Real estate in a deceased estate – what are the options?

06 November 2023 ,  Natalie Steenkamp 508
Dealing with real estate in a deceased estate can be a complex and emotionally challenging process for heirs. In such a situation, understanding the available options, addressing cash shortfalls, and resolving disputes are essential steps in the administration of the deceased’s assets. In this article we shed light on these crucial aspects and provide guidance to heirs on facing these challenges.

A common option is to transfer the property to the beneficiaries mentioned in the deceased's will or intestate according to the Intestate Succession Act 81 of 1987 where there is no will. This process involves the legal transfer of the property's ownership to the heirs by transferring attorneys and registration in the names of the heirs at the Deeds Office.

The heirs may in the alternative choose to sell the property and distribute the proceeds among the heirs. This can be a practical option if the estate needs to cover debts, expenses, or if the heirs prefer cash over property. In cases where multiple heirs cannot agree on whether to sell the property, they will become joint owners of the property. This means each heir owns a percentage of the property and shares responsibilities and expenses accordingly. If the property has rental potential, the heirs may opt to generate income by renting it out. The rental income can be distributed among the heirs or used to cover ongoing expenses related to the property.

In many deceased estates, there may be a cash shortfall where the estate is not able to cover debts, taxes, or other expenses associated with the property and other estate administration processes. Here are some ways to address such cash shortfalls:

  • Sale of the property: The heirs may be forced to sell the property in order to wind up the estate. The consent of the heirs will still be necessary. An application in terms of section 42(2) of the Administration of Estates Act 66 of 1965 is lodged at the Master of the High Court for the Master’s approval. If some of the heirs are not willing to consent to the sale, the property cannot be sold and the Master will also not approve the sale.
  • Liquidate other assets: Heirs can consider selling other assets within the estate, such as investments, vehicles, or personal belongings, to generate cash to cover the shortfalls in the estate.
  • Personal contributions: Heirs may choose to contribute their own funds to cover the estate's expenses. This option is often used when heirs are financially able and willing to preserve the property.
  • Mortgages / loans: In certain cases, heirs may opt for a mortgage or a loan secured against the property to cover cash shortfalls. The will, amongst other documents, is sent to the bank in order to secure the mortgage or loan from the bank. In the absence of a will, a next of kin affidavit and  letter of executorship is lodged at the bank.
Disagreements amongst heirs over the distribution of the property can be challenging. To address such conflicts, the following options are available:

  • Mediation: Engaging a mediator or a professional estate attorney can help heirs communicate and reach a consensus. Mediation encourages open discussions and can lead to more amicable resolutions.
  • Buyout agreements: If some heirs wish to retain the property while others want to sell, buyout agreements can be drafted. The heirs who want to keep the property can buy out the shares of those who want to sell. In this instance a Redistribution Agreement is drafted and also lodged at the Master of the High Court for approval.<./li>
  • Court intervention: If disputes persist, heirs may need to resort to legal action. A court can decide how the property should be distributed based on the deceased's will or intestate succession laws.
  • Auction or public sale: When disagreements are irreconcilable, the property may be auctioned or sold publicly, and the proceeds distributed among the heirs. An application in terms of section 47 of the Administration of Estates Act 66 of 1965 is lodged at the Master of the High Court and the property sale may proceed if approved by the Master.
Dealing with real estate in a deceased estate can be a complex process, especially when faced with cash shortfalls and disagreements amongst heirs. Heirs should remain aware of their options, have open communication and be willing to compromise to facilitate a smoother resolution of estate-related issues.


Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy have been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s). 


 
Related Sectors: Wealth Management
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