As many as 70 to 80% of South Africans don’t have wills in place, according to the Financial Sector Conduct Authority and Sanlam.

Although it only comes into play when you die, your will is probably one of the most important legal documents you will ever draw up. It allows you to leave clear instructions on how your assets will be disposed of, who inherits what, and most importantly, alleviates stress for your family at a time when they are undergoing emotional trauma.

However, a will takes on even greater significance when you have minor children to provide for.

Under South African law, children younger than 18 are not legally capable of managing their inheritance. Any funds inherited by minors should ideally be administered by a testamentary trust (which is set up when you die). But if you have not made any provision for a testamentary trust in your will, then any money will be transferred to the state-run Guardian’s Fund where they will be administered until the child reaches age 18. The Guardian’s Fund forms part of the Master of the High Court.

Roy McMurchie, head of fiduciary services at Professional Provident Society, says you can include provisions in your will to allocate funds specifically for your child’s education and related expenses. This can be done via a trust or by designating a specific portion of your estate to be used for educational purposes. You can specify the types of education expenses for which funds can be used, such as tuition, books, fees and other associated costs.

An education trust

“An education trust is a type of trust that is specifically created to provide for a child’s educational needs. It can be structured to provide for a child’s educational expenses at various academic career stages, such as primary and secondary school or any tertiary education. A trustee can be appointed to manage the trust and ensure the funds are used for educational purposes,” says McMurchie.

He adds that you should provide for flexibility. For example, if your child decides to pursue a different career path or attend a different educational institution from the one you thought they would when drafting your will. You can even go so far as to specify the age or conditions under which the education funds should be distributed. For example, you may want to require that your child reach a certain age or complete a certain level of education before the funds are distributed to ensure that they are used for educational purposes.

However, bearing in mind that not everyone follows the tertiary academic route, McMurchie advises that you include a clause to provide for alternative uses of the education funds, such as vocational training or starting a business.

Regardless of whether you choose to set up a trust specifically for education or a testamentary trust to provide for the general financial needs of your minor child, it is important to appoint the right trustees.

At least one trustee should be a professional such as a lawyer, financial planner or fiduciary company, while another trustee could be someone who is close to your child and has a better idea of family dynamics and your child’s needs.

Providing for the fur kids

Morebadi Mabule says a study by Sanlam Trust revealed that 14% of respondents didn’t have children, but they had “fur kids”. Leaving anything or everything to a beloved pet is complicated. If you want to make provision for a fur kid, you need to consider:

• Who will look after your pet?
• Are they going to take your animal in, as its “guardian”?
• Is the expectation that the person will move into your home to care for your fur kid there? If so, have you left sufficient funds for rates, taxes and the upkeep of the family in your estate?
• Will the “guardian” inherit your house (you cannot leave this to your pet) or will the property go into a trust?

“You need to be clear in your will and financially provide for this, for the duration of your pet’s life,” Mabule says.

Sanlam Trust says more than 40% of the deceased estates it administers have insufficient cash to cover all debts, costs, cash bequests and taxes payable during one’s lifetime, and income tax, capital gains tax and estate duty upon death.

This can have serious consequences for loved ones left behind.

Planning for these costs through a life insurance policy can cut out the drama for your beneficiaries on your death, so they are not forced to sell assets to cover costs. DM