As a single mom, planning for your child’s future is essential, especially if you’re not on good terms with the other parent. In this article, David Thomson, Senior Legal Adviser at Sanlam Trust, provides insights on guardianship and estate planning to help any single mom make the best choices for her child.

A will is crucial to ensure your child’s well-being. Apart from specifying your wishes around your child’s future, your will can also provide clarity on complex scenarios, such as how your child’s inheritance should be managed if the surviving parent is regarded as unfit to be the guardian.

Key considerations for the single mom

Choose your child’s guardian wisely

The guardian should be someone whom you trust and hold in high regard. This is the person who will care for your child after your death, so you need peace of mind that it’s someone who will make the best decisions about your child’s future.

Consider a trust

A trust – inter vivos, testamentary or umbrella (see more details below) – can give you reassurance that your child’s inheritance will be responsibly managed.

Nominate beneficiaries carefully

Remember that the guardian for your minor children will manage the funds you leave behind for your children until they come of age. This could be your child’s other parent, but if you’re concerned about this person’s ability or commitment to manage the inheritance responsibly and in the best interests of your children, then consider directing life insurance payouts and other assets into a trust rather than making these available directly to the child.

Understanding guardianship

Unlike a godparent, a guardian takes legal responsibility for your child’s care, including decisions about education, healthcare, and finances. Being a guardian means stepping into the shoes of the parents. The role encompasses both emotional and financial support.

A trustee, on the other hand, manages financial assets left to your child through a trust. Although one person can serve as both guardian and trustee, the roles are different. A trustee focuses on managing money and property for your child’s benefit. Appointing co-trustees, such as a family member and a professional trustee, can help ensure the estate is managed effectively.

Having a will is crucial

If you don’t have a will, your assets may go to the government’s Master’s Guardian Fund and the court will appoint a caregiver for the child that it sees as most suitable (in the absence of a surviving natural parent).

The guardian (or caregiver) will have to request money from the Master’s Guardian Fund for your child’s needs. This can be time consuming and restrictive and may not provide the flexibility needed for unforeseen expenses.

Under the Children’s Act, the surviving natural parent is typically appointed as the guardian unless deemed unfit. A co-guardian can be appointed if the surviving parent is unable to fulfil the role, for example, if they’re incarcerated.

If you believe the other parent is unfit, legal steps in the High Court can be taken to challenge their guardianship. Similarly, if you pass away and your family believes the other parent is unfit, they can take legal action as well.

The court always prioritises the child’s best interests, so apart from your child’s other parent, consider nominating a co-guardian who has a strong relationship with the child, in case the surviving parent is unable to fulfil the role alone.

In trusts you can trust

Testamentary Trust

Created through a will, this type of trust takes effect after death. It allows you to appoint trustees to manage assets left for your child.

A testamentary trust can protect your child’s inheritance from misuse. You can appoint a professional trustee, such as Sanlam Trust, or a trusted family member to manage the funds responsibly.

It can be a critical buffer. If, for example, the surviving parent remarries, the new spouse won’t easily be able to access your child’s inheritance unless he or she can prove the money will be used in your child’s best interests.

Inter Vivos Trust

This ‘living trust’ is created while you are still alive and gives you greater control and flexibility over the management and distribution of your assets. This trust can be especially useful for ensuring structured, ongoing financial support for your child while protecting assets from creditors. Additionally, it avoids the lengthy estate administration process, making immediate provision for the child’s needs.

Both inter vivos and testamentary trusts are subject to income tax and capital gains tax.

Umbrella Trust

This is an affordable alternatives where you can stipulate that your life insurance payouts go to a specified umbrella trust like the Sanlam Guardian’s Trust or Sanlam Legacy Children’s Trust. This offers your children a sub-account in the trust, which is managed by a professional trustee and a team of skilled administrators until they reach adulthood.

Economies of scale mean the fees for these trusts are more affordable for most people and the administration involved in setting up an inter-vivos trust is avoided.

Why not just use a beneficiary fund?

A beneficiary fund is set up by trustees of retirement or group life insurance schemes to protect money left to minors until they turn 18. These funds are tax free but limited to employer-sponsored retirement funds or group life policies and are not suitable for all personal assets like savings or property.

For ordinary life policies, beneficiary funds do not apply. If a minor is named as your beneficiary on your life policy, then the funds will be paid to the surviving guardian or guardian appointed by the court.

If you have a challenging relationship with the other parent, you may want to consider alternatives, such as nominating an umbrella trust like the Sanlam Trust Guardians Trust as your policy beneficiary, or establishing a testamentary trust for the exclusive benefit of your child.

Consult an expert

For a single mom, understanding the intricacies of guardianship, trusteeship, and the different ways to protect your child’s inheritance is crucial. Consulting a legal expert and intermediary and creating a solid estate plan can help to ensure that your child’s future is secure, regardless of what happens.

This post was based on a press release issued on behalf of Sanlam Trust.