As a parent, you have a responsibility to ensure that your minor child is cared for in the unfortunate event of your passing.
Apart from the usual financial planning which is required, it is also important to have a last will and testament in place wherein you make provision for the nomination of a legal guardian and provide instructions on the management of your child’s inheritance while he/she is still minor.
Appointment of a legal guardian
In the absence of a natural guardian, a legal guardian will be responsible for the daily care and general wellbeing of your child and is required to administer and protect your child’s financial interests. The legal guardian will also represent your child in any administrative, contractual or other legal matters and give or refuse consent, where it may legally be required.
Careful consideration should therefore be given when deciding who will be the legal guardian for your minor child. Things to consider are for example the willingness of such person to accept the role of legal guardian, that person’s financial stability, age and health status as well as the relationship between the person and your child.
It is important to be aware that only the High Court can grant the rights and responsibilities of a legal guardian to a person. Therefore, the person so nominated in terms of your will, is required to make application to the High Court for an order appointing him / her as legal guardian and should submit a copy of your will in support of the application. The legal guardian’s appointment becomes effective upon the order being granted by the High Court.
Management of your child’s inheritance through a testamentary trust
The inheritance due to a minor child is usually paid to the Guardian’s Fund which is administered by the Master of the High Court. The money in the Guardian’s Fund is invested with the Public Investment Commission and audited on an annual basis. By following the prescribed procedures, a legal guardian can submit a claim to the Guardian’s Fund for payment of expenses, such as school fees, and the Guardian’s Fund will pay the legal guardian out of the inheritance it holds on behalf of the minor child. This can however be a time-consuming and onerous process.
The Guardian’s Fund will pay the inheritance due to the minor child upon him / her attaining the age of 18 (eighteen) years and upon receipt of the requisite application form and supporting documents.
The alternative to payment of inheritance to the Guardian’s Fund, is the registration of a testamentary trust for the benefit of your minor child. You can make provision for a testamentary trust in your will and upon your passing, the testamentary trust is registered with the Master of the High Court.
The advantage of a testamentary trust is that it allows you to nominate the trustees of the trust, to decide what their powers are, to determine what the inheritance / trust funds may be used for and when the trust must legally be terminated.
The powers of the trustees may include for example the investment or re-investment of trust funds as well as the sale, purchase or lease of fixed or movable property. Trust funds are used for the education of a minor child, his / her living expenses, medical costs, general wellbeing or any other purpose you have specifically included in your will.
A testamentary trust is terminated upon the minor child attaining a specific age, as pre-determined by you. This means that you can decide that you child’s inheritance shall remain in trust beyond the age of 18 (eighteen) years and that the trustees will continue to pay for your child’s expenses as listed above, until your child has reached the pre-determined age. Upon termination of the trust, the trustees will pay to your child the balance of the inheritance / trust funds as well as any undistributed income.
We know that death is inevitable and by taking the time to prepare a will, you have the ability to ensure that your minor child is protected and cared for when you are no longer able to do so.
Written by Karen Britz