MAKING PROVISION FOR MINOR CHILDREN IN YOUR WILL
While it is never pleasant to consider our own mortality, ensuring the well-being of our loved ones, particularly minor children, is essential. Life’s unpredictability makes it crucial to plan ahead and safeguard their future. This article explores the key considerations for including provisions for minor children in your will in South Africa.
- Guardianship and Parental Rights
- Understanding Guardianship
Biological parents are generally the co-holders of parental rights and responsibilities in respect of their children. This includes the rights of guardianship as set out in Section 18 of the Children’s Act 38 of 2005. Guardianship rights include:
- Administering and safeguarding the child’s property and property interests.
- Assisting or representing the child in administrative, contractual, and other legal matters.
- Giving or refusing any consent required by law in respect of the child, including for marriage, adoption, departure from the Republic, passport applications, and dealing with the child’s immovable property.
- Nomination of Guardians
A parent can nominate one or more people as the guardian of their child in their will. This nomination becomes effective if the parent dies while the child is still a minor, and if the nominated guardian accepts the appointment. The surviving parent typically becomes the sole guardian of the child unless the will specifies otherwise, and the court approves the nominated guardian.
- Estate Planning and Minor Children
- Bequeathing Fixed Property
Minor children can inherit immovable property with the assistance of their legal guardian. However, there are risks:
- If the estate has liquidity issues, the executor may need to sell the property to cover costs.
- The legal guardian will manage the property until the child reaches 18, but their powers are restricted and require approval from the Master of the High Court for significant decisions.
To mitigate these risks, setting up a testamentary trust in your will is crucial. The property is transferred to the trust upon your death, and trustees manage it until the child is old enough to handle their affairs. However, ensure your will is valid to prevent the trust from being invalidated.
- Life Insurance Proceeds
Life insurance policies are useful for providing immediate funds to beneficiaries. But, when planning for minor children in your will, it’s important to manage life insurance proceeds carefully. Minors under 18 can’t directly inherit cash, so if they’re named as beneficiaries, their legal guardian will manage the funds until they reach adulthood. To better protect these funds, consider naming a testamentary trust as the beneficiary, ensuring the proceeds are managed within the trust until your child is of age. Additionally, be aware that if your estate is the beneficiary, the insurance pay-out could be used to settle debts before any inheritance reaches your child.
- Retirement Fund Benefits
Beneficiary nominations on retirement funds are regulated by Section 37C of the Pension Funds Act. The fund trustees distribute the benefits to dependents based on their financial dependence. This means that even if a minor child is nominated, they might not receive the full benefits if other dependents are identified.
- Living Annuities
Living annuities allow for beneficiary nominations ensuring that minors receive their benefits. However, legal guardians decide how the benefits are received.
- Practical Implications and Recommendations
- Nominating a Guardian
Nominating a guardian in your will is crucial. If no guardian is named or if the named guardian cannot accept, someone must apply to the court, which is a time-consuming and costly process. It is advisable to nominate alternative guardians to avoid complications.
- Guardians Living Abroad
If the nominated guardians reside outside South Africa, the minor children may need to relocate, which can be challenging. Additionally, accessing South African trust funds and dealing with tax obligations in another country can be complex. Discussing with potential guardians beforehand ensures they are prepared for the responsibility and any changes in circumstances can be addressed promptly.
- Regularly Reviewing Your Will
Regularly review and update your will to reflect any changes in circumstances. This ensures that your wishes for your minor children’s education, care, and inheritance are up-to-date. Writing a letter of wishes can provide additional guidance to guardians regarding specific instructions for your children’s upbringing and inheritance.
- Legal and Financial Considerations
- Testamentary Trusts
One effective strategy to prevent a cash inheritance from being paid to the Guardian’s Fund is creating a testamentary trust in your will. A testamentary trust is established in your will and commences upon your death. Trustees manage the trust’s assets for the benefit of the minor children. This ensures that funds are utilised solely for the children’s maintenance, upbringing, and welfare as specified in your will.
- Trust Provisions
A testamentary trust typically includes:
- Naming the trust and appointing trustees.
- Outlining the rights, duties, and powers of trustees.
- Nominating beneficiaries.
- Establishing the trust’s purpose.
- Determining when the trust will terminate and distributing proceeds upon termination.
By creating a testamentary trust, you can control the purpose for which the funds will be used and ensure they are accessible to your minor children when needed, bypassing the administrative burdens of the Guardian’s Fund.
- Oversight and Management
Appointing multiple trustees can provide additional oversight. It is crucial to ensure that trustees are willing to accept their appointment and understand their duties. Regularly updated contact details for trustees will help to avoid delays during the trust registration process.
CONCLUSION
Making provisions for minor children in your will involves careful planning and consideration of various factors. By understanding guardianship rights, effectively managing assets through testamentary trusts, and regularly updating your will, you can ensure that your children’s future is secure. Consulting with a professional can help navigate these complexities and create a comprehensive estate plan that safeguards your minor children’s interests.
The Wills & Estates division at TDP PE specialises in the drafting, execution, and safekeeping of wills. Please feel free to contact us should you require professional assistance with regard to the execution or updating of your will, especially when there are potential minor children who will benefit from your estate, by sending an email to wills@tdpsa.co.za or give us a call on 041 450 8799 and ask to speak to Maurice Millard.
