Drafting a Will may be the last thing on your mind, but it is an important obligation and responsibility, particularly for the protection of your children. Whilst many of us are aware of the importance of a Will, have you ever wondered what happens if you die without a valid will in place or what will happen to the inheritance of your minor children or beneficiaries who might not be able to manage their own affairs?
Recent reports by the Guardian Fund paint a scary picture of how the mismanagement of funds have left many families in dire financial positions. “Protecting the rights of our minor children and beneficiaries is important,” says Aneesa Razack, CEO of FNB Fiduciary. “It’s vital for families to put the necessary plans and structures in place to ensure that the interests of their minors are fully protected and to avoid unfortunate incidences in the future. When funds or assets are left to minors in a Will or in the absence of a valid Will, in terms of intestate succession, the executor of the estate will be unable to transfer these funds directly to the minors and will be required to pay over the inherited funds on behalf of the minors to the Guardian’s Fund.”
Established by statute, the Guardian Fund receives and manages inheritance money on behalf of people who are legally incapable (minors) or those unable to manage their affairs (mentally or physically disabled). Anyone younger than 18 is a minor and cannot legally receive and administer their own inheritance. Payment from the fund is allowed for essential maintenance expenses of the beneficiaries. A beneficiary can claim the invested money and the accrued interest upon reaching the age of 18.
Razack explains that “It’s important that we find appropriate vehicles to safeguard our children’s inheritances. One such avenue is creating a Testamentary Trust in a Will which is an effective option that ensures that your children’s interests are protected.”
However, Razack advises that there are key considerations when planning or drafting your testamentary trust:
- It’s important to nominate credible and qualified professional trustees who have the knowledge and skill to effectively manage the assets of the trust, and who you believe will do so in the best interests of your minor beneficiaries or children.
- This trust will only be established upon your death, and it will receive your children’s inheritance to be administered until they are old enough to look after their own affairs.
- The trust will allow for payments to your children or their legal guardians for day-to-day maintenance, and you can stipulate at what age, older than 18, the trust should terminate.
- Also consider if you have nominated minor beneficiaries on your life assurance policies. The proceeds of these policies are also at risk if no other provision is made.
- Ensure that you get help and contact your life insurance provider to establish if you can nominate your testamentary trust created in your Will as a beneficiary or, as an alternative, nominate your estate, in which case you can direct in your Will that the proceeds should go to your minor beneficiaries via the testamentary trusts.
Considering the importance of a testamentary trust for families, FNB has included the required provisions and paragraphs in all their Wills. Not only has it become easier to draft your own Will on the FNB App, but the option also provides you with the comfort of knowing that the Will you drafted is complete and caters for the best interests of your family.
Your children and securing their future must be a priority. “There is no ‘one-size-fits-all’ approach to estate planning, and each person’s situation and context is unique. But with careful planning and sound decision-making, your estate can be tailored to suit your current circumstances and your loved ones’ needs,” concludes Razack.
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