By Jonathan Theunissen, CFP ®

Having a valid will is crucial, especially when minor children are involved. Without one, you lose control over the distribution of your assets upon your death, leaving the decision to be governed by law, specifically the Intestate Succession Act. This can place additional emotional and logistical burdens on your loved ones, who may struggle with the legal processes of appointing an executor and identifying all assets and liabilities. Additionally, if a will is not in place, any inheritance meant for minor children could be placed in the Guardians Fund, where it may be subject to bureaucratic delays and limited accessibility, potentially hindering the immediate financial needs of your children. Moreover, the absence of a will could lead to unintended distribution outcomes, potential tax inefficiencies, and extended settlement times, which can increase the likelihood of family conflicts.

Guardianship

It is essential that minor children have guardians appointed after the death of their parents. Without a guardian, children cannot contract and thus cannot accept an inheritance or death benefits. This can only be done in one of two ways:

1. A guardian is appointed by the child’s parents in a valid will, or
2. A guardian is appointed by the High Court.

Receiving assets as a minor

The guardians of a minor may accept moveable assets due to the minor from a deceased estate. Unless the will expressly provides otherwise, no money may be paid to the guardian on the minor’s behalf, unless security is provided by the guardian. The Master may also request additional security if the guardian commits an act of insolvency, is sequestrated, or moves abroad.

The Guardians Fund

When funds are bequeathed to a child, there is a risk that these funds will be paid over to the Guardian’s Fund, where they will be held and managed until the child reaches age 18. This fund is administered by the Master’s office and invested with the Public Investment Corporation (PIC). Guardians may claim from the fund for school fees, clothes, medical fees, and other necessary needs that can be motivated. The Master may pay all interest, as well as an amount up to R250 000.

To claim, the guardian needs to complete and submit various forms indicating the nature of assistance required, personal and banking details, information regarding income and expenses, quotes in respect of the claim, certified ID documents of the guardian and beneficiary, and fingerprints of the guardian. Claims can either be paid to the guardian or directly to the third party, such as the school or healthcare provider.

In April 2023 over R17 million was stolen from the Guardian’s Fund, leaving more than 50% of recipients unpaid two months later. Investment outcomes are not ideal as money must be invested in cash, which generates interest at a rate prescribed by the finance minister.

The Solution

Firstly, parents should discuss guardianship for their minor children with those who they would like to nominate as guardians. This empowers parents in the sense that they get to choose guardians that align with their values and beliefs and that they trust to raise their children in their absence. It also helps potential guardians to understand what is required of them and the financial provisions that will be made available to them to raise the children.

Ask your financial planner or attorney to help you draft a will that reflects your wishes. This should be done in conjunction with an estate plan, to gain an understanding of the costs, taxes, and procedures involved with winding up your estate. This planning process should also inform some of your investment and insurance decisions. Certain investments are excluded from your estate, meaning they do not incur estate duty or executor’s fees. Some are subject to estate duty but exempt from executor’s fees, while others offer immediate liquidity without needing to wait for the estate to be finalized.

As a parent, your will should contain the nomination of your chosen guardians and alternate guardians and should contain a provision for a testamentary trust. This is a trust to be set up for the benefit of your children. It is only established in the event of your death. You should also nominate 3 trustees who have the legal and financial knowledge to manage the assets in the trust and who you believe will act in your children’s best interests. Make sure that all assets intended to provide for your minor children are bequeathed to the testamentary trust.

Many people are tempted to draft their own wills to save on costs. Unfortunately, many are found to be invalid. If this is true of yours, you will not only be deemed to have died intestate, but your testamentary trust will not be formed. It is worth partnering with a professional to ensure your will is valid and your wishes are carried out. National Wills Week runs from 16 to 20 September 2024, during which many law firms will draft basic wills for free.