This month we are touching on a sensitive subject: ensuring that the inheritance of our minor children is properly covered in our will. To some this simply means that – in the event of our death, there will be enough money for our dependents education and lifestyle needs. Sadly and more often than not, it’s a case of not naming the children (and their inheritance) properly – or worst case, not having a will at all.
There is a difference between custody of the children’s inheritance, and physical custody of the children. The provisions in a will are always considered, but if the will is unclear, a guardian for physical custody is determined by the Commissioner for Child Welfare, or ultimately, the High Court. The inheritance of a minor is a separate issue, and this is administered by the Master of the High Court via the Guardian’s Fund. We are taking a look at the latter today.
WHAT IS THE GUARDIAN’S FUND?
In layman terms, the Guardian’s Fund is a fund that holds the inheritance of a minor child. In addition, this Fund can also take care of monies left to those who are under curatorship, unborn heirs, or people who have been reported and remained missing over a number of years. The intention of the fund is good and it aims to protect funds for those who can’t do it themselves.
THE WORKINGS OF THE FUND FOR MINORS
If the will of the parent or legal guardian does not specifically mention who will be responsible for the administration of the child’s inheritance (or where there is no will), the inheritance will then automatically be given to the Guardian’s Fund to manage.
When the Master receives funds for a child, an account within the Guardian’s Fund is opened in the child’s name, or at least given a reference to the estate where the funds came from (think here of the case where funds are left to an unborn child, who has neither a name nor an ID number until the day he is born). These accounts are well managed from an accounting perspective and audited annually by the Public Investment Commission.
Every account earns interest, compounded monthly. The rate is determined by the Minister of Finance, and is currently set at 9% per annum. Interest is paid from the month the funds are received, up to five years after the funds became claimable. There are no fees or administration costs and funds are managed completely free of charge.
The guardian of the child can claim maintenance from the Fund for school fees, clothes, medical aid, and so forth. This is usually the annual interest on the invested capital, plus a maximum of R250 000 per year from the invested capital.
An account holder (the minor) can claim the invested capital plus accrued interest when he turns 18, or at the age that the testator stipulated in his will (for instance, age 30). Important to note here that interest on invested capital will only accrue to the age of 25.
Interestingly, funds are not always claimed by the account holder because they simply didn’t know it existed. If funds aren’t claimed within 30 years after it became claimable, the money is forfeited to the State. The Master advertises claimable accounts every year in September in the Government Gazette, but this is not a publication that is frequently read by the man-on-the-street, so it is understandable how this can sometimes fall by the wayside.
THE BIG BAD WOLF?
There is a perception out there that the Guardian’s Fund is nothing short of a black hole, but fortunately this isn’t the case at all. There are very clear regulations pertaining to how the funds are to be administered, and the return on capital isn’t even particularly bad! If your child’s inheritance happens to land in this Fund, it’s not the end of the world.
However, there are two primary problems with the Fund, and good reason why you want to avoid it.
Firstly, the loss of control on how the funds are managed. In addition, accessing the funds and receiving maintenance payments requires an application form for every single withdrawal, accompanied by quotations and supporting documents. One can expect that claiming the invested capital will eventually be a hassle for the account holder too.
Secondly, the Fund can’t hold any assets other than cash, so whatever is bequeathed to the minor (or inherited according to Intestate rules) must be sold. This is not ideal for various reasons, such as seeing valuable assets converted to cold cash, or perhaps having to let go of a family heirloom.
Of all the different aspects of our lives and estate planning, anything that relates to our minor children demands particular care. Be very clear with your bequests in your will. Rather write too much than too little, and make sure your intention is clear and unambiguous:
- use your children’s full names and ID-numbers;
- be specific about what assets are left to them (proper descriptions and account numbers);
- identify the person or institution who will look after these assets before they are old enough to do it themselves;
- make sure your bequests are practically enforceable.
We want to stress once again that this is just another important reason why a will should be drawn up by a professional estate planner or fiduciary specialist. Get in touch with us and make sure your children are taken care of!
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