This blog explains how a section 38 takeover under the Administration of Estates Act works, using a case study as an example and providing practical considerations. It highlights that section 38 allows a surviving spouse to take over their minor children's inheritance, ensuring family stability and preserving estate assets. The process involves submitting a sworn affidavit to the Master, addressing specific questions, and choosing an appropriate payout method for the minor children.

Introduction

The Administration of Estates Act, section 38, stipulates that a spouse may take over the inheritance of their minor children if circumstances permit. This typically occurs when the surviving spouse and their minor children share in the inheritance. In some situations, this can undermine the authority of the surviving spouse and parent. However, section 38 is designed to help the spouse maintain a stable home environment for their minor children by placing the surviving spouse in a better position to do so.

What Happens When a Takeover Occurs

A takeover has the same effect as a sale, but the purpose behind it differs. The spouse must explain the purpose of the takeover in their application to the Master of the High Court. The primary goal is not economic but rather social. That's why the surviving spouse may choose to provide security and give the payout to the children when they reach 18 years old.

Social reasons for a takeover may include:

• Allowing the surviving spouse to maintain a stable home environment.
• Preserving the estate intact, for example, to prevent the breakup of businesses or division of farms.

Case Study

The deceased and surviving spouse were married in community of property. The spouse and minor children are the beneficiaries. After the payment of debts, only the family home remains as inheritance. The surviving spouse owns half of the house due to the marriage in community of property. The other half constitutes the inheritance of the surviving spouse and children. The surviving spouse may "takeover" this half-share in the house to buy the children's inheritance. In return, the children will receive a cash payout.

How does the payout work?

The payment (buying) of the inheritance can be done in one of three ways:

Immediately: The surviving spouse pays the children's inheritance to the executor, who then deposits the cash into the Guardian Fund for the minor children to receive when they turn 18 years old.

Security: The surviving spouse provides security for the payment of the inheritance share when the children reach 18 years old. The children will receive their cash payout at that time. If the minor's share is to be secured by an insurance bond, a bond of security signed by an authorised officer of the insurance company must be given. The executor will then need to obtain and submit an undertaking by the spouse and a bond of security signed by an authorised officer of the insurance company, stating that the inheritance of the minors will be paid out by the spouse when the children turn 18 years old.

Personal Guarantee: One or more individuals may provide a personal guarantee, but this form of security is only allowed by the Master in exceptional cases. This is similar to an insurance bond, as previously explained.

Questions to be Answered for a Takeover

To proceed with a takeover, the surviving spouse must answer the following questions in a sworn affidavit to be submitted to the Master for consideration and approval:

• At the time of the deceased's death, the applicant spouse must have been married to the deceased parent of their minor children.
• The minor children must also be the children of the applicant surviving spouse.
• Identify the estate properties that constitute the inheritance of the minor children and the surviving spouse, and which of those properties the spouse wants to takeover. The surviving spouse can takeover all or some of the minor's inheritance, except for the minor's cash inheritance, which must be paid into the Guardian Fund in favor of the minor. The value of the properties will determine the payout amount involved.
• Consult the surviving spouse and request their reasons for the takeover and the type of payments they plan to make to 'buy' the minor's inheritance.
• Obtain sworn valuations of all estate properties to determine their accurate market value and establish the payment amount.
• Inquire if there is a minor child who would be prejudiced by the takeover. There must be no interested person who would be prejudiced (e.g., if a person receives less due to the takeover).
• Determine if there are any other beneficiaries affected by the takeover (excluding the minor children and spouse involved in the takeover). Consent must be given by other affected beneficiaries who are above the age of 18 years old.
• Obtain the consent of all claimants (creditors and others who have a claim) for the takeover.
• Was the deceased previously married to someone else who passed away before them? If so, verify the Master's records to see if the estate was reported, and examine whether any limited rights were created that could potentially impact the takeover.
• Obtain the necessary payment requirements. Follow up on the request for the spouse to submit the necessary security requirements if that was the payment option chosen.

Assist the spouse in drafting the affidavit. This is part of the formal application to the Master to obtain the Master's consent. The affidavit must be signed by the spouse in the presence of a commissioner of oaths.

The Master may request additional requirements. If dissatisfied with the Master's security requirements, the aggrieved party may apply to the court for an exemption.

Conclusion

The Administration of Estates Act, section 38, plays a crucial role in ensuring the welfare of surviving spouses and their minor children during the inheritance process. By allowing the surviving spouse to takeover the minor children's inheritance under certain conditions, section 38 aims to provide stability and continuity for the family unit, especially in maintaining a stable home environment and preserving the estate's assets. 

The process involves a series of steps, including submitting a sworn affidavit to the Master, addressing specific questions, and determining the best method for payout to the minor children. By understanding the purpose and requirements of a section 38 takeover, surviving spouses can make informed decisions and ensure the best interests of their family are met during the administration of the estate. 

It is important to seek legal advice to ensure that all legal requirements are met.