A deceased estate is not a juristic person that independently enters into a loan in the same way as a company. Any financing must be arranged by the executor in the executor’s representative capacity and within the executor’s legal powers.
An executor can incur necessary administration expenses and can enter into agreements on behalf of the estate where properly authorised. There is, however, no unlimited general right to borrow or encumber estate assets merely because the executor considers borrowing convenient. The will, the Administration of Estates Act, the nature of the proposed security, the interests of creditors and heirs, and any Master’s or conveyancing requirements can all affect the executor’s authority.
In practice, an estate with a temporary liquidity shortfall may be funded by an heir or third party, or the executor may need to realise an asset. Any advance to the estate should be properly documented so that the lender’s claim and the repayment terms are clear and can be correctly reflected in the estate administration.
Where borrowing would be secured against estate property or would materially alter the estate’s liabilities, specific legal and fiduciary advice should be obtained before the transaction is concluded.
See also: What if there is not enough money in the estate? | How to avoid estate duty in South Africa?
Disclaimer: The information provided here is intended as general guidance only and does not constitute legal, tax, or financial advice. Every situation is unique, and legislation is subject to change. We invite you to reach out to our team at Wealth and Legacy Group for guidance tailored to your specific circumstances.