Objectives
At
the end of this lecture you will be able:
- Define
a will
- Differentiate
between a testate person and interstate person
- Determine
the matters which determine the validity of the will
- Explain
the ways in which a will may be revoked
- Explain
the means of appointment of executor, administrator and legal personal
representative
- Explain
the duties, powers and liabilities of legal personal representative
- Describe
the composition of the claims against the deceased
- Distinguish
between legacies and devises
- Explain
the lapse of legacy
- Describe
the order of priority for distribution of estate
- Prepare
a distribution statement of estate
Content
- Meaning
of a will
- Distinction
between a testate person and interstate person
- Validity
of the will and its revocation
- Appointment
of executor, administrator and legal personal representative
- Duties,
powers and liabilities of legal personal representative
- Claims
against the deceased estate
- Distinction
between legacies and devises
- Lapse
of legacy
- Preparation
of a statement showing the distribution of estate
1.1 Introduction
Every
human being will one time die. When death happens, there should be someone
behind to inherit all what the deceased left behind. The law governing the
distribution of the estates of the deceased is called Executorship Law. If the
deceased is poor, the work needed to be done can be very easy and may take a
few days to accomplish. But if the deceased is rich and has left much estates
behind him, there could be a lot of disputes regarding the distribution of his
wealth. In order to avoid such, the law is very clear to show what need to be
done.
The
role of accountant in executorship is to report and keeping the proper books
needed during this situation. He should be able to open all the necessary books
and recording the distribution of the estates with the help of the deceased
lawyers. This topic is all about what need to be done with regards to
distribution of estates of the deceased. We shall show different scenarios,
such as when the deceased left a widow, or without a widow; when he left a son,
two sons, a daughter etc.
1.2 What is executorship?
Executorships
refers to the arrangements under which an executor takes the charge of the
deceased’s estate and fulfils the deceased as expressed in his will
There
are basically two types of succession, namely testate succession and intestate
succession. There is also a mixed category of partially testacy (partial
intestacy). These can be illustrated further as follows
1.3 Testate (Testamentary) Succession
When
a person dies, leaving a valid will such as an instrument in writing containing
his direction regarding his affairs after his death, he is said to have died
testate. Succession to his property is thus described as testate succession, or
testamentary succession. This incident of succession is governed by the law
relating to wills and also generally by the succession Act. Since very few
people in Tanzania make wills, this type of succession is very rare to find in
our country.
1.4 Intestate succession
Intestate
succession is the opposite of testamentary succession. A person dies intestate
in respect of all property, which has not been disposed of by a valid
testamentary disposition. The vast majority of people in Tanzania die without
making a will and there fore intestate succession is predominant.
1.5 Partial Testacy (Partial Intestacy)
This
is a hybrid between testamentary and intestate succession. It is a situation
whereby part only of the deceased’s property is disposed of by a valid will,
the deceased having died intestate in respect of the rest of his property.
1.6 What is a Will?
A
will is declaration made by a person during his lifetime regarding certain
matters which he desires to take effect on or after his death.
Such
matters primarily relate to the disposition of his property. Property disposed
of by will is called legacy and its recipient is called the beneficiary or a
legatee
Besides
the disposition of a property, a person may by his will given certain
directions intended to satisfy his wishes. Foe example regarding manners in which
he should be buried. A person who makes a will is called a testator if a male
and a testatrix in case of a female
deceased.
