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26 November 2024
A will is imperative to ensure your child's well-being. Apart from specifying your wishes linked to your child’s future, your will can also provide clarity on complex scenarios such as how your child’s inheritance should be managed should the surviving parent be regarded as unfit to be the guardian. David Thomson, Senior Legal Adviser at Sanlam Trust, provides insights on guardianship to help single moms make the best choice for their child.
Should you be concerned about this person’s ability or commitment to manage the inheritance responsibly and in the best interests of your children, then consider directing life insurance payouts and other assets into a trust rather than making these available directly to the child. Thomson discusses some of the main guardianship considerations.
Unlike a godparent, a guardian takes legal responsibility for your child’s care, including decisions about education, healthcare, and finances. "Being a guardian means stepping into the shoes of the parents," says Thomson, emphasising the emotional and financial support involved in the role.
A trustee, on the other hand, manages financial assets left to your child through a trust. Although one person can serve as both guardian and trustee, the roles are different. A trustee focuses on managing money and property for your child’s benefit. Appointing co-trustees, such as a family member and a professional trustee, can help ensure the estate is managed effectively.
If you don’t have a will, your assets may go to the government's Master's Guardian Fund and the court will appoint a caregiver for the child it sees as most suitable (in the absence of a surviving natural parent). The guardian (or caregiver) will have to request money from the Master’s Guardian Fund for your child's needs. This can be time consuming and restrictive, and may not provide the flexibility needed for unforeseen expenses.
Under the Children’s Act, the surviving natural parent is typically appointed as the guardian unless deemed unfit. A co-guardian can be appointed if the surviving parent is unable to fulfil the role, such as incarceration. If you believe the other parent is unfit, legal steps in the High Court can be taken to challenge their guardianship. Similarly, if you pass away and your family believes the other parent is unfit, they can take legal action as well.
The court always prioritises the child's best interests, so apart from your child’s other parent, consider nominating a co-guardian who has a strong relationship with the child, in case both parents are unable to fulfil the role.
"A testamentary trust can protect your child's inheritance from misuse," says Thomson. "You can appoint a professional trustee, such as Sanlam Trust, or a trusted family member to manage the funds responsibly."
It can be a critical buffer. If, for example, the surviving parent remarries, the new spouse won’t easily be able to access your child’s inheritance unless he or she can prove the money will be used in your child’s best interests.
Both inter vivos and testamentary trusts are subject to income tax and capital gains tax.
Beneficiary funds are set up by trustees of retirement or group life insurance schemes, to protect money left to minors until they turn 18. These funds are tax-free but limited to employer-sponsored retirement funds or group life policies and are not suitable for all personal assets like savings or property.
If you haven’t set up a trust, nominated an umbrella trust or your employer does not have a contract with a beneficiary fund (such as the Sanlam Trust Beneficiary Fund), and your child is named as the beneficiary of a life insurance policy, the insurer will pay the proceeds to the Master’s Guardians Fund or to the natural guardian and the guardian will manage the money until your child comes of age. So, if you have a challenging relationship with the other parent, a trust or beneficiary fund may offer a suitable alternative.
For single moms, understanding the intricacies of guardianship, trusteeship, and the different ways to protect your child’s inheritance is crucial. Consulting a legal expert and intermediary and creating a solid estate plan can help to ensure your child’s future is secure, regardless of what happens.
“Planning for your child’s future might seem overwhelming. Get the right team in place to support you as these decisions are never easy to think about,” concludes Thomson.