It’s every parent’s worst nightmare. But your Will needs to take into account the sad possibility that you may die before (some of) your children reach adulthood. Sentinel’s Johann de Vos unpacks the key issues…
Your Will is one of the most important documents that you will ever sign in your life. It is intended to deal with your legacy – however big or small you may consider it to be. We all want to know that our loved ones are catered for when we are gone.
It’s natural to hope that you will live to a ripe old age and that your children will have reached adulthood by the time you die. That said, it is vital that your Will caters for the fact that (some of) your children might still be minors at the time of your death. Especially when you consider how many people have blended families these days. Here are some key considerations for parents of minor children to bear in mind when drafting their Wills.
Awarding assets to minor children
Two of the easiest ways to award your assets to your children are:
1. Beneficiary nominations
The benefit of some assets such as insurance policies and retirement annuities can be passed to your intended beneficiaries by nominating a beneficiary when you take out the policy. This is a contractual nomination which is taken on record with the facilitating company. This has the benefit that the change of ownership, or benefit, doesn’t require your executor’s signature. The benefit may therefore be received by the nominated person/s even before the estate is wound up.
2. Special bequest or inheritance in terms of your Will
Other assets where contractual nominations are not possible can be awarded in terms of your Will. You can either identify a specific asset to be awarded to your child, or you can nominate your child as an heir to a specified portion of the residue of your estate.
The implications for minor children
When you decide to nominate a child as a beneficiary or heir, it’s very important to consider their age and legal capacity. Legal (contractual) capacity and majority status are nowadays obtained at the age of 18 years (previously 21 years). This will mean that any asset bequeathed directly to a minor child, such as a policy or annuity, is subject to the signature of his/her guardian. This guardian will have full authority to withdraw or surrender the investment. Even where policy proceeds are paid to a bank account held in the name of a minor child, the guardian will still have full signing authority. This emphasises the importance of choosing guardians carefully.
Where ownership of an asset is transferred in terms of a Will and you did not direct that a minor child’s benefit shall be paid to the trustees of a trust created in terms of your Will or otherwise during your lifetime, distinction must be made between movable assets and fixed property or cash. In terms of Sect 43 of the Estates Administration Act 66 of 1965, the guardian of such minor child will have authority over movable assets awarded to the minor. Where an asset is reduced to cash by the executor or any cash amount becomes due and payable to a minor and there is no specific provision for such inheritance to be handed to the guardian, such amount will be paid to the Guardian’s Fund as administered by the Master of the High Court.
When a good plan goes bad
The undesirable outcome of a bequest to a minor child was demonstrated in a 1995 case where a father nominated his minor child to receive the benefits of a life insurance policy. Sadly, he died when his child was just four years old. His wife was to receive the proceeds on behalf of her minor child. The family was concerned that the surviving spouse was not financially astute and would not use the funds for the best benefit of the child. But the law did not provide for removing or limiting her authority over these funds and the claim was paid to her. Sadly, the funds were depleted within two years. The child may well have grown up never knowing that her father left any money to her.
This kind of thing doesn’t only happen with insurance policies. A guardian has the same powers if money or movable assets are awarded directly to a minor in terms of a Will.
Your wishes – and responsibilities
When drafting your Will, you should first get clarity on your wishes for your loved ones. South African Law provides you with freedom of testation. This means that you can decide who your heirs are. However, this does not set you free from your obligations to maintain your minor child who may be financially dependent on you. Your wishes will remain but will be subject to your legal responsibility to support the minor child.
In this day-and-age, many families are blended families. This may mean that your current spouse is not the parent of all your children. This results in a situation where a testator may need to provide separately for a child from a previous relationship. While it is the norm in the majority of relationships, it is no longer a given that your spouse will be the sole heir of your estate and that your children will inherit upon your spouse’s demise.
Putting it into practice
You have a child from a previous relationship who doesn’t live permanently with your now blended family. You decide to keep your Will simple and rather bequeath a life insurance policy directly to the minor child on the assumption that you are free to leave the remainder of your estate to your blended family. This above bequest has the following implications:
- As explained above, the proceeds from the policy will be in the hands of the child’s guardian. The funds will not be subject to management by trustees and may be at risk.
- The policy proceeds may be of substantial value, but this does not cancel the child’s right to maintenance. The guardian of the child will can approach an actuary to establish the minor child’s needs and calculate a possible claim for maintenance against the estate of the deceased parent. The actuary must, however, take into account the proceeds from the policy when calculating the claim, if any. Any amount due to the minor must, in terms of Sect 43 of the Act, be paid to the Guardian’s Fund.
The bottom line
In South Africa we enjoy freedom of testation, but our law also lays certain burdens on testators. When drafting a Will, it’s vital to consider your legal obligations to ensure that there is an alignment of your obligations and your wishes. “Template wills” should be avoided at all costs. Instead your Will should be drafted in close consultation with a professional. Sentinel International has professionals available to assist you at any of our branches.