As a single mom, what happens if you die without a will? Who decides what happens to your children? What happens to your assets? Being a single mom means every decision is about looking after and protecting your children. What many single moms don’t realise is that without a valid will, the law – not you – decides what happens to your children and their inheritance if you pass away. This can have huge consequences for their upbringing, especially if they are still minors.
We asked single moms about their greatest fears for their kids’ future and what they would like to know when it comes to wills and estate planning. This Single Mom’s Guide to Wills contains the answers to their questions.
Of course, there is every chance you will see your children grow up. But won’t you sleep so much better at night if your affairs are in order? As a single mom, the most powerful gift you can give your children is security, and that starts with your will.
Choose a topic from the list below or scroll down for the full article.
What happens when a single mom dies without a will?
What is included and excluded from your will?
What happens when a single mom dies without a will?
There are two parts to this – what happens to your child, and where the funds go.
If you die without a will (intestate) in South Africa we have the Intestate Succession Act that determines who will be your beneficiaries and what portions they will inherit from your estate.
For minor children, this means their cash inheritance will be managed by the Master of the High Court through the Guardian’s Fund until they reach the age of 18.
The surviving parent generally becomes the legal guardian, but if both parents have died, a Children’s Court will determine what is in the best interest of the child
What is included and excluded from my will?
Your will deals with the assets you own, which will form part of your deceased estate when you pass away. These assets can be divided into four categories:
- Immovable assets, e.g. property like a family home or holiday home, a plot of land, etc.
- Movable assets, e.g. vehicles, jewellery, etc.
- Cash, e.g. tax-free savings, investments, etc.
- Claims in favour of your estate, e.g. a loan in your favour.
Excluded from your will, and therefore from your deceased estate:
- Life cover – If someone is named as beneficiary on your life cover, they will receive the money directly even if it’s a minor child. Life cover does not form part of your estate if there is a named beneficiary.
- Retirement funds – This is administered by trustees of the retirement fund, not by the executor of your estate. The trustees of the fund decide who gets to benefit from this money. They are not bound by a nomination form, nor by your will. They will consider what is fair and equitable for your legal and financial dependants and they have up to 12 months to make their final decision. This is not an immediate process, so quick payouts cannot realistically be expected.
LIFE COVER
As a single mom who has taken out life cover and named my minor child as beneficiary, what happens when I pass away?
The insurance company will call for a bank account that belongs to the child and the funds will be paid into it. The child will receive the money directly into their bank account, even if they are still small.
It is highly recommended that you consider another option, to avoid a small child (or, possibly worse, a teenager!) receiving the proceeds of your life cover.
You can make provision in your will for a testamentary trust to be set up for your child. The trust is then the beneficiary of the life cover and comes with built-in safeguards and protection mechanisms against underaged children and other people (possibly irresponsible or ill-intended) having access to the funds.
RETIREMENT FUNDS
My child is nominated as beneficiary on my retirement fund – can those funds go into testamentary trust for her if I pass away?
The trustees of a retirement fund are responsible for making a decision about payout of the funds and they will look at several considerations before making a final determination. They’ll look at your child’s needs, living circumstances, legal guardian, etc.
Your retirement fund isn’t dictated by your will – you can’t write in your will ‘I direct that…’ – but you can include a motivation that your retirement fund monies be paid into a testamentary trust for your child, but make sure that your will provides for the creation of a testamentary trust. Ultimately, the final decision about the payout of your retirement funds is up to the trustees of that fund.
PROPERTY
As a single mom, can I leave my property to my minor child if I pass away?
Yes, minors can inherit property and a property can be registered in their name. However, minors have limited contractual capacity so in dealing with the property, your child will still need consent from the Master of the High Court – for example, if they want to sell, rent or mortgage the property.
Another way of achieving the same result of leaving the home to your child, would be to place the property into a testamentary trust, where it can be managed by professional trustees for the benefit of your child. You get to decide on the termination age of the testamentary trust. For example, the trustees will manage the property until your child is 25, and then on your child’s 25th birthday it can be transferred to their name.
Single moms tell us that a home is an especially important asset and the idea of leaving a home to a daughter, for example, so that she’ll have a safe haven, is an emotional decision. Of course, it’s also a financial decision and this is where you must think carefully.
Owning and maintaining a property costs money – rates and taxes, levies, water, electricity, internet connectivity, maintenance, insurance, and more. If you leave only the property to your child, and no life cover to support the running costs, it could quickly become a problem. Either your trustees or your executor might have to make the difficult decision of selling the property – not what you’d want for your child. Liquidity is a serious consideration, often overlooked.
LIQUIDITY
How do I know that my insurance policies are sufficient to look after my child if something happens to me? And how do I make sure that I have the right policies?
If you take out life cover, ensure the amount is sufficient to cover all your financial responsibilities if you pass away. The banks are not going to wait for your executor to make a plan with your home loan or your car finance, for example. They will call for those loans to be settled.
