What's the cost of inheriting an unadministered estate?
In succession law, the legal owner is the deceased while the beneficial owner is the beneficiary who ultimately inherits the property. PHOTO | SHUTTERSTOCK
My father inherited properties from his parents, but they were not formerly passed down to him through the court process. I’m about to inherit some of those properties. What are the effects of not administering a deceased person’s estate in terms of costs?
There are many facets to this question, but a good place to start would be to first distinguish between the concepts of beneficial ownership and legal ownership.
Legal ownership refers to being registered as the proprietor of a property while Beneficial ownership refers to being entitled to the property even though you are not the registered title holder.
In succession law (the law of inheritance), the legal owner is the deceased while the beneficial owner is the beneficiary who ultimately inherits the property.
The normal procedure in succession proceedings is that the legal interest is transferred from the deceased to the beneficiary before the beneficiary takes possession of any property. However, this does not always happen as sometimes the beneficial owner takes possession of the property before legal ownership changes, as in this case.
Your only recourse
When a beneficiary finds themselves in possession without the property having been transferred to them, their only recourse is to go back to administer the estate of the deceased and this applies whether the deceased is a parent, grandparent or even a great-grandparent of the beneficiary.
In this case, we are talking about inheriting property from your grandparent’s estate, which property is in the possession of your parents. Even though your parents are in possession and wish to transfer the property to you, they cannot do so as they have no legal ownership.
Your parents and other beneficiaries of the estate would have to file succession proceedings in the succession court where they would agree on a mode of distribution (which is an agreement between the beneficiaries of the estate detailing how the assets of the deceased are to be distributed amongst the beneficiaries).
Where there is no will, the beneficiaries are usually free to agree on how the properties shall be distributed and the court simply adopts this agreement. Where there is a will, the parties and the court follow the deceased person's wishes on how the properties will be distributed.
In this case where your parents desire for you to inherit from your grandparent’s estate (assuming the parents are still alive) there are two options available.
The two options
Your parents can give up whatever share they are entitled to and instead have you inherit so that the property is directly transferred from the grandparent’s estate to the grandchildren.
You should however note that your parents can only give up their own share and cannot make a special provision for you and your siblings unless by agreement of all other beneficiaries. (This does not apply when the parents are deceased as their share automatically goes to their children).
Your parents can directly inherit their share of the estate and then subsequently transfer the properties to you when they wish or otherwise list you and your siblings as beneficiaries in a will to inherit upon their death.
On the issue of costs, the options provided above do not have the same implications.
Administering costs
In terms of the legal costs of the administration of the grandparent’s estate, there would be no difference as what determines the payable legal cost is the value of the estate and not who the properties are transferred to. The legal costs of administering a deceased person’s estate are a minimum of 1 percent of the entire value of the estate as per the provisions of the Advocates Remuneration Order.
On the issue of transfer costs, when one inherits land from a deceased person’s estate, such acquisition is exempt from payment of stamp duty (a land transfer tax that is 2 to 4 percent of the value of the property, depending on where the property is situated).
In this case, if the property is transferred directly from the grandparent’s estate to you, it shall be exempt from stamp duty. However, if the property is inherited by your parents first before being transferred to you, they will have to pay stamp duty to the government on the second transfer.
Risk of taking possession
The other issue on costs is associated with the risk of taking possession of property that is still in the deceased person’s name. There are many cases where a beneficiary takes possession of a property in an estate, develops it or otherwise sinks in substantial resources in the property, assuming that they will ultimately inherit it only for other beneficiaries to refuse to agree for the would-be developer to inherit that property solely.
In such cases, the development and the costs sunk into the property tend to be irrelevant in deciding whether one is entitled to the property.
This only makes sense if the beneficiaries who had the means to develop property were allowed to inherit on the basis that they had moved onto a property and developed it. This would always favour the beneficiaries with the financial means.
It is for this reason that the courts usually do not count the level of investments made as grounds to inherit. In fact, a beneficiary who takes over a deceased person’s property before it is transferred to them may be liable to the estate in damages and this applies even when the beneficiary believes the property to be their birthright.
The criminal act
Strictly speaking under law, the only person with the authority to deal with a deceased person's property is the administrator/executor as all other people can be considered as intermeddlers (intermeddling is the illegal interference with a deceased person's properties before distribution) which is a criminal offence under law of succession.
My advice to you and anyone else who is on property that is yet to go through the succession process, be it a child, parent, grandparent, or any other relative, is to take steps to administer the estate of the deceased and acquire a legal title to secure their ownership of the property.