1.7 Matters which determine the validity of the will
The
following items are the requirements of a valid will
a. Testamentary capacity
b. Animus Testandi (Intention to make a
will)
c. Formal requirements must be followed
and complied with
Testamentary
capacity
A
will may only be valid if and only if the person giving it is an adult who is
above 18 years of age and in addition to that be of a sound mind. In this case,
the following persons may not issue a valid will: (i) Infants or minors- these
are people of below 18 years. (ii) Persons of unsound mind, or whose memory is
lost. There are however exceptions to this:
(i) A person of unsound mind can make a
valid will during lucid period. In this case, the person propounding the will
must prove lucidity
(ii) A person who is generally of sound mind
might nevertheless suffer periods of insanity. The burden of proof in this case
on the person attempting to upset the will on the grounds that the testator was
insane when making it
Animus
testandi (intention to give a will)
To
make a valid will, testator must have animus testandi that is the intention to
make a will. Where the testator executes a document which is apparently a will,
it is presumed he had animus testandi unless evidence in introduced to the
contrary. Wills obtained by force, fraud or undue influence are void. The
burden of proof is upon the person intending to upset the will. Undue
influences should be distinguished from mere persuasion which is not sufficient
to invalidate a will.
Formalities
to be met
i. A will must be in the form prescribed
by law. Formalities of a valid will have been contained in sections 8 to 16 of
the Law of Succession Act (Cap. 160). The Act says:
ii. A will may be made either orally or in
writing
iii. Oral wills (Nuncupative will)- is
allowed in some states I n dire circumstances like sickness and usually only
allowed for a small value. Military personnel are good examples of where this
kind of will might occur, because they mostly die sudden deaths
iv. No oral will shall be valid unless; (a)
it is made before two or more competent witnesses and (b) the testator dies
within a period of three months from the date of making the will
v. No written will is valid unless: (a)
the testator has signed or affixed his mark to the will, or has been signed by
some other person in the presence and by the direction of the testator. A
signature can take the form of:Rubber stamp, a mark, a thumb print or a
descriptive signature (e.g your loving wife, mother etc)
1.8 Ways in which a will may be revoked
A
will may be revoked in the following ways:
a. Express revocation in a later will or
codicil
b. Implied revocation in a later will or
codicil
c. Actual destruction
d. Subsequent marriage
Express
revocation in a later will or codicil
Each
will or codicil may contain a clause which expressly revokes the earlier will.
This revocation may be of the previous will or of parts of it. if no such
revocation clause is included, the earlier will is not revoked except by
implied revocation
Implied
revocation
Where
two wills are in existence at death and the latter does not expressly revoked
the former, both will be upheld except where the later will in inconsistent
with the former. To the extent that the later will changes the terms of the
former will, then the former is revoked. The rest of the former will, however,
remains valid
Revocation
by destruction
The
following is necessary for an effective revocation by destruction:
An
act of physical destruction
By
the testator or by some other person in his presence and at his direction, with
animus revocandi (the intention to revoke the will)
Revocation
by subsequent marriage
A
will is always revoked by the subsequent marriage of the testator unless the
will is expressed as being in contemplation of marriage to a specific
individual
1.9 Appointment of executor, administrator and legal personal representative
Personal
Representative
The
personal representative is the person who represents the deceased and deals
with his estate. The office used to relate to personal property only, but now
relates to both real and personal property.
Where
the personal representative is appointed in the will of the deceased, he is
called the executor. Where no executor is appointed, or the person appointed is
unable or unwilling to act, the representative is termed the administrator and
is appointed by the court of law
Duties
of personal representative
(i) Arrange burial of the deceased
(ii) Make an inventory of property left by
the deceased and gets this property into his custody and control
(iii) Advertise for claims
(iv) Pay duty and detain probate
(v) Settle debts and liabilities of estate,
including regains
(vi) Distribute residue
The
Executor
Any
person may be appointed as an executor. If he is incapable of acting due to
infancy or insanity, the other named executors will obtain probate with power
reserved for the person under incapacity to prove when the incapacity ends.
Where the person under incapacity is the sole executor, letters of
administration will be granted to a guardian, or other person on his behalf
Number
of executors appointed: ant number of executors may be appointed but only four
may obtain clearance probate in respect of the same property.
Executor
de son tort
An
executor de son tort is an authorised person who intermeddles with the estate.
