Law Talk January 2012


	JANUARY 2012 SPLITTING HEIRS Most testators wish to do two things in their wills: Provide for their spouses; and Benefit their children fairly (equally?). Often this presents an intractable problem. Suppose our testator is a well-to-do farmer who owns one indivisible asset, a farming enterprise. He is married out of community of property and has three children. What to do? What is normally done: Leave the enterprise to his spouse if she is still energetic enough to farm for her own account. Leave the enterprise to all his children (via a company, as one may not increase the number of owners of farmland!) or one of them subject to a bequest price (a sum to be paid by that heir to the others). Such arrangements are often scuppered by greed and family feuds. Bequeath the farm to one heir and buy life insurance to equalise the inheritance. This is generally unaffordable as one gets on. An alternative approach the farmer might take is the following: Bequeath the enterprise to a trust created in his will. Set up the trust to enable it to farm and instruct it as its primary function to care for the surviving spouse during her lifetime. Any minor children can be raised and educated or trained to a level equal (as far as possible) to their siblings at the trust's expense. On the death of the surviving spouse, the trust assets can be liquidated and shared (equally?) between the remaining heirs. A right of refusal may be given to the children – this means that they could buy at a price which an outsider has offered for the enterprise. If well conceived and well written, such a scheme could be flexible to allow for heirs to agree on how to share or, alternatively, be more rigid to provide for the testator's directions to be given effect to. The subject is complex, and requires some tax expertise and an understanding of how each family knits. There are many variations on the above theme, but the following are key: The scheme should be flexible, all decisions taken transparent, and the heirs should be consulted or (even better) drawn into the decision-making process. Do consult an expert in testation; given the value and sentiment involved, skimping on such advice is not clever.

FOR FURTHER INFORMATION CONTACT:	Property Department T: (033) 341 9100 F: (033) 392 4622 E: tatham@tmj.co.za