Following an article in Moneyweb, I have the following questions:
- When a minor inherits an immovable property (based on a will), assuming that the minor has a legal guardian (a parent or other person), can the property be managed by the guardian until the minor reaches maturity age? Or must it be sold and the proceeds managed by some other authority for the benefit of the minor?
- How many immovable properties may be bequeathed in a given will (to one or more beneficiaries) without the need to pay transfer duty for their transfer? Assume that these are non-primary residences.
With regards to your first question, there are a number of scenarios that could play out and these would depend on the individual circumstances of a deceased person’s family and estate.
Firstly, there is nothing which would compel the estate to specifically sell the property on behalf of the minor unless the estate has a liquidity issue and requires the immovable property be sold to cover the cost of the estate. In such an instance, the minor would then inherit any remaining cash portion from the property once the estate has been settled.
Assuming the immovable property does not need to be sold, how the property is handled moving forward would greatly depend on the wording and bequests in the will. The minor may inherit the immovable property, but it will be ‘in care of’ the guardian on behalf of the minor. Understanding the role of a guardian, natural or nominated, and the authority they have over the asset(s) is important.
When a natural (parent) or other legal guardian manages and controls property on behalf of the minor, the guardian has the authority and autonomy over such assets to handle them as they see appropriate. However, in order to protect the minor’s future estate, certain restrictions are put in place regarding the actions the guardian may take in the administration of the asset.
For example, the guardian may not sell the property without the consent of the Master of the High Court. Should they wish to sell the property, the guardian would need to make an application to the Master of the High Court who will assess and determine whether or not to approve the request on the basis of the sale being in the best interests of the minor.
If your intention is for the minor to inherit the immovable property, then you may wish to consider a testamentary trust which can be noted in the will and established upon your death. In this instance, the property and any other assets are held in the trust for the minor rather than in the care of the guardian. The guardian may be a trustee of such trust, but you would also have the option to nominate additional trustees to the trust, such as another family member or a professional trustee, to ensure the trust assets are managed in an unbiased way.
Unlike the guardian, with whom the minor would reside, the trustees would only be entrusted with the responsible management of the assets for the minor’s benefit. The testamentary trust may also have a maturity age for the minor, generally between 18 and 25 years, at which point the trust would dissolve and the assets would be transferred to the beneficiary in their personal capacity. This age of maturity can be set at your discretion.
A trust may become a very important vehicle for the protection of the property intended for a minor beneficiary as it creates an additional layer of oversight for the assets without removing the flexibility for the property to be sold if this is the appropriate course of action. In addition, although we do not like to think of this, we can never be absolutely sure of a guardian’s personal financial future. If they fall into financial difficulty, they may be tempted to use the assets in their care for their own personal use.
With regard to your second question, any immovable property left to an heir or beneficiary is exempt from transfer duty as per Section 9(1)(e)(i) of the Transfer Duty Act of 1949. This exemption extends to any heir or beneficiary regardless of their relationship to the deceased. Any transfer costs would, however, still be payable, and any remaining bond(s) over such properties would need to be settled by the estate and cancelled simultaneously with the transfer.