When you draft a “free” will through a bank or fiduciary company, they usually nominate themselves as the executor. While this seems convenient, executor fees in South Africa are capped at a statutory maximum of 3.5% of the total estate value plus VAT, so 4% in total.

Depending on your wealth, this can become an exorbitant expense that does not even cover conveyancing or property valuation fees.

The hidden problem with percentage-based fees

Executor fees are charged as a percentage of your estate’s overall value rather than being based on the time or complexity involved in winding up your estate.

For example, a simple estate worth R10 million (consisting of a home and unit trusts) will incur R400 000 in executor fees, whereas an identical estate worth R4 million will incur R160 000.

Yet in both cases, the executors would typically spend only 20 to 30 hours on actual administrative work.

Executors can also earn up to 6% on any income (such as rent or interest) accrued while the estate is being finalised.

Furthermore, once an executor is appointed in a will, removing them requires an order from the Master’s Office, and can only be done on the grounds of serious misconduct.

As a result, banks and fiduciary firms rarely discount their maximum standard fee unless this is requested during the drafting stage.

Alternatives: appointing a spouse or family member

Financial planners recommend appointing a spouse or trusted family member as the primary executor of your estate, along with a named replacement.

This gives the family member legal authority to act on behalf of the estate, which means that they can shop around for the best rate or outsource complex tasks.

1. Spouse as primary executor: The spouse administers simple affairs or hires an attorney/accountant at a negotiated flat rate or hourly fee.
2. Pre-agreed fiduciary agreements: You can nominate a spouse as executor while locking in an agreed, discounted fee structure with a specialist firm directly inside the will.
3. Backup executors: Appoint your spouse as the first choice and a specialist firm as an alternative if your spouse is elderly or unable to act.

Organise your affairs

How much you pay often depends on how organised your paperwork is. Bringing neatly filed assets and spreadsheets to an estate attorney leads to lower negotiated fees than handing over unorganised files.

For individuals without a trusted family member, appointing a professional executor is necessary. In these cases, you may wanto to look into specialised insurance policies that cover or cap executor fees and testamentary trust costs. Some companies that provide these policies are FNB, Capital Legacy, and Discovery Life,

This is a summary of an article I wrote for News24. You can read the full original article here.