How should I plan for my minor child to inherit?

“My wife and I have a young daughter. We are planning to update our estate planning to provide that our daughter inherits everything should both of us pass, but have been wondering what will happen if this happens while she is a minor? Can we plan for this eventuality?”

Our law determines that minor children (under the age of 18) cannot enter into contracts without the consent of their legal guardian (parent or court appointed guardian). By implication, this limitation also prohibits minors from inheriting assets while they are still minors. Rightly so, it raises the question of who will look after assets that a minor child stands to inherit.

A trusted way of ensuring that the inheritance of a minor child is protected until the child becomes a major is to have the parents set up a trust. Such a trust can be set up during their lifetime (an inter vivos trust) or their will can be drafted to provide for a trust to be established on their death (a testamentary trust). Although the process for setting up these trusts may differ, the end result is same, namely that the minor’s inheritance will be administered on the minor’s behalf by the appointed trustees of the trust. 

A trust can own property, receive donations and inherit money from your estate when you die. What makes a trust a very good choice, is the fact that its decisions are taken by the trustees you appoint at your discretion. It does require you to be careful about whom you nominate, but fortunately, the actions of the trustees are also regulated and they are required by law to always act in the best interests of the beneficiaries and to manage the trust in accordance with the law and the provisions of the trust deed, the provisions of which can be defined by you.

The danger in not providing for a trust is that any funds bequethed to a minor child, will have to be paid over to the Guardians Fund. The Guardian’s Fund falls under the administration of the Master of the High Court and administers funds that are paid into it. Guardians of minors can claim maintenance from this fund, which would typically include school and university fees, clothing, medical fees, lodging, and any other costs that can be motivated by the guardian. But claiming from this fund can be time-consuming and leave your child at the availbility of officials that have to deal with numerous claims. A trust on the other hand provides for persons who are directly responsible to have the best interests of your family foremost in mind.

We would recommend discussing the option of a trust with your estate planner as well as the options of possible trustees for your family trust when you review your current estate planning.

February 7, 2018

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