Plan carefully for your child’s inheritance

As a working parent, nothing makes it worth braving those early mornings more than knowing your children will always be taken care of – and this Youth Month is the ideal time for parents to take a fresh look at their children’s continued well-being.
You may invest for their education, list them as beneficiaries to your life cover and employer fund benefits and put a will in place to make sure your wishes will be honoured. But did you know that a minor child cannot manage their inheritance on their own without the assistance of a legal guardian? Or that in the absence of a surviving parent or legal guardian their inheritance must be held in the Guardian’s Fund, which is controlled by the Department of Justice?
David Thomson, Senior Legal Adviser at Sanlam Trust, explains that South African law prohibits children under the age of 18 from entering into contracts without the consent of their legal guardian. So if you want to leave an inheritance for your children – whether immovable property, or the proceeds of policies or investments – and especially if you’re a single parent, you should rather set up a trust for their benefit until they reach the age of maturity.

Where do minor children’s inheritances go?

Parents can bequeath their personal assets and life cover proceeds to a testamentary trust. This kind of trust is formed when parents pass away, if they included such an instruction in their last will and testament. If a parent’s will has no testamentary trust clause, all assets left to minor children are transferred to the Guardian’s Fund, which is administered by the Master of the High Court. Proceeds from employment benefits – such as pension fund, provident fund and group life benefits – are paid into beneficiary funds.

Consider your options carefully
It’s advisable that parents establish a testamentary trust in their last will and testament to avoid complications that may arise after their passing, David says. For instance, whoever becomes your child’s guardian can gain access to their inheritance and may use the funds for purposes other than your child’s upbringing and maintenance, which is what it’s intended for.
‘The advantage of a testamentary trust is that you can have one person as a guardian for your children and another as a trustee for your estate. Separating these responsibilities will help avoid possible abuse of the money you’ve left for your children by their guardian,’ he explains. ‘You can nominate any competent person you trust as a trustee, or a professional trustee such as a trust company. The appointment of the trustee will ultimately be made by the Master of the High Court, who’ll ensure a proper process is followed.’

At Ginsburg Financial Services we do holistic financial services and have an independent lawyer that drafts our clients wills for us