This article will explore what a Deceased/Late Estate (Estate) is and what Customer Due Diligence (CDD) documents and disclosures are required from an Accountable Institution’s perspective to FICA these Estates.
A Late Estate is formed when a Testator (someone who has made a validly executed Will) becomes deceased and is used as a means or a vehicle by which the various assets that were listed in the Will and which now form part of the Estate are distributed and to which heirs. Heirs are the beneficiaries that are listed in terms of a Will and upon a deceased’s death, stand to inherit the deceased’s property, which may include immovable property (ie: a house) or movable property (ie: proceeds of a life insurance policy, an investment, cash etc).
In addition, an Executor is generally nominated in a Deceased’s Will and is appointed by the Master, being charged with the responsibility of administering and distributing the assets of the Estate as well as accounting for and managing its liabilities or debts. The Master is the supervisory authority for the administration of the Estate, who assists the Executor in his/her duties, and whose primary function is to ensure the seamless administration of the Deceased’s financial affairs and the protection of the heirs listed in the Will.
Generally speaking, an Executor nominated in a Will, who in some cases may be a family member of the deceased and is perhaps a lay person in terms of the law relating to the administration of estates, may elect to enlist the assistance of an Attorney/Law Firm/Auditor/Auditor’s Firm as an Agent or Authorised Person. However, the ultimate legal responsibility for the administration of the Estate rests with the Executor.
If the value of the Estate assets exceeds R250 000, Letters of Executorship are issued by the Master, whereas if the value is less than R250 000, Letters of Authority are issued, in terms of which the nominated person does not have to fulfil the complete set of obligations in terms of the Administration of Estates Act 66 of 1965 due to the Estate’s value.
Practically speaking, on the death of the Testator, the bank accounts and assets of the now deceased are frozen and no transactions may occur without the permission and authorisation of the Master. If the deceased was married in community of property, the joint estate is frozen, which necessarily adversely affects the surviving spouse in being able to access accounts/estate assets.
As previously mentioned, the primary document in an Estate is a validly executed Will, from which various pieces of important due diligence information can be garnered. But there are also situations in which a Testator sets up a testamentary trust (or mortis causa trust) and bequeaths/leaves property to a trustee/trustees in his/her Will to be administered in favour of selected beneficiaries on the death of the Testator. This type of trust will only come into being on the death of the testator. Wills are, however, the more standard primary document and the CDD disclosures and documents are set out below with this in mind.
Below are examples of potential documentation and disclosures that may be required, bearing in mind each Accountable Institution’s risk-based approach and risk rating matrixes and is by no means exhaustive.
For purposes of this article, we will look at examples of standard evidence (for low and medium risk clients) and enhanced evidence (for those higher risk relationships) that could be requested:
· Client disclosure in a client onboarding form/mandate letter with accompanying copy of Letters of Authority/Executorship issued by the Master giving authority to the Executor to act;
· A copy of the Deceased’s Will;
· Notice of Death
· Death Certificate
· Bank document confirming the Estate’s bank details from a standard due diligence perspective may be requested and for enhanced evidence, certified copies of these documents
· In terms of the Parties to be FICA’d, for the Deceased, disclosure by the client, which will likely be the Executor, confirmed against an ID document and residential address dated within the last three months (standard) and certified copies of these documents (enhanced).
· For Related Parties such as the Executor/s and Heir/s, client disclosure confirmed against the Will with a supporting ID document, residential address and contact details from a standard perspective and certified copies and a document evidencing the address from an enhanced perspective.
· For Agent/s or Authorised Person/s, client disclosure with supporting ID document (natural person)/ CIPC documentation (legal person), residential address (natural person) and registered address (legal person) and contact details as well as documentary evidence authorising the Agent to act on behalf of the Executor/s (ie: Power of Attorney) from a standard viewpoint and certified copies and a document evidencing the address from an enhanced perspective. Deceased Income Tax Number, Marital Status, source of funds and wealth, reason for the transaction or relationship and the Deceased’s last industry or occupation, client disclosure in an onboarding form is acceptable for low and medium risk clients, whereas for higher risk relationships, documentary evidence may want to be requested
This article serves as a guide and ultimately your business’ RMCP should inform the type of due diligence that needs to be carried out when dealing with a Deceased Estate. For more information on how to FICA a Deceased Estate, feel free to reach out to the DocFox Compliance Team: firstname.lastname@example.org