, the Department of Justice (responsible for the master’s offices), and the South African Revenue Service (Sars).

Katherine Gascoigne, senior associate at Gascoigne Randon & Associates, says in her practice alone more than R100 million is tied up in deceased estate accounts.

“The money should be in the hands of the heirs and released back into the economy. This is not happening because of delays. It is ridiculous.”

An estate with few assets and no complications used to take between six and nine months to wind up. It is currently taking double the time.

Jane Barnard, whose mother had a “simple estate with a few investments” is incensed by the lack of finality. It has been nine months since the liquidation and distribution account (L&D) was lodged at the master’s office in Thohoyandou. There has been no feedback from the office at all. Moneyweb’s questions remain unanswered.

The lack of accountability and service delivery, along with fraud, corruption and outdated and dysfunctional technology is causing hardship for the families left behind – and costs are piling up in the respective estates.

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Sanlam sets out the process in an ideal world:

The Fiduciary Institute of Southern Africa (Fisa) shows what happens in the real world:

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Grinding to a halt

The Government Printing Works (GPW) grinds the process to a halt early on. The South African Restructuring and Insolvency Practitioners Association (Saripa) had been to court numerous times just to get the GPW to do its job.

The advertisements alerting debtors and creditors must be published in the legal gazette every Friday. However, weeks go by without this happening.

Saripa obtained a court order in 2021 forcing the GPW to print the three gazettes it was mandated to do. In the latest action Saripa brought an urgent application asking the court to hold the GPW CEO as well as the minister and director-general (DG) of Home Affairs in contempt of the 2021 court order. It wanted the CEO, the minister and the DG to be sent to jail.

The matter was struck from the roll for want of urgency. Saripa did receive a letter confirming that the reautomation project for the e-Gazette system has been completed.

Saripa COO René Bekker said they were “cautiously optimistic” that the gazette will be printed every Friday, but will go back to court if further failures occur.

Saripa member and insolvent estate administrator Rikus Hartman says they know of at least 2 000 unfinalised insolvent estates.

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Frustration, frustration, frustration

Gascoigne says a huge improvement in the process is the ability to report estates electronically … if it works. The Department of Home Affairs link is imperative for the registration of deceased estates.

However, the link is more offline than anything else. “I cannot begin to explain the difficulties it is causing,” says Gascoigne.

“The master is frustrated, and we are frustrated. There is nothing that anybody can do about it, except Home Affairs. Home Affairs does not seem to think it is a problem. They do not understand the effect when that link goes down.”

The department must verify if the deceased did indeed die, and it must verify the appointment of the executor – all because of fraud and corruption. What used to take days now take months.

Moneyweb sent a list of questions to the Department of Home Affairs regarding its dysfunctional link with the master’s office, delayed status updates, and old and outdated technology. There has been no reply.

Kgalalelo Masibi, chief director of communications at the Department of Justice, reacted to questions relating to the master’s office. She says delays caused by downtime at Home Affairs and the GPW delays have “profound and far-reaching consequences” for dependants and heirs.

“These delays disrupt the administration process of deceased estates, leaving families unable to access vital resources in a timely manner,” she says.

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Liquidation and distribution

It can take up to six months for the Department of Home Affairs to update a person’s marital status (from single to married, married to divorced, married to widowed). Until that happens there is no progress on the estate’s winding up.

The executor must provide the master’s office with a liquidation and distribution (L&D) account within six months of their appointment. “Sometimes you don’t even get your certificate of balance and the documentation you need from the banks within those six months. The delays are absurd,” says Gascoigne.

Lawyers at a small firm in Limpopo are at their wits end with the master’s office. They are currently dealing with about 20 deceased estates.

Some of them have been delayed for more than a year because the L&D account has not been approved.

“Although it is not an official directive, the unofficial turnaround time is supposed to be 21 days. We have been requested not to enquire during that period,” one of the lawyers said, speaking anonymously because of fear of victimisation. 

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Lack of service

There has been a period of two months when it was impossible to register a deceased estate at the Thohoyandou master. “The systems of the master and the Department of Home Affairs did not communicate with each other. It was impossible to register an estate,” the Limpopo lawyer said.

Gascoigne says there is a total lack of service.

The attitude is: ‘We will not help you unless you cross my palm with silver. People do not want to report bribery because then they are victimised.’

Source: Fisa

Fisa CEO Louis van Vuren says the master’s offices are certainly part of the problem, but by no means the only problem. Sars sometimes take up to six months to issue an estate duty assessment.

Eventually people point fingers at the lawyers, saying they are “useless”, says Gascoigne.

“They drag you to the Law Society because you are so useless. Your hands are literally tied. But people have heard the excuses so often that they actually don’t believe you after a while. They think it is just another lying lawyer.”

Van Vuren says there is no incentive for practitioners to delay matters. The fees are fixed. The longer it takes to finalise an estate the smaller the profit margin of the professional becomes.

This article was republished from Moneyweb. Read the original here.