A will reflects the testator’s wishes at the moment it was signed, but it cannot always anticipate what will actually work best for the people left behind.
A testator might leave the family home and a share portfolio to two different children in roughly equal value, only for one child to have no interest in living in the house and the other to have no interest in managing shares. South African law allows heirs in this situation to agree among themselves to rearrange what they inherit, through a legal mechanism known as a redistribution agreement.
Redistribution agreements are a well-established part of South African estate administration, but they come with specific legal formalities, timing requirements, and tax consequences that heirs often do not anticipate.
This blog explains how redistribution agreements work, which South African legislation governs them, and where they can create unexpected tax exposure if not handled correctly.
What Is a Redistribution Agreement in a South African Deceased Estate?
A redistribution agreement is a written agreement, signed by all the heirs or beneficiaries affected, in which they agree to vary how the assets of a deceased estate are actually divided among them, compared to what the will or the Intestate Succession Act 81 of 1987 originally provided for.
Rather than each heir strictly receiving the specific assets bequeathed to them, the heirs agree, usually for practical reasons, to swap, combine, or reallocate assets in a way that better suits their individual circumstances. Crucially, a redistribution agreement does not override the will. The heirs are not changing who is entitled to inherit or disinheriting anyone.
They are simply agreeing, voluntarily and collectively, on a different practical division of what they are jointly entitled to receive, using their own agreement rather than the literal terms of the will to decide who ends up with which specific asset.
Legal Basis: The Administration of Estates Act and the Liquidation and Distribution Account
Redistribution agreements are dealt with within the framework of the Administration of Estates Act 66 of 1965, which governs how a deceased estate is administered from the executor’s appointment through to final distribution. During the administration process, the executor prepares a liquidation and distribution account, often referred to simply as the L&D account, setting out exactly how the estate’s assets and liabilities will be dealt with and distributed among the heirs.
A redistribution agreement is typically concluded by the heirs before this account is finalised and confirmed by the Master of the High Court, and the agreed redistribution is then reflected directly in the liquidation and distribution account itself.
This timing matters significantly, because a redistribution agreement reached after the estate has already been finalised and assets have been formally transferred into each heir’s name is treated very differently in law, often as a separate set of transactions between the heirs in their personal capacities, rather than as part of the estate administration process itself.
Why Heirs Choose to Redistribute an Inheritance
Redistribution agreements are most commonly used where a will leaves heirs with assets that are difficult to divide practically, such as a single family home left to several children in undivided shares, or a mix of illiquid and liquid assets that do not naturally suit each heir’s circumstances. Rather than forcing a sale of the family home purely to split the proceeds equally, heirs might agree that one sibling keeps the home while the others receive a larger share of cash, investments, or other assets to balance the overall value each person receives.
This approach can preserve family assets that heirs want to keep intact, avoid the cost and delay of an unnecessary forced sale, and allow heirs to end up with assets that genuinely suit their individual needs and plans, rather than a technically equal but practically awkward division of everything.
Tax Consequences: Donations Tax and the Income Tax Act
The most significant tax risk in a redistribution agreement arises where the assets exchanged between heirs are not of genuinely equivalent value. If one heir effectively gives up value to another as part of the redistribution without receiving fair value in return, the South African Revenue Service may treat that shortfall as a donation, triggering donations tax under the Income Tax Act 58 of 1962.
A properly structured, bona fide redistribution agreement, concluded by heirs for genuinely equivalent value and finalised before the liquidation and distribution account is confirmed, is generally not treated as a donation, because the heirs are simply rearranging their collective entitlement rather than one heir gifting value to another.
However, where the values exchanged are clearly unequal, or the agreement is used to informally pass extra value to a particular heir, SARS can and does raise donations tax assessments on the shortfall. This makes an accurate, independent valuation of the assets involved essential before any redistribution agreement is signed.
