“Leaving an inheritance to minor children”
The most important reason to create a will is to ensure that your children are cared for but, when beneficiaries are minor children (under the age of 18), legislation places special safeguards on how their inheritance is managed and distributed.
It is essential to understand these regulations to ensure that your children are properly provided for and that their inheritance is protected until they are old enough to manage it themselves.
The Administration of Estates Act 66 of 1965 states that a minor child’s inheritance cannot be paid directly to them and that the inheritance must instead be held and managed on their behalf until they reach the age of majority (18 years), or another age as specified in a valid trust arrangement.
This is mainly due to the fact that a minor child is not legally competent to manage property on their own.
How is a minor child’s inheritance managed?
When a minor child inherits from an estate, the inheritance must be protected and managed in one of the following ways:
- A Testamentary Trust
A trust that comes into existence upon your death, and it is specifically designed to manage assets for your minor children.
The trust provides controlled and professional management of the assets, protects the inheritance from misuse and allows for staged distributions for example when the minor child attains the age of 18 or 25 years.
- The Guardian’s Fund
If no trust has been created in the will, the child’s inheritance is paid into the Guardian’s Fund, which is administered by the Master of the High Court.
The Guardian’s Fund will then hold the money on the minor child’s behalf and release the capital once the minor has attained the age of 18 years.
Although it is a safe mechanism, it is relatively basic and does not offer the flexibility of a private trust.
What happens if there is no will?
In the event that a parent dies without a valid will (intestate), the minor child still inherits a share of the estate and their inheritance is typically paid into the Guardian’s Fund. However, this results in less control of how the inheritance is managed.
How do I control when a minor child receives their inheritance?
In order to control when a minor child receives their inheritance you will have to make provisions for a testamentary trust in your will, which clearly states the age at which the child will receive the capital, what expenses the funds may be used for and the conditions for distribution.
This will protect the minor child from receiving large sums of money before they are financially mature.
Conclusion
It is important to remember that whilst minor children may inherit, careful planning and consideration is required to ensure that their assets are protected until they are old enough to manage them responsibly.