What is a Redistribution Agreement When Winding Up an Estate?

When winding up a deceased estate, the division of assets among heirs can sometimes be complex, especially when the estate includes a mix assets. A redistribution agreement is a legal tool that allows heirs to allocate assets in a manner that suits all parties, ensuring a fair and practical distribution.

Here’s how it works and why it is often essential in estate administration.

This method of administration is quite common in the majority of intestate estates, as well as several testate estates. It may be essential to make use of this method. For example, if a testator stipulates that his property must be distributed equally among his three children, it is possible to determine that each should inherit R50,000. However, the assets do not usually consist of cash only but may include a house, policies, shares, furniture, motor vehicles, and so forth. In order to distribute these assets, an agreement must be reached on who must inherit what.

The redistribution agreement among heirs departs from the stipulations of the will and the rules of the laws of intestate succession, in the sense that co-ownership of the assets is dissolved, and each heir is entitled to sole ownership of those assets allocated to him or her in terms of the redistribution agreement. It is important that executors make very sure that such an agreement does in fact exist before distributing the assets.

The approval of the Master must be obtained once the redistribution agreement has been signed by the heirs. Where the beneficiaries are all majors and it is clear that the purpose of the agreement is merely to shuffle the assets, which would in any case have fallen to them, no problems would normally be experienced in obtaining the necessary permission from the Master.

The objective of a redistribution agreement must always be a redistribution of assets. Each heir involved in the agreement must contribute something and receive something. If this does not happen, it is not a redistribution agreement but rather a deed of donation, a disguised sale, an assignment of estate, or something similar. It must be clear that the main objective of the agreement is redistribution and nothing else.

Contact us for expert assistance with wills and deceased estates.