Estate Duty Implications
Estate duty under the Estate Duty Act 45 of 1955 is calculated on the overall dutiable value of the deceased estate as at the date of death, based on the assets the deceased actually owned at that time. A redistribution agreement concluded afterward, which simply changes who among the heirs ends up with which specific asset, generally does not change the total estate duty payable by the estate, since the overall value of what is being distributed has not changed, only its allocation among the beneficiaries.
Executors should nonetheless ensure that any redistribution agreement is properly documented and accounted for in the estate’s records, since the Master of the High Court and SARS will both expect a clear, verifiable explanation of how the final distribution reflects the agreed redistribution rather than the will’s original terms.
Transfer Duty on Immovable Property Redistributions
Where a redistribution agreement involves immovable property, such as one heir receiving the family home in exchange for giving up a claim to other assets, the Transfer Duty Act 40 of 1949 becomes relevant.
A redistribution that takes place within the deceased estate, before the liquidation and distribution account is confirmed, and that reflects a genuine reallocation of inheritance rather than a separate sale between the heirs, is generally treated as part of the inheritance itself and is typically exempt from transfer duty. Ordinary conveyancing costs for registering the property in the receiving heir’s name still apply, since the property must still be formally transferred at the Deeds Office, but the specific tax that applies to a standard property sale does not usually arise in a correctly structured redistribution.
This exemption depends heavily on the redistribution being properly documented and concluded within the correct timing window. A similar rearrangement of property ownership agreed between heirs after the estate has already been wound up and the property transferred into their names individually is far more likely to be treated as a separate transaction between the heirs, potentially attracting transfer duty in the ordinary way.
Formalities and Timing Requirements
For a redistribution agreement to be recognised and given effect within the estate administration process, every heir whose inheritance is affected by the rearrangement must agree to it voluntarily and sign the agreement. Where a minor is among the affected heirs, the consent of the Master of the High Court, and in some cases the appointment of a curator or guardian to represent the minor’s interests, is typically required before the redistribution can proceed, since a minor cannot independently consent to giving up or varying their inheritance.
Timing is equally critical. The agreement generally needs to be reached and submitted to the executor before the liquidation and distribution account is finalised and confirmed by the Master, so that the agreed redistribution can be reflected directly in the account itself. Agreements reached too late in the process, after finalisation, lose the specific protections and tax treatment available to a proper redistribution agreement and are instead treated as separate dealings between the heirs.
Rearranging an Inheritance the Right Way
Redistribution agreements offer heirs genuine flexibility to divide an inheritance in a way that actually works for their lives, rather than being locked into a literal, asset-by-asset division that may no longer make practical sense.
Getting the timing, valuation, and documentation right is essential to avoid unintended tax consequences, and every estate’s circumstances differ, so this article should be read as general guidance rather than a substitute for advice tailored to your specific estate.
Executor Law assists South African heirs and executors in structuring redistribution agreements correctly, ensuring they are properly documented, timed, and valued to achieve the intended outcome without unnecessary tax exposure.
Speak to an estate administration specialist about redistributing an inheritance correctly →
Frequently Asked Questions
Can heirs change how an inheritance is divided after someone dies in South Africa?
Yes, through a redistribution agreement, heirs can voluntarily agree to a different division of the estate’s assets among themselves, provided all affected heirs consent and the agreement is concluded before the liquidation and distribution account is finalised by the Master of the High Court.
Does a redistribution agreement change who the will says should inherit?
No. A redistribution agreement does not alter who is entitled to inherit under the will. It simply changes the practical allocation of specific assets among the people already entitled to inherit, based on their own agreement.
Will I have to pay donations tax if I give up part of my inheritance to a sibling?
Possibly, if the assets exchanged are not of genuinely equivalent value. A bona fide redistribution agreement for fair value is generally not treated as a donation, but an unequal exchange can trigger donations tax under the Income Tax Act on the value of the shortfall.
Does transfer duty apply if a redistribution agreement reallocates a house between heirs?
Generally not, provided the redistribution is concluded within the estate administration process before the liquidation and distribution account is confirmed. Ordinary property transfer and conveyancing costs still apply, but the transfer duty that applies to a standard sale is typically exempt in a properly structured redistribution.