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Redistribution agreements - legality

19 August 2010

Although redistribution agreements were by common law adopted to prevent co-ownership (see Testate Estate of John McDonald 1897 NLR 15 (6)), the subsequent development extended the causa for redistribution agreements to carry out the wishes of testators or to comply with certain legal provisions such as the Subdivision of Agricultural Land Act 70 of 1970, the Agricultural Holdings (Transvaal) Act 22 of 1919, etc.

A redistribution agreement may not be contrary to the common law rule, in that the explicit provisions of a will may not be departed from, even though there was an agreement between the interested parties (see De Wet v De Wet 1951 (4) SA 212 (CPD) and Bydawell v Chapman NO 1953 (3) SA 514 (A)). This rule is not always strictly adhered to, irrespective of the hypothesis in Cuming v Cuming and Others 1945 AD 201, that:
"the wish of the testator, as clearly and fully expressed in the will, must be given effect to."

In the case of De Wet v De Wet (supra) it was also held:

"… that acts and agreements by and between them (beneficiaries) which vary or modify the terms of a will are invalid and unenforceable unless sanctioned by the court, which sanction is given only in certain expected cases."

According to our common law it is thus clear that it will only be admissible to enter into a redistribution agreement to redistribute assets acquired by heirs or legatees by virtue of a will or ab intestatio, and thus they cannot agree to alter the provisions of the will or law relating to intestate succession. However, section 14(1)(b)(iii) has altered the common law, in that all redistribution agreements alter the provisions of the will or intestate succession in one way or another.

It must, however, be noted that where a bequest is unfeasible, for example where a testator bequeaths a house to each of his children and after his death it becomes evident that all the houses are built on one piece of land and the subdivision of such land is not permissible, such bequest is void and the land will be regarded as part of the remainder of the estate and will devolve upon whoever is entitled to such remainder (see Ex parte Adams NO 1964 SA 135 CPD).

There exists no prescribed form for a redistribution agreement, however, from the wording contained in regulation 5(1)(e) of the Administration of Estates Act 66 of 1965, it is evident that such agreement must be in writing. Furthermore, section 2(1) of the Alienation of Land Act 68 of 1981 also provides that if immovable property is involved in such redistribution, then it must be in writing.

Redistribution agreements are nothing less than a contract (see Bydawell v Chapman NO and Others supra) and thus all the requirements pertaining to contracts must be complied with.

Redistribution agreements pertaining to immovable property should be signed by the contracting parties before two competent witnesses or a commissioner of oaths.

However, this is no peremptory, if the agreement is signed outside the borders of the Republic of South Africa, the provisions of Rule 63 of the Supreme Court Rules must be complied with, which provides for the proper authentication of documents executed outside the borders of the Republic of South Africa.

From the wording of section 14(1 )(b)(iii) of the Act it is clear that the redistribution agreement can be in respect of the whole or any portion of the assets of an estate. As already mentioned, section 14(1)(b)(iv) sanctions the introduction of movable assets not forming part of the estate of the deceased for purposes of equalising the division.

It is thus clear that all the immovable property forming part of the redistribution agreement must derive from the estate of the deceased.

The question which now arises is whether a surviving spouse's common law half share to which he/she is entitled by virtue of a marriage in community of property, is an asset in the estate of the deceased, which may be introduced in a redistribution agreement. If it does not form an asset in the estate of the deceased it is, naturally, from the analogy of the wording of section 14(1 )(b)(iii) of the Act, not capable of being brought into the redistribution agreement.

The Law of Succession in South Africa by Corbett, Hahlo, Hofmeyer and Kahn on page 12 refers in this regard as follows:

"... where a man or woman who was married to his or her spouse in community of property dies, the heirs of the predeceased spouse do not acquire co-ownership in individual assets of the joint estate, but merely the right to claim from the executor half of the net balance of the joint estate. Nor is the survivor, despite the fact that he was during the lifetime of the predeceased spouse co-owner of half of the joint estate vested with dominium or half of the assets. Like the heirs of the predeceased spouse, he is restricted to a right against the executor to half of the balance. " (my underlining).

On the death of a spouse married in community of property, the surviving spouse only acquires a ius in rem with regard to his/her half share, and thus such common law half share remains an asset in the estate of the deceased spouse.

The right to claim transfer of the common law half share is thus subject thereto that the estate debts of the joint estate are firstly paid (see Klerck NO v Registrar of Deeds 1950 (1)SA626T).

Where the estate debts cannot be paid without the assets of the deceased being sold, the surviving spouse will not be entitled to enter into a redistribution agreement with the heirs of the deceased whereby such heirs acquire the common law half share of the surviving spouse, and introduce movable assets, such as money, to equalise such distribution. This will merely have the effect of a sale and not a redistribution of the assets in the estate of a deceased.

In the Klerck case on page 630 the following is of relevance:

"In order that there should be a redistribution of immovable property in an estate, it seems to me that the position must be that, but for the redistribution, there would have been a distribution of immovable property; that there must be immovable property in the estate for distribution"

Subsequently in lieu what has been submitted above, the common law half share of a surviving spouse to a marriage in community of property is an asset which can be brought into a redistribution agreement, provided sufficient funds exist to pay estate debts.

It is permissible for certain heirs acquiring specific property from an estate to redistribute such property without reference to other heirs, and the conference of registrars regarded this as giving effect to the letter and spirit of section 14 (RCR 2 of 1951).

Also in the Klerck case on page 629 the following is averred in this respect:
"… that in every redistribution there must be involved sale, exchange, or donation between on heir and another, or between the heir and surviving spouse. But the mere fact that a sale between two heirs or between an heir and the surviving spouse is entered into does not necessarily mean that a redistribution is brought about by that sale."

How must one determine whether the redistribution agreement does not constitute a covert donation of sale? A test which can be made use of to determine whether such redistribution agreement does not perhaps constitute a covert donation or sale, is the one which was used in the case of Lubbe v Commissioner for Inland Revenue 1962 (2) SA 503(O) whereby the following question can be posed to determine the answer to this question, viz;

If the redistribution agreement is ignored, will there, irrespective of the movable assets which are possibly introduced, be an allocation of the relevant assets being distributed in the agreement to the contracting party?

If the question is answered in the affirmative, the redistribution agreement will be forthcoming. A similar test was also applied in the Klerck case (see discussion supra).

Each redistribution agreement will thus have to be, as indicated above, tested to determine whether it does not in effect constitute a concealed or covert donation of sale.

Republished with permission from SA Deeds Journal

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