A badly drafted will may cre­ate prob­lems for your mi­nor ben­e­fi­cia­ries

Weekend Argus (Saturday Edition) - - FRONT PAGE - STAFF RE­PORTER

It is nor­mal for peo­ple to leave as­sets to their chil­dren and, in the case of grand­par­ents, to their grand­chil­dren. How­ever, un­less your will cor­rectly deals with as­sets be­queathed to mi­nor chil­dren, your wishes may not be car­ried out as you in­tended.

David Knott, a fidu­ciary ex­pert and di­rec­tor of Pri­vate Client Trust, a wealth man­age­ment firm in Cape Town, says that un­less your will pro­vides for the cre­ation of a tes­ta­men­tary trust to ad­min­is­ter as­sets in­her­ited by mi­nor ben­e­fi­cia­ries, names the trustees and grants them the power to make in­vest­ment de­ci­sions, your wishes in re­spect of your chil­dren or grand­chil­dren will be thwarted.

“The Mas­ter of the Court has no power to read into a will some­thing that is not con­tained within the doc­u­ment,” cau­tions Knott, who says that if a will does not cre­ate a trust with all the con­di­tions spelt out, the ex­ecu­tor will be obliged to pay any award ow­ing to a mi­nor ben­e­fi­ciary to the Guardian’s Fund.

“The Guardian’s Fund is es­sen­tially a sav­ings ac­count man­aged by the Mas­ter, to which all funds ac­cru­ing to a mi­nor or un­known ben­e­fi­ciary are paid,” Knott says. “The money in the fund will earn only sim­ple in­ter­est, which is cred­ited from time to time. When the mi­nor turns 18, or when the un­known ben­e­fi­ciary has been iden­ti­fied, the cap­i­tal plus the ac­crued in­ter­est can be claimed back. The in­ter­est rate paid at present by the fund is not bad, but his­tor­i­cally this has al­ways lagged com­mer­cial rates.”

Knott says that, by earn­ing in­ter­est only, which will trans­late into a neg­a­tive real (af­ter-in­fla­tion) re­turn, the spend­ing power of the cap­i­tal sum even­tu­ally claimed by the mi­nor may be greatly re­duced. If the funds are in­vested more pru­dently via a trust into a bal­anced unit trust fund, for ex­am­ple, the ben­e­fi­ciary will at least earn above-in­fla­tion growth on the cap­i­tal.

“The guardian of a mi­nor can ap­ply to the Guardian’s Fund for the re­lease of money from time to time for the main­te­nance of the mi­nor, as the Mas­ter does have this dis­cre­tion. How­ever, I would rather not rely on a stranger hav­ing the dis­cre­tion to al­low this, when I could have spelt out those wishes in terms of a trust cre­ated by my will.

“It may be tempt­ing to pre­pare your own will, or amend an ex­ist­ing one your­self, es­pe­cially in rushed or changed cir­cum­stances. But there are many pit­falls ready to trap the un­wary should you fol­low this course. Seek pro­fes­sional ad­vice to avoid such is­sues,” Knott says.

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