Everybody deserves a second chance, the saying goes. With your will, you have unlimited “second chances” to correct any past mistakes or to change your mind. With so many chances, it is mind-boggling and tragic that court records are replete with disputes about deceased estates.
Contrary to popular belief, wills and estate planning are not more important for people with large estates.
Any parent of minor children should have a will, regardless of the size of their estate. A will is about more than possessions.
The three most compelling reasons for a parent to have a will, and to keep it up to date, are:
- Guardianship of children;
- Safe-guarding your surviving spouse; and
- Ensuring that your child does not have to rely on government officials for their daily needs.
Apart from the practical needs of children to be cared for, children do not have contractual capacity. A major implication of this fact is that a child cannot sell a property, give instructions for an investment left by his or her parent, or perform a host of commercially necessary transactions to tend to his or her own needs.
In terms of the Children’s Act, any natural parent is automatically a guardian of the child. If one parent passes away, the other will still be able to perform his or her duties as a parent.
However, in instances where the last surviving parent dies, or where both parents die together, a vacuum may exist as to who the legal guardian of the child is. In those cases, it may become necessary to ask the High Court, as upper guardian of all children, to assign a guardian.
Section 27 of the Children’s Act explicitly grants parents the right to appoint someone else as the child’s guardian in the event of his or her death if there is no other surviving guardian in place. This may be stipulated in a will (s27(2)).
Don’t forget your surviving spouse
If someone dies without a valid will, the estate will be distributed in terms of the Intestate Succession Act.
The good news for children is that the Act makes provision for them. The bad news for a surviving spouse is that their inheritance may not be what he/ she initially would have hoped for.
Section 1(1)(c) of the Intestate Succession Act stipulates how an estate will be divided where the deceased is survived by a spouse and children.
The surviving spouse cannot inherit more than a set amount, currently R250 000, or a child’s share in the estate, whichever is the greater. The children will inherit the rest in equal shares.
For example: Peter dies with an estate of R1.2 million, which includes a house. He had three children and a spouse, Maria. Each child’s share is calculated by dividing the value of the estate, being R1.2 million, by the number of children (three) plus one, being R300 000.
Maria will therefore inherit a child’s share (being the greater amount) of R300 000. The rest of the estate (R1.2 million – R300 000 = R900 000) will be divided equally between the three children and each child will get R300 000.
Not many people will choose to cut off their surviving spouse who has to care for their children, but this is exactly what the implication of intestate succession could be.
Estates often involve a fixed property where the surviving spouse and children live. As the children inherit a share in the house, the surviving spouse may be severely restricted in encumbering the property with a mortgage or selling the property.
Compounding the drama, the children cannot repudiate their inheritance without assistance from their guardian as they do not have contractual capacity. However, as the guardian stands to benefit from the repudiation of the inheritance, the guardian cannot assist the child to do this as he or she is conflicted.
Intestate succession causes a myriad of problems that can be avoided altogether through a valid and up-to-date will.
The schlepp nobody wants to cause their children
As mentioned above, children do not have contractual capacity. Even though they may inherit from a parent, there are severe restrictions on what they can and cannot do with their inheritance while still a minor.
The Administration of Deceased Estates Act stipulates that children may have immovable assets registered in their names.
However, moveable assets and cash may only be received if a guardian accepts it on a child’s behalf. If there is no guardian, the assets will be held by the Guardian’s Fund on behalf of the child until he or she turns 18.
The Guardian’s Fund is administered by government officials in the office of the Master of the High Court.
Again, a child has no contractual capacity and cannot claim funds from the Guardian’s Fund for his or her needs without assistance of a guardian. It could take months to years to get a court-appointed guardian or tutor for the child who will be able to claim for maintenance from the Guardian’s Fund after following detailed procedures.
Parents must consider all these potential difficulties their surviving children and spouses may face due to their failure to update and maintain a valid will. It is the one mistake which cannot be rectified from the grave.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)