In certain cases, a beneficiary may not be willing to accept their entitlement, or they may prefer to redirect their inheritance to someone else. In estate administration, there are mechanisms in place that help to effect a solution. These are deeds of variation and disclaimers.
Subject to exceptions, it should be noted at the beginning that these deeds can only be made by majors, who are ascertainable, living and of full mental capacity.
A deed of variation
A deed of variation redirects the whole or part of an entitlement to another person. Among many other reasons, it could be that a beneficiary intends to provide for someone else. It may also be that a beneficiary wishes to make a charitable contribution. Beneficiaries can choose to vary their interest in cash, land or personal chattels. A variation must be done within two years of the deceased’s death. It must also be in writing by the person giving up their inheritance.
A deed of disclaimer
A disclaimer is refusal to accept an entitlement or inheritance. The general law is that a beneficiary cannot refuse part of the entitlement only, they must refuse it in whole. However, a will may permit partial disclaimers in which case it may be permissible to disclaim a part of an entitlement.
Unlike a variation, a beneficiary making a disclaimer has no control over who receives the interest. The effect of a disclaimer falls under two categories, a disclaimer under a will and a disclaimer of an intestate estate. Under a will, the beneficiary who disclaims is deemed as having died immediately before the testator. The effect is that if the beneficiary is a descendant of the testator, they will be substituted by their descendants in terms of the Wills Act. If not, the share goes into the residuary estate. Under intestacy, the beneficiary is treated as having died immediately before the intestate deceased. The effect is that it allows the beneficiary’s descendants to inherit in their place in terms of the Rules of Intestacy.
How this affects you?
If you are a beneficiary, you may want to redirect your inheritance for various reasons. Some beneficiaries may simply not want to receive an entitlement for personal reasons. These deeds present a solution to such situations. It is important that you seek legal guidance as both may carry different tax implications. This includes Inheritance tax, Capital Gains tax or Income tax.
How can we help you?
At Bhakar Greenfield LLP, we possess an understanding of these mechanisms, and we are equipped to offer advisory services to both personal representatives and beneficiaries and drafting of deeds. There are also exceptions to some of the aspects above and you should contact us for a tailor-made solution.
