ESTATE PLANNING AND THE IMPORTANCE OF THE SUBDIVISION OF AGRICULTURAL LAND ACT

Scenario

Mr Reyneke owns a farm in South Africa and in terms of his last will and testament he bequeathed the said farm to his two sons in equal shares. Mr Reyneke died in 2019 and the executor of his estate requires clarification concerning the farm and the two sons.

Firstly, the distribution of a person’s estate when he dies is determined by the South Africa law of succession, subject to certain limitations. The South African law of succession is supported by the principle of freedom of testation in terms of which a person is given considerable freedom and discretion as to how his estate should be distributed at death.

One of the limitations to an executor’s freedom of testation is contained in the Subdivision of Agricultural Land Act 70 of 1970.  The Act prohibits the subdivision of agricultural land without the consent of the Minister of Agriculture. Without the consent of the Minister, the wishes contained in the will of Mr Reyneke cannot be carried out.

The following options are available to the testator and heirs: –

1. Redistribution agreement – the heirs can enter into an agreement whereby the land is registered in the name of one heir and the value of the one-half share is paid to the other heir. Both heirs must therefore inherit/benefit equally; or
2. The land can be sold to a third party; or
3. The heirs can create a company/trust whereby the heirs become shareholders/trustees and the entire farm is to be transferred to the said company/trust. The heirs can therefore work together as co-shareholders or co-trustees even though they may not own portions of the farm in their individual capacity.

It is therefore important to make use of a fiduciary specialist when drafting your last will and testament.

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)