Life is moving along at such a rapid pace that we often only think about our immediate expenses at hand and don't think to plan ahead for the future. Take a moment to think about what will happen to your child if something happens to you and you don't have any safeguards in place to take care of their expenses such as their schooling, which is now expected to cost around R3.7 mil for private education or R1.6 mil for public education from grade R to grade 12 and that is without university. You also need to consider their day-to-day living, medical and housing expenses. Here is a list of measures you can take to ensure they are looked after even after you are gone.
A life insurance policy is definitely the place to start as they provide financial protection for your dependents after you are gone. You pay a monthly amount (premium) which pays out a non-taxable amount at your time of death. Funds are often frozen when someone dies until their estate is wrapped up, life insurance policies pay out straight away, immediately alleviating the financial burden. If you take out a policy when you are younger, your rates are lower because your chances of being diagnosed with serious illness are much less although not impossible.
You must review your life insurance annually, especially with major changes in your life that would affect your children such as:
Dying without a Will causes many complications and leaves your children at risk of being financially robbed of everything you have worked your life to obtain. Dying Intestate is the term used for someone who dies without leaving a Will and their assets will be distributed in terms of the Intestate Succession Act 81 of 1987. Under this Act, only beneficiaries can inherit from the deceased’s estate and in a particular order; the spouse and biological children first and then moving along to other blood relatives. Putting together a Will is important in order to intentionally direct funds towards your children, spouse or partner in the event that you are not married.
A trust where your children are the beneficiaries will give them access to finances immediately after your death, so they don't have to worry about any expenses right away, especially while waiting for your estate to be settled – bank accounts are frozen during this process. A trust would hold ownership of your property; it becomes an instrument with its own legalities. Trustees are appointed to administer and manage the trust which, in the situation where you are setting up a trust for your children, it would either be them or, if they are below legal age, their guardian.
This is someone you need to trust completely as they will not only be looking after the physical, emotional and day-to-day aspects of your child's life, but they will be responsible for your child/children’s inheritance.
Children under 18 under South African law are not allowed to inherit large sums of money – the thinking behind this is that they lack the ability to manage assets in a positive, constructive manner. Without proper advice and management, your assets might never be used to care for your children nor reach their hands when they are of legal age to manage their own assets. Estate planning is something that needs to be done beforehand with a worst-case scenario in mind – if I am not around, who will look after the needs of my child/children until they are able to look after themselves?
We can help you plan your estate to ensure that your children are taken care of even after you're gone. Legal&Tax offers you funeral cover to ease the burden on you family. Contact us for more information.
Disclaimer: The content of this article was correct at the time of publishing, but the legislation or underlying information forming the basis of this article may have changed. You should always speak to a qualified Legal&Tax advisor before making any decisions.