He is personally liable for any losses incurred. Simple acts of kindness will
not be sufficient to constitute him an executor de son tort
An
Administrator
An
administrator is appointed in the following circumstances:
(i) Where the deceased leaves a valid will
which names an executor who will not act
(ii) Where the deceased leaves valid will
which does not name an executor
(iii) Where the deceased dies without leaving a
valid will
Number
of administrators: as with executors, a maximum of four may be appointed in
respect of any type of property.
The
composition of the claims against the deceased
1.10 Distribution of the Estate
The
distribution of estates involves:
(a) Payments of creditors: this is
particularly important where the estate is insolvent and it is necessary to
follow the statutory order of priority for the payments of creditors
(b) Distribution under a will: where there
is a will, it is necessary to interpret the provisions in accordance with
statutes and cases law
(c) Intestate distribution: where there is
no will, special rules have been developed in statutory form for the
distribution of the estate
(d) Partial intestacy. Where a will does not
dispose off the whole of an estate, the indisposed part is distributed
according to the intestacy rules and a partial intestacy is said to occur
Distribution
to Creditors
In
making an inventory of the estate, one of the tasks of a personal
representative is to detail the deceased’s creditors, in many cases, this may
prove to be more difficult that listing the deceased’s assets. The personal
representative can protect himself against claims for creditors who come to
light after the distribution of the estate by advertisement. Providing at least
three months since the advertisement was made, the personal representative can
not be liable for creditors who make a late claim against the estate.
Where
an estate is solvent, the order of payments of the creditors is not important
since everything claimed will be paid eventually. But where an estate is
insolvent certain creditors have priority over others and it is essential to
pay the debts in the correct order which is:
a) Pre-preferential Debts
(i) Funeral, testamentary and
administration expenses (paid before all other items)
(ii) Money in possession of a debtor as
officer of a friendly society or trustee savings bank
b) Preferential Debts
(i) Rates due at the date of death, having
become payable within the previous twelve months
(ii) Assessed taxes preceding death, not exceeding
one year’s assessment
(iii) Wages or salary of an employee I respect
of four months prior to his death
(iv) National insurance contributions for the
twelve months prior to death
(v) Value added tax due on death which has
become payable in the previous twelve months
c) Unsecured Debts (other creditors)
d) Deferred Debts
(i) Interest on loans at the rate in excess
of 5% p.a. (paid before other deferred debts)
(ii) Loan by a spouse for purposes of trade
(iii) Advances to a person in return for a share
of the profits of his business
(iv) Debts due to vendor of goodwill payable
by way of an annuity or share of profits
e) Interest at 4% p.a on all debts proved
f) Funds of settlements sets aside by the
trustee in bankruptcy
Distribution
under a will
Many
wills are models of clarity and are easy to understand. Many others are
ambiguous, poorly drafted and only too frequent, practically impossible to
understand. As a result of the latter form of will many of which are home-made,
a large body of case law has grown up concerned with the interpretations of
wills.
Types
of Gifts under a Will
a) Legacy and Devise- A legacy is a gift
in a will of personal property. Where it relates to movable property, it is
called a bequest (hence to bequeath) and where it relates to immovable
property, it is called a devise (hence to devise). The person to whom it is
given is called a legatee
b) Residue- a will normally contains
legacies and devises and then a gift of whatever is left after these items have
been dealt with. Such a gift is called a gift of residue. It may consist of
reality or personality or both and the person to whom it is given is called the
residuary beneficiary
Types
of Legacies
(i) Specific legacy
(ii) General legacy
(iii) Demonstrative legacy
(iv) Pecuniary legacy
(v) Residuary gift
A
residuary gift
A
residuary gift consists of the surplus or residue of the testator’s estate
after all debts and other liabilities, expenses and other legacies have been
paid. A beneficiary entitled to the residuary estate is called a residuary
legatee. For example ‘’to pay the residue to my wife’’
Causes
of Failure of Legacies, Devises and Gifts of Residue
1.11 Circumstances in which legacies lapse or fail
i. Ad emption- It means that if anything
which has been specifically bequeathed does not belong to the testator at the
time of his death.
