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Preparing for the uncertainties of life

There are several risk control measures to prepare for uncertain eventualities.

Valuable lessons learnt by most financial planners during the Covid-19 pandemic is that matters may not be in our professional hands owing to sudden life-changing events despite us having control of what we do. Therefore, it is important to understand that if our circumstance changes, what we can do to protect ourselves and our loved ones.

There are several risk control measures used around the world singling out South Africa, to prepare for uncertain eventualities of life such as legal tools, guardianship and minors’ inheritance. We will explain the usefulness of these measures in detail below.

Legal tools

There are times in our life’s when we are unable to act on our own or where we require others to act on our behalf. In such a situation, legal tools and mechanisms are in place to assist. Below are examples of some of the mechanisms that we can use.

Power of Attorney (POA)

A POA is a legal document whereby you give another party authority to represent or act on your behalf on your personal or business matters. This party can be a family member, friend, accountant, lawyer, or financial advisors. This document is set out to the extent of the party to act and make decisions on your behalf. It must be carefully drafted to ensure it meets your requirements and needs. The POA is terminated if one or a combination of the following occurs when you: decide to cancel it, pass away, become insolvent or become mentally incapacitated. The POA is valid for a specific period upon which it expires.

Appointment of a curator

A curator role is to help you manage your financial affairs, providing consent for medical treatment and submitting annual reports to the Master. An application is submitted to the High Court to declare you are incapable of managing your affairs. This procedure is relatively expensive and may also be a lengthy process. Once the application is made and all the investigation is done the court will appoint a curator bonis to administer your estate and manage your affairs. It is important to note that the curator may only act once they have been authorised by the High Court.

Appointment of an Administrator

In terms of Section 59(1) of the Mental Health Care, the Master of the High Court may appoint an administrator to care and administer your property if you are mentally incapable or have been diagnosed with severe or profound intellectual disability. This process is much cheaper than appointing a curator and depending on the value of the property or income the appointment is made. Medical reports are required as proof to show that you cannot manage your affairs due to mental illness.


Have you ever thought should you and your spouse pass away who will look after your child? If you have nominated a guardian, is your child in safe hands? We are constantly encouraging our clients to nominate a guardian for minor children in their wills. The first important element to understand about guardianship is that a person must have respect for a child.

To fully comprehend the concept of guardianship we need to understand the nature and scope of parental rights and responsibilities as set out in the Children’s Act such as:

  • Taking care of a child;
  • Maintaining contact with a child;
  • Acting as a guardian of a child; and
  • Contribution towards the maintenance of a child.

A person can have either full or only specific parental rights and responsibilities. Normally biological and adoptive parents will have full parental rights and responsibilities with regards to a child.

Important factors to consider when appointing a guardian

  • Have a heart to heart with the person before you nominate them as a Guardian.
  • Take note of the role of a guardian meaning that guardian includes administrative and safeguarding the child’s property.
  • Financial considerations such as maintenance and financial support for minor children.

Best way to deal with minors’ inheritances

It is important that you do estate planning if you are intending on bequeathing your assets to your minor children. There may be situations where you will need to care for a physically or mentally disabled child who is financially dependent on you. This can be emotionally devasting for the family members when you have passed on therefore financial planning is necessary to ensure there are sufficient funds for family members. Below are some examples that you can consider:

Life policies

If you are considering nominating a minor child as a beneficiary on your policy, your child will not have the legal capacity to receive and control the funds. As a general rule when a minor is nominated as a beneficiary, payment will take as follows:

  • Minor’s guardian if there is one. The guardian can choose to pay the funds into a minor’s bank account then the guardian must sign the claim forms on behalf of the minor.
  • A testamentary trust is created in terms of the deceased’s will for the proceeds of the policy to the minor child.
  • If there is no guardian or no trust created for the minor, then the proceeds will be paid into the Guardian’s Fund. The proceeds in the Guardian’s Fund are invested with the Public Investment Corporation and audited annually. The minor can claim the proceeds when they reach the age of 18.

Local and offshore collective investments

As a rule, clients cannot appoint beneficiaries on their unit trusts therefore proceeds are paid into the investor’s estate or will be distributed to the beneficiaries as per the investor’s will. If the will states that a trust needs to be created, proceeds of the investments can be paid into the trust for the benefit of the beneficiaries.

Retirement funds

The allocation of the retirement fund benefits is regulated by Section 37C of the Pension Funds Act. A client can only nominate a nominee and cannot appoint a beneficiary. The trustees of the retirement fund will identify all client’s dependants (spouse, children, or persons financially dependent on the client) as defined by the act. The trustees will then decide how the funds should be shared between the dependants in a fair and equitable manner.

In closing, having a minor requires careful planning when structuring a will, trust, policy, and retirement fund beneficiary nominations. This will provide peace of mind knowing that your minors are being taken care of when you are no longer able to do so.

This article is sourced from the Momentum Newsletter Edition 7, “Leverage”.

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Michael Haldane

Global & Local The Investment Experts


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