How should I plan for my minor child to inherit?

A minor child is someone under the age of 18 years. South African law determines that minor children cannot enter into contracts without the consent of their legal guardian. A legal guardian can be either a parent or a court appointed guardian. When a child reaches the age of 18 years, they cease to be a minor. This limit underage children to inherit assets while they are still minors. The dilemma with assets for children who are underage is who will look after and manage the assets which they stand to inherit.

The most effective way to protect the inheritance of minors, is to set up a trust. This can be done by creating an inter vivos trust while still alive, or a testamentary trust, also known as a mortis causa trust, established in terms of a Will. The process for establishing these trusts may differ slightly, but the outcome is still the same: Ultimately the goal is to enable the appointed trustees to administer the minors’ inheritance to their best interests.

A trust can own property, receive donations and inherit money from an estate. By planning and providing for a trust to protect the interests of the minors, decisions are taken by the appointed trustees. Choosing trustees should therefore be considered carefully. However, the actions of the trustees are also regulated by law and they are required to always act in the best interests of the beneficiaries. The trust must be managed in accordance with the law and the provisions of the trust deed, which can be defined by the benefactor.

Some people think a testamentary trust is not necessary and would argue that they trust their family to look after their children and to do the right thing. History has proven time and time again that many a head has been turned when money is involved. It is dangerous not to provide for a trust for minors whom stand to inherit from an estate. This is regulated by law and no intervention of family members can change that. If no provision for a trust is made, the inheritance will be paid over to the government’s Guardian’s Fund which falls under the administration of the Master of the High Courts. The Guardian’s Fund administers funds which are paid into their account. In very rare instances will they accept assets because it would be very difficult for them to manage assets. Therefore, assets are mostly sold and converted into cash.

Guardians of minors can claim maintenance, medical fees, lodging and any other costs which can be motivated by the guardian. This can be a time-consuming endeavour however, and dependent on the availability of officials that must deal with numerous claims. The advantage of creating a trust is that it provides for trustees to be appointed who are directly responsible for the wellbeing of the beneficiaries and have their interests foremost in mind.

The option of trusts and trustees should be discussed when estate planning is done or reviewed with your financial advisor.

Wealth Associates Fiduciary Services can set up any type of trust dependent upon client needs and will assist in the compliance and management of testamentary trusts by Will as nominated trustee, co-trustee or agent for the trustee only. Professional and independent management of trusts is critical in ensuring that the wishes of the founder are complied with and that the best interests of nominated beneficiaries are catered for.

 

Source: Phinc.co.za