ii. Abatement-Is a situation where there
are insufficient assets after payments of debts. In this case the general
legacies are abated first and being reduced to zero.
iii. Lapse- A legacy is not valid if the
legatee is proved to have survived (live longer than the testator). But where
the legatee predeceases the testator, the legacy will lapse.
iv. Disclaimer- A beneficiary can always
disclaim a legacy or devise and would do so where the gift involved onerous
conditions or where he wished to increase the share of residue passing to
another. A beneficiary can refuse the gift bequeathed to him. The law can not
force a man to take an estate against his will. Disclaimer can be made either
by deed or by conduct.
v. Uncertainty: A gift under a will fails
where there is uncertainty as to:
- what
is being given
- To
whom it is been given or
- The
quantity of the interest being given
vi. Gifts subject to an illegal condition: A
gift fails if it has an illegal condition attached to it for instance ‘ I give
Tshs. 2,000,000 to Kumalija Samweli providing he murders his wife.
vii. Gifts subject to a condition which is
contrary to public policy. Where a gift is subject to a condition which is
contrary to public policy, the gift will not fail, but the beneficiary will
take without the condition; An illustration of such a gift is ‘ I give Tshs.
3,000,000 to my wife on condition that she shall not marry again. The wife will
take the legacy but remain free to marry again.
Effects
of failure of legacies, devises and gifts of residue
(a) Failure of legacy or devise: Where for
any reason, a legacy or devise fails it enlarges the residue
(b) Failure of residue. Where for any
reason, a gift of residue fails, the intestacy provisions apply and the
position is described as a partial intestacy.(53)
Account of the Executor
The
executor or administrator of an estate is called a Fiduciary. The inventory and
the accounting statements which are prepared during the operation of the estate
are submitted to the courts. In this regard, the following procedures are
followed:
1. The assets of the deceased are called
as the ‘The Principle of the Estate’ and are valued at the date of the death.
The double entry will be
Dr.
Individual Assets Accounts at fair market value
Cr.
Estate Capital Account at fair market values of all assets
2. Any interest accrued on stocks and
dividends declared on shares held by the deceased are also taken as part of the
Principal of Estate
3. Life insurance policies that have the
estate of the deceased are also included in the inventory of the estate. Any
loans obtained on the security of these policies are deducted from the proceeds
of these policies
4. The liabilities of the deceased are not
recorded initially. These are recorded only when paid
5. Any increase or decreases are not
recorded initially. These are recorded only when paid
6. Any increase or decrease in the
principal assets is considered as principal. If an executor sells an asset for
less than the recorded value then loss is a decrease of the estate principal
and vice versa. In this case:
Loss
on disposition
Dr.
Loss on disposition of principal assets account
Cr.
Respective Asset Account
Gain
on disposition
Dr.
Respective Asset Account
Cr.
Gain on disposition
7. Usually, depreciation is not recorded
unless the will specifies that.
8. Any obligations that existed at the
time of the death of the deceased are considered principal and are debited to
‘Debts of the Deceased Account’ when paid
9. All the funeral and administration
expenses of the estate are considered obligations of principal unless the will
specifies that they are to be changed to income
10. Any income received after the date of the
death that was accrued and recorded as principal is considered as income. It is
credited to the ‘Estate income Account’
1.12 Accounts to be prepared usually by the executor:
(a) Distribution Statement
(b) Estate Capital Account
(c) Estate Cash Account
(d) Estate Income Account
(e) Balance Sheet of the Deceased
NB:
Definition of Personal Chattels
The
personal chattels comprise carriages, horses, stale furniture, motor cars,
garden effects, domestic animals, plates, linen, glass, books, pictures,
prints, furniture, jewels, and articles of household use or ornament, musical
instruments, wines and spirits. The main provision is that the items are not
used in a business.
