SUBSTITUTION

Substitution is when the testator or the rules of the law of succession nominate someone to inherit in the place of the beneficiary under certain circumstances.

There are two forms of substitution namely:

•Direct substitution

•Fideicommissary substitution

In either direct or fideicommissary, the original beneficiary is referred to as an instituted beneficiary while the alternative is called the substitute beneficiary.

 

Direct substitution is when the testator nominates a substitute  beneficiary to inherit only if the instituted does not want or cannot benefit. In most cases it is when the testator foresees that the instituted beneficiary might refuse or not be able to benefit(unworthy).

Therefore to avoid bequeathed assets devolving intestate or to avoid representation the testator provides for a substitute.

Direct substitution by operation of law, the legislation also creates direct substitution, meaning even if the testator has not provided for substitution in his will, a statutory substitution may take place.

•Position before 1 October 1992 Sec 24 of the general Amendment Act 32 of 1952:-when a child of the testator who would have been entitled to a bequest in terms of the will…his descendants will be entitled to represent him per stirpes unless a contrary intention was clear from a will.

•Position on or after 1 October 1992, for the testator who died after 1 October ’92 the position is regulated by S2C(1) and (2)…. Lets read same on page 149

Please note the word bequest used in S24 is replaced in S2C with the word benefit.

FIDEICOMMISSARY SUBSTITUTION

Fideicommissary as a form of substitution different from direct substitution.

What is fideicommissary?

It’s a legal institution in terms of which a person transfers a benefit to a particular beneficiary subject to a provision that, after a certain time has lapsed or a certain condition has been fulfilled, the benefit will pass over to another beneficiary.

Who are the parties to a fideicommissary?

There are 3 different parties who are as follows:

•fidecomittens: this is a person who creates a fideicommissary or the person who transfers the benefit (testator)

•Fiduciary: this is a beneficiary to whom the benefit is transferred subject to a time limit or fulfilment of a condition.

•Fidecommissary: this a beneficiary to who the benefit passes at the expiry of time limit or fulfilment of the condition placed against the benefit given fiduciary.

How can it be created?

•Between leaving persons (inter vivos) or;

•By means of a will

Please note we will only concentrate on the fideicommissary created by means of a will.

If it is not clear whether the testator intended creating direct substitution or fideicommissary, the legal presumption is that there it is the direct substitution that has been created by the testator in his will.

The reason for the presumption in favour of direct substitution  is that the fideicommisum creates more burden (more chances of loosing the benefit) than direct substitution.

Requirements for a valid fideicommissum

•It must be clear from the will that the testator intended to create a fideicommissum.  It must be clear that it is not direct substitution, usufruct or modus.

•The fideicommissum is only valid for the fideicommissary (a beneficiary) entitled to take the benefit at the expiry of the time limit or fullfilment of the condition. If the fideicommittens(the testator) put time limits or condition against the benefit of a fiduciary without naming or indicating the fideicomissarry, such fideicommissum will have no legal effect and the fiduciary will inherit the benefit as if there were no fideicommissum.

•The provisions of the fideicommissum must give a clear indication of the following

1.Assets which are subject matter of fideicommissum

2.The fiduciary and

3.fideicommissary

•If the condition has been used, it must be valid. A condition is invalid if it is

1.Vague

2.Impossible

3.Unlawful

4.Contra bonos mores

If a condition of a fideicommissum is invalid, a fideicommissum has no legal effect and the fiduciary will take the benefit as if there was no fideicommissum

How may a fideicommissum be created?

•Explicitly(expressly)

•Tacictly (impliedly)

1.Explicitly or Expressly creation

It’s a normal way of creating a fideicommissum

It must clearly appear from the wording of the will who is a fiduciary and who is a fideicommissary. E.g. I give my farm to my daughter X if she dies it passes to my son Y. in this example a fiduciary is daughter X and the fideicommissary is son Y.

•Tacit or implied creation

It is when it is clear who is the fiduciary but it is not expressly stated who is a fideicommissary. E.g. I give my farm to my daughter X, if she dies childless, the farm passes to my son Y.

The problem is that if the daughter X has children when she dies Y will not be a fideicommissary.