Calculate the amount your child will need to cover living costs. Based on that, insurers will be able to give you an indication of the lump sum you would need to provide the income required. There are also education policies that could help ensure your kids can continue their schooling.
What we’ve seen in practise is that as many as 55% of deceased estates are difficult to finalise because there is insufficient cash in the estate. When the costs are calculated during estate administration – settling a home loan, providing for kids’ education, etc. – the estate-related costs are often overlooked. These include executor fees (3.5% of the gross asset value of your estate, plus VAT), conveyancing attorney fees to transfer a property from your name to a beneficiary, setup and management fees to establish a testamentary trust for your child, and more.
These costs must ideally not be paid from your life cover because that erodes your loved ones’ inheritance. Life cover should be for your family. That’s why it’s worth covering estate fees. There are insurance products available at affordable monthly premiums that specifically cover estate fees. This indemnifies your estate against the costs of dying and separates the provision you make for your loved ones from paying to wind up your estate.
COMPANY BENEFITS
How can I use my company benefits to provide for my child when I am no longer able to?
Not touching your company retirement benefit, especially when you change jobs, and not cashing out via the two-pot system could prove valuable with a view to providing for your child if you pass away. Because if something happens to you then your retirement funds have had time to build up and could be used to take care of your child.
Many companies include a death benefit, usually a multiple of the annual salary. For example, your death benefit may be 1 x annual salary or even 5 x annual salary, depending on the company. Ask your employer for a full benefit statement, to understand exactly what your benefits are. Also ensure your child is nominated as beneficiary.
There are two types of death benefits – approved and unapproved. Approved benefits would form part of your retirement benefits, and the trustees of the fund will determine the beneficiaries while also considering who you have listed on your beneficiary nomination form. For unapproved life cover, the benefit will be paid to whoever you have nominated. All of this should be clearly set out on a full benefit statement.
MISMANAGEMENT OF FUNDS
What is the best way to ensure the funds I leave for my child are not mismanaged?
If you pass away and your child is still a minor, the biological father will most likely become the legal guardian if he is still alive. As the guardian, he will have rights to your child and access to the assets you have left for your child. So, if you have made your child the beneficiary of your life cover, you will not be able to prevent the father from accessing those funds.
You cannot rule from the grave. Rather consider creating a testamentary trust in your will and leaving everything you would like your child to inherit, to be administered via that trust in the best interest of your child. In a testamentary trust, the money and other assets will be protected against people who may not be financially responsible, because it is a financial vehicle with built-in safeguards and protection mechanisms.
TESTAMENTARY TRUSTS
What is a testamentary trust?
A testamentary trust comes into effect when you pass away, not while you are still alive, and only if you have made provision in your will for it to be set up – hence the name ‘testamentary’ as it is created in your last will and testament. There is not another way of setting up a testamentary trust. You must also nominate trustees in your will and you could have a professional trustee together with someone you know, love and trust. Often, a sibling of the deceased is appointed as co-trustee or co-executor to work with the professionals. In the case of a testamentary trust, it is useful to understand that the will becomes the Trust Deed and sets the ‘rules of play’, so to speak, for the trustees to carry out your wishes – they cannot simply do what they like. Certain fiduciary duties must be upheld, and these can be set out in your will.
BENEFICIARY FUNDS
How do beneficiary funds differ from testamentary trusts?
Beneficiary funds specifically receive payouts from pension funds for the benefit of minors (children under 18) after a member of a pension fund passes away. When the person dies, the trustees of that fund must decide where the benefit will be paid to. They have a few options.
If the trustees are confident that the guardian is capable of managing the funds on behalf of the child, they will pay directly to the guardian. If they believe the guardian may not be best placed to manage the funds, the trustees could opt to pay into a preselected beneficiary fund, which will then manage the cash for the beneficiary until the child turns 18. The beneficiary fund will determine what the child needs per month for living costs, etc. and there is built-in protection to make sure the money is managed in the best interests of the child.
Alternately, trustees could consider the will of the pension fund member who passed away, if it contains a motivation to pay into the testamentary trust for the benefit of a minor child.
There are a few differences between beneficiary funds and testamentary trusts, including tax consequences, and the fact that testamentary trusts are set up in terms of your will whereas beneficiary funds are linked to pension fund membership of a person who passes away.
While beneficiary funds and testamentary trusts are different, the spirit in which they operate is the same, which is to protect and responsibly manage funds that belong to a minor.
GUARDIANSHIP
My husband died and we have two children. How can I ensure that they go to the correct guardian if something happens to me?
If you nominate a guardian for your children in your will, it is only a wish – it is not legally binding. A court would still be required to appoint a legal guardian if your children are minors when you pass away. Your preferred guardian would need to approach the Children’s Court for such an application and probably require legal advice on the steps to follow.
