Wills Week: The Hidden Cost of Executors’ Fees and Why Planning Ahead Matters

Bertie Nel, Head of Financial Planning & Advice at Momentum, is a lawyer and financial planner with 20+ years’ experience in wealth management, advisory tools, and financial planning frameworks within Momentum.

National Wills Week is a timely reminder to prioritise drafting a Will. However, while having a legal and executable Will formalises your final wishes and ensures your loved ones are provided for, just having one is not enough. Many people overlook a cost that can reduce the inheritance left behind: executor fees.

Will does not guarantee a stress-free transfer of assets

According to Bertie Nel, Momentum Head of Financial Planning and Advice, just a Will does not guarantee a stress-free transfer of assets. While it provides a clear roadmap for how one’s assets must be distributed, it doesn't solve the problem of liquidity.

Nel emphasised that your estate - the collective value of your assets, like property, investments, and personal belongings - needs to be wound up when you pass away, and this comes at a cost. The person or entity you nominate as your executor is responsible for all legal and administrative duties, from collecting assets and paying off debts to ultimately distributing the inheritance to your heirs.

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What exactly are these fees?

Nel said in South Africa, the maximum legal fee an executor can charge is regulated at 3.5% of the gross value of the estate, plus 6% on any income earned by the estate after the deceased’s death. While this may seem like a small percentage, it can amount to a substantial sum. For example, on an estate valued at R2 million, the executor's fee alone could be R70,000, excluding VAT.

Nel explained that the fee is calculated on the gross value of the estate, not the net value after debts are paid. This means a family could be left in a difficult position if the estate's primary assets, such as a family home or a business, cannot be easily converted to cash. If there isn’t enough cash to cover the executor fees and other costs, assets may have to be sold, sometimes at a distressed value, leaving heirs with less than they expected.

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“Many people confuse life insurance with estate liquidity. While a life insurance policy payout can be a valuable financial resource for your family after you're gone, it doesn't automatically cover the costs of winding up your estate unless specifically structured to do so.

A standard life policy is usually paid to a nominated beneficiary, bypassing the estate and therefore not available to settle debts and fees,” Nel said.

Estate planning is important

Nel stated that this is why proactive and holistic estate planning is important. The conversation with your financial adviser shouldn't stop at drafting a Will. It needs to extend to how you can make specific provision to cover all potential costs, ensuring your legacy is preserved, and your loved ones are protected from financial distress.

He added that by working with an accredited financial adviser, you can structure your finances to ensure liquidity. An adviser can help you with financial solutions specifically designed to cover estate costs. This could be a separate policy that pays out directly to the estate or an investment that can easily be liquidated without incurring penalties.

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“Having a plan that accounts for every eventuality, from estate duty to capital gains tax, provides reassurance. It provides peace of mind, knowing that your heirs will receive the full value of their inheritance without any surprises,” Nel said.

An experienced financial adviser can guide you through the complex legal and financial landscape of estate planning, including helping you understand the tax implications of your assets, and tailor a plan to your unique circumstances.

“While a Will is a powerful tool it's only one piece of the puzzle. The true value of a well-designed estate plan is its ability to protect the legacy you've built, and ensuring it is transferred to your loved ones exactly as you intended.

By partnering with a financial adviser who understands these complexities, you can move beyond a Will and create a robust financial fortress for your family's future," Nel concluded.

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Disclaimer: The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of Briefly News.

Source: Briefly News