Testamentary Trusts – Minors and Inheritances

The utilisation of trusts is becoming more and more common. It is an effective manner of safeguarding an inheritance, especially where it comes to the inheritance of minor children.

GUARDIAN’S FUND

The Administration of Estates Act does not allow for minor children to receive their inheritances, either personally or by the minor’s guardian while they are below the age of 18 years.

The Guardian’s Fund is a fund created to hold and administer funds in such cases and also holds these funds for various known and unknown persons, including minors and unborn heirs. The Guardian’s Fund forms part of and is administrated by the Master of the High Court. Each seat of the Master’s Office has its own Guardian’s Fund.

A minor’s inheritance will be paid to the Guardian’s Fund in either of the following instances:

• Where a child below the age of 18 (including unborn heirs) years inherits money from a deceased estate and no provision is made for a Testamentary Trust;
• Where the Will specifies it must be paid to the Guardian’s Fund; and
• Where the Master of the High Court directs that such inheritance be paid to the Guardian’s Fund.

The inheritance is paid to the Guardian’s Fund in an account in the name of the beneficiary (heir) and will grow at a specified interest rate. The beneficiary can claim the inheritance upon reaching the age of majority, or as directed in terms of the Will.

A guardian of the minor child can claim periodically for maintenance of the child, such as school fees, clothes, medical expenses and other expenses based on necessity and sufficiently motivated to the Guardian’s Fund discretion.

You can read more about the Guardian’s Fund at:    https://www.justice.gov.za/master/guardian.html

TESTAMENTARY TRUST

A person can stipulate in a Will that an heir’s inheritance (irrespective of age) must be kept in trust for the benefit of the heir(s).

Such a stipulation can determine that the inheritance be kept in trust until the heir reaches the age of majority (at least) or any other age as determined. The Will can also stipulate that the trust be discretionary, which means that the Trust will terminate when the Trustees, in their discretion, decide that the Trust be terminated.

THE ADVANTAGES OF A TESTAMENTARY TRUST INCLUDE:

• A guardian, family member or friend can be nominated as a Trustee to assist the Independent Trustee in the administration of the Trust. This will allow for personal insight into the needs of the beneficiary;
• The Trustees can manage the Trust assets in their discretion, such as investing funds, to allow for the best financial benefit of the Trust assets and allow for the Trust assets to grow;
• Beneficiaries can gain easy access to funds for maintenance and expenses as deemed necessary by the Trustees and need not approach the Guardian’s Fund which may cause a delay;
• Upon reaching the specified age (as determined in the Will and at discretion of the Trustees) the Trust will be terminated and the beneficiary will receive the funds (and assets) without a formal application to the Guardian’s Fund;
• Donations Tax does not apply when inheritances vests in a Trust; and
• The administration of the Trust is done by the Trustees and the beneficiary need not be delayed by the administrative rigamarole.

The establishment and administration of the Testamentary Trusts is one of the best tools of estate planning and should be considered when drafting your Will. It is recommended that you consult with a practitioner that specializes in estates, such a JJR Trusts and Estates to ensure your children’s best interests are catered for when drafting your Will and to ensure that your children are not financially limited by administrative and restrictive stipulations of the Guardian’s Fund upon your passing.