The guardianship application happens in front of a judge in Children’s Court, and a social worker will also be appointed. There are a few considerations before a legal guardian can be appointed, including the judge reviewing why the person wants to be appointed as legal guardian, their financial situation, whether they have a criminal record, what sort of relationship they have with your child, etc. The judge must make a decision that is right for your child – not for the guardian. With so many factors at play, single moms must take this very seriously.
Your will deals with assets – your child and taking care of your child are not assets in your estate. That is why your will cannot dictate what happens in this regard. So, don’t assume what you write in your will is automatically going to be executed when you pass away. And if it’s about appointing a guardian for your child, it may still have to go through a court process. Having said this, nominating a preferred guardian in your will does carry weight as judges can look to the will and would usually respect and follow a parent’s wishes in the case of a guardianship dispute or uncertainty.
Should I pass away, and my ex-husband becomes my child’s legal guardian, how can I make sure that my family will still be able to see my child?
The surviving biological parent automatically becomes the natural guardian. He doesn’t have to apply for it or do anything to secure it. He will have access to your child and rights to your child that nobody else will.
If you are concerned that he will prevent your family from seeing your child, you need to address that while you are still alive. You cannot rule from the grave, so the best way of ensuring your family still has access to your child, is to have these conversations – with your loved ones and your child’s father – sooner rather than later. Also talk to them about how you want your child to be brought up if you are not around. Finally, you can set it all out in a letter of wishes, which can provide guidance, even if it is not legally binding.
EXECUTORSHIP
I’ve been a single mom for three years while going through a divorce and working full time. Where can I get advice about estate planning and wills?
There are four big things to consider when thinking about drafting your will and who to appoint as executor:
- Convenience. The number one reason why people don’t have wills is often good old procrastination, so find a company that makes it convenient and easy for you to draft yours so that you will be more likely to get it done. Look for a company that offers after-hours appointments, online bookings and virtual consultations by way of phone calls or video calls. The convenience factor is more important than many of us realise because otherwise we keep putting it off, until it’s suddenly too late.
- Consultation. Instead of using an online template or buying a pre-printed one from a stationery shop, rather sit with a professional to draft your will because it is the most important document you will ever sign. It’s easy to make an innocent mistake that could have serious consequences. For example, leaving a beloved pet to two siblings (meaning Fluffy would have to be split in half if the letter of the law was followed). Or wanting to pass a firearm onto a minor child and placing it in trust for them (not realising this means the trustees would have to complete firearms training, get competency certificates and successfully apply for a firearm licences, or risk breaking the law; alternately the gun would have to be kept in ‘dealer stock’, which would incur years’ worth of costs payable by the estate, eating into the child’s inheritance). Some things are impossible to do, some things are illegal – as a layperson, you wouldn’t necessarily know the ins and outs, so professional, good-quality advice when drafting your will could make a big difference. When it comes to deciding on trustees or an executor, you should appoint experienced professionals. Nothing stops you from also naming someone you know and trust as co-trustee or co-executor. In South Africa we have freedom of testation, which means you are free to make these decisions. However, appointing professionals mean you can rest assured that things will be done correctly, legally, and in the best interests of your loved ones.
- Integration. You don’t want your family to be with one company for executorship, another company for trusteeship and a third company for property conveyancing to transfer your property from your name to your beneficiary. This makes your estate administration unnecessarily complex, expensive and time-consuming for your loved ones after you pass away. Choose a company that does it all under one roof.
- Funds. Do you have enough funds to cover the costs associated with dying? It’s one thing to have life cover. But you may want to consider what’s called ‘indemnification’ – insurance at an affordable monthly premium to cover death-related legal expenses, leaving your life cover, education benefits, etc. to be used for their intended purposes. Many people think their life cover is sufficient for their child’s education, but they forget about the (often significant) costs associated with winding up their deceased estate. Opting for separate insurance to cover your estate costs, could preserve your legacy and leave your other investments untouched, for the benefit of your loved ones.
COSTS
What does it cost to draft my will?
You shouldn’t be charged for drafting your will. It should be free. Every South African, 16 years or older, should have a will.
You can choose who you appoint as executor of your estate, but it is a decision you should make with care. It’s a common misconception that appointing a sibling or family friend as executor is a good idea because you know and trust them, but they may not possess the professional skills to wind up your estate. Executorship duties involve many legal obligations. Your friend or family member’s name can be on the Letter of Executorship from the Master of the High Court, if that is your wish, but it is highly recommended that a professional executor supports them through Power of Attorney and takes them through the process to handle everything correctly.
VALIDITY
What makes my will valid?
A properly thought out will is first prize but simply drafting one is even more important because dying without a will (intestate) is the worst-case scenario, arguably even more so if you are a single mom. For your will to be valid:
- It must be signed in wet ink, not electronically.
- It must be typed and printed, preferably not handwritten.
- You and two independent witnesses (individuals who are not beneficiaries of your will, or their spouses) must sign your will together in each other’s presence.
Your will does not have to be stamped by the police or a lawyer. But do tell your loved ones where it is stored.