According to South African legislation, deceased estates are either wound up testate, by means of a will or intestate, whereby there`s an absence of one. The former serves as common law, the most popular alternative with customary law still applicable.
For an heir`s eligibility to be regarded, the testator must have died; left benefits &/ conferred status onto another; the beneficiaries must already be alive or at least born and the heir must be competent to inherit. This all expected by the time the testator passes on.
As a rule of thumb, South African`s are encouraged to exercise their freedom of testation as this allows for the creation of a tailored last will and testament, particularly considering South Africa`s past law, where certain race groups were refused this preference. Nevertheless, whilst some still opt for the traditional routes of winding up estates, there are several alternatives readily available with redistribution agreements amongst these.
In essence, a redistribution agreement, subject to testate or intestate succession, provides a channel whereby heirs can restructure the allocation of assets amongst themselves, if desired. Section 14 (1)(b)(iii) of the Deed`s Registries Act allows for the transfer of immovable property & its associated rights according to the law of succession and advocates for the use of redistribution agreements.
“If in the administration of the estate of a deceased person any redistribution of the immovable property in such estate takes place among the heirs of the deceased or between such heirs and the surviving spouse, the executor or administrator of such estate may transfer or cede the property direct to the persons entitled thereto in terms of such redistribution.”
Section 1 of the Administration of Estates Act defines heirs as assumed beneficiaries, legatees and donee`s under a donatio mortis causa. Only heirs party to the original vehicle, testate & intestate succession are obliged to contract to these agreements and no formal compliance other than a written form, date, and signature is required from all the beneficiaries. Once established, these agreements are submitted to the Master of the High Court for approval, with the relevant estates distributed accordingly.
Both amassed assets and those selected can be redistributed depending on the type of assets the estate holds with these agreements theoretically likened to the following illustration.
The end of January 2015 saw the passing of Ms Caroline Gumede. Survived by 3 major sons, Ms Gumede`s Last Will & Testament, nominated the latter as sole heirs. Despite their mother`s chosen means of succession, Anele; Sizwe and Bongs sought estate restructuring and entered into a redistribution agreement. Upon the master`s approval, all estate assets were sold and the proceeds of this equally divided amongst the heirs.
As per Section 14(2) of the Deed`s Registries Act, beneficiaries are liable for estate and transfer duty tax. However, S 9 (1)(e) of Transfer Tax Act absolves heirs from property tax, in respect of movables or immovables, provided a redistribution agreement`s applicable with exemptions certificates issued herein.
In conclusion, redistribution agreements provide an alternative means to succession, purported to satisfy the wishes of the heirs. This tax-free vehicle assists with impractical and unfeasible bequests and in recent times opted by many.
Trusts & Estates department
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This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE).