REDISTRIBUTION OF ASSETS ON DIVORCE AND THE INTER VIVOS TRUST
Simply put, Section 7 of the Divorce Act Number 70 0f 1979 as amended provides that in a marriage solemnised prior to 1984, which is out of community of property where the Parties wish to Divorce, the Court on divorce, is empowered to award a redistribution of the assets of the Parties accumulated during the marriage is it deems just and equitable given the contribution made by the Parties to the marriage during its subsistence.
Many parties to a marriage decide for a variety of reasons to transfer some of their assets in to what is known as an inter vivos Trust. An inter vivos Trust is an entity created by a party in terms of which assets are transferred to it to be administered by Trustees upon terms and conditions created in the Trust for the benefit of certain named beneficiaries created therein. It is not the function of this article to discuss and debate the reasons one would create such an entity other then to state that upon transfer of the assets to the Trust ownership in tem passes from the Party creating the Trust to the named Trustees who hold them in a fidcuciary capacity for the benefit of the named beneficiaries.
In Supreme Court of Appeals judgment of
BADENHORST VS BADENHORST CASE NUMBER 7/05 DATED 29 TH NOVEMBER 2005,
The Judges of Appeal were called on to apply their minds as to whether the assets belonging to the husband which had been transferred to an inter vivos Trust during the course of the marriage, could be taken into account in making a redistribution of assets upon the divorce of the Parties in accordance with Section 7 of the Divorce Act.
Combrick AJA with whom the other presiding Judges of Appeal unanimously concurred held that in order to succeed in asking the Court to hold that the assets of an inter vivos Trust must be included in the distribution, the spouse contending that it should, must prove that the other spouse controlled the Trust and that but for the creation of the Trust he or she would have acquired and owned the assets in his or her name. In order to do this it is necessary for a full enquiry and investigation to take place. The Trust Deed must be examined perused and analysed with regard to who the Trustees are and what their powers are, then each asset transferred to the Trust must be analysed and examined as to when and how such asset was acquired and the circumstances surrounding the transfer of that asset to the Trust must be analysed. Thereafter an examination as to how the Trust is administered between the time of its creation and the date of divorce must be examined. If it can be said that the founding spouse controlled the Trust and administered it as if it were his own assets the Court can and will in effecting a redistribution of assets in terms of Section 7 the Court will take into account in the redistribution the value of the assets in the Trust.
In the present case Combrinck AJA conducted a complete and thorough analysis of the evidence and of all the factors to be taken into account and held that the value of the assets in the inter vivos trust created by the Husband and administered by him should be taken into account and such value should be added to the value of the Husband's estate upon divorce. In affecting the redistribution the vale of these assets made a marked difference to what was ultimately awarded to the wife as her sole and absolute property upon divorce.