I think we can all finally agree that nothing is sacred in our country anymore!
Recently it was the turn of the young and the helpless to suffer at the hands of the corrupt and inept.
It’s come to light that R80 million (so far) has been siphoned out of the guardian’s fund.
When is ‘enough going to be enough’? What has become of living your life with honour and integrity?
This was money intended to benefit both children and those unable to take care of themselves financially. Money which was entrusted to the state, and who are supposed to “guard” it (hence the term guardian’s fund!) on behalf of the young, the innocent and the defenceless (Talk about fox guarding the hen house!).
Consider this…
You spend thousands of Rands in your lifetime paying for life insurance – and let’s face it – you’re never going to benefit from it, are you?
And for those of you concerned about leaving young children without any means of financial support, you now face having to make a critical decision.
“What’s the best option when it comes to ensuring that your children receive this money…and that someone trustworthy and accountable is investing it on their behalf?”
So what are your options if your major concern is looking after your children?
Two situations could exist:
- You nominate minor children as beneficiaries on your life policy (Minor children are defined as being younger than 18 years of age).
- You nominate your estate as the beneficiary
So what happens if you nominate minor children as beneficiaries on your life insurance and investment policies?
Monies payable to a minor beneficiary would end up in the Guardians Fund. The reasoning behind this was simple – a minor cannot understand the implications of making their own financial decisions. The alternative was to allow the appointed guardian free rein with such funds, and this could prove all too tempting…(little did we know)
So what exactly is this guardian’s fund?
Basically the guardian’s fund was set up by the Master of the Supreme Court in order to hold and administer funds on behalf of:
- Minor children,
- Persons incapable of looking after themselves financially,
- Unborn heirs, and
- Missing persons.
According to info.gov.za the amount currently invested in the Guardians Fund is approximately R4 billion. This money is invested with the Public Investment Commission who are audited annually. Interest is calculated monthly at a rate per year determined from time to time by the Minister of Finance. For more info on the guardians fund please visit justice.gov.za.
So what if I nominated my estate as beneficiary?
Well, these monies would form part of your estate.
The executor of your estate would use the proceeds for two things:
- To settle the debts of your estate, and
- To distribute the money in terms of your wishes.
Of course if you had no last wishes then you leave the poor old executor with few options (but we’ll get to this scenario in a later post!).
If however, you did indeed leave behind a valid last will and testament, then the executor would start reading the fineprint…and here’s what you need to look out for.
Leaving your estate to your minor children would result in all assets being left under the control of the Guardians Fund!
Heck Lawrence, if I can’t leave the money to my children who must I then leave it to – you?
Relax (although I wouldn’t mind a mention in your will! 
)…there’s a simple solution.
What you need to do is insert a clause in your will stating that a “Testamentary Trust” must be established on your death for the benefit of your children until they reach a desired age (stipulated by you although this is usually either 21 or 25 years of age).
What’s a Testamentary Trust?
A testamentary trust is a legal entity which only comes into existence on the founder’s death and which is created for the sole benefit of the founder’s beneficiaries.
An “inter vivos trust”, on the other hand, is created during the founder’s lifetime.
So what’s the take away?
If you have any minor children – or persons with special needs – who need to be taken care of in the event of your untimely death, then you owe it to them to make sure that you have a valid last will and testament in place which clearly states that a “testamentary Trust” must be set up in order to take care of them.
Of course, having a testamentary trust with nothing to fund it, doesn’t help much either (Speak to me afterwards about that)!
In our next post we’ll look at what happens when you don’t have a valid Last Will and Testament in place. In other words we’ll discuss dying intestate.
By the way, if you have any questions regarding this article why not post a comment…or if you’d prefer discussing it personally, give us a call on 0861 999 114.
In the meantime take care of yourself and your loved ones!
Lawrence
Related posts:
- Is It Possible To Leave My Life Insurance Pay-Out To My Kids?
- Financial Planning | Dying Intestate And Leaving Wife And Child Behind
- The Citizen Reported 150 Insolvent Estates Today!
- What is the Difference Between Succession Planning and Estate Planning?
- Life Insurance | Does A Will Override Life Insurance Beneficiaries?
Article by Lawrence
Someone, who as he gets older, finds he has more questions than answers
Lawrence has written 150 awesome articles for us at Insurance Fundi