Some
Illustrations
Illustration1
Alpha
died intestate leaving a wife, two children Ponsi and Quine and two
grandchildren Rose and Sundi, the children of a deceased child Oldo. The
children are both over 18 years, the grandchildren are minors. The estate after
debts was valued at Tshs 80,000,000, which included Tshs. 5,000,000 for
personal chattels
Required:
Prepare the Estate distribution Statement
Solution
Alphas
Statement of Distribution of the Estate
Estate 80,000,000
To
surviving spouse
Personal
chattels 5,000,000
Statutory
legacy 15,000,000 20,000,000
60,000,000
Residue
To
surviving spouse
One
half for life with
Reminder
to issue (2 children) 30,000,000
To
issue
P
one third 10,000,000
Q
one third 10,000,000
R
and S taking O’s share 10,000,000 30,000,000
Illustration
2
Alpha
died intestate leaving a wife, a brother J and a nephew M, son of a deceased
sister K. A’s parents are both dead. The estate amounted to Tshs. 100,000,000
including Tshs. 2,000,000 for personal chattels
Required:
Prepare
the Distribution of the Estate ignoring 4% interest
Solution
Alpha’s
Distribution of Estate
Estate 100,000,000
To
surviving spouse
Personal
chattels 2,000,000
Statutory
legacy 40,000,000 42,000,000
58,000,000
Residue
To
surviving spouse
One
half absolutely 29,000,000
Other
half: to brothers and sisters
J
one quarter 14,500,000
M
taking his mother’s share
Peter
stripes 14,500,000 58,000,000
Exercises
Question
One
Josephat,
who had two sons, Charles and David; and two daughters, Evelyn and Francisca,
died intestate on 31 December 2010, leaving a widow, Beatrice.
Charles
had died some years earlier leaving a son George and a daughter Helen.
Francisca had also predeceased her father leaving two sons, John and Kenneth.
During
his lifetime, Josephat had made the following payments to his children and
grandchildren:
Charles Tshs.
4,000,000
David
Tshs.
15,000,000
Evelyn Tshs.
5,000,000
John Tshs.
2,000,000
Kenneth Tshs.
3,000,000
The
residue of the estate net of the advances and after distributing the chattels
to the widow but before the widow’s statutory legacy amounted to Tshs.
108,000,000.
Required:
Prepare
a statement showing the distribution of the estate on the death of Josephat and
also on the death of Beatrice.
Question
Two
(i) Explain
the essentials of a valid will
(ii) Distinguish
between an executor and executor de son tort
(iii) Describe
any four causes of failure of legacies, devices and gifts of residue
Question
three
What
are the financial and legal implications or consequences of a person who dies:
(a) Without
leaving a will
(b) Leaves
a will which does not dispose off whole of the deceased owned property
(c) Leaves
a will which is found to be invalid
Question
Four
Joachim
died on May 1, 2007 leaving the following property
i.
Personal chattels
valued at Tshs. 4,500,000
ii.
Simba shares of Tshs. 3,000,000
iii.
Cash in CRDB Bank Tshs. 10,200,000
His
will provided the following bequests:
- To
his beloved wife Raha, Tshs. 7,500,000; his personal chattels and the
residual absolutely.
- To
his son Range, Tshs. 3,750,000. Range has predeceased testator leaving a
widow and daughter Anna who are still alive.
- To
his sister Dinna, Simba shares of Tshs. 3,000,000
- To
his brother Jakaranda, Tshs. 1,500,000. Jakaranda had predeceased testator, leaving a wife
and two children.
- To
his grandson Fatihiya, Tshs. 375,000
- To
Kibaha, Orphanage Camp, Tshs. 375,000
- To
his friend Charles, Tshs. 750,000
Required:
Prepare
a statement showing the distribution of the estate of Joachim the deceased. (10
Marks)