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June 23, 2017

Who is a legal guardian?

A client asked me when and how a person should appoint a guardian to look after minor children, on his or her death.

Why is it so important to appoint a legal guardian for your children?
On the death of the first dying parent, the surviving parent becomes the sole guardian. On his or her death, the legal guardian would be appointed. If the will does not nominate a guardian for the minor children, then a family friend or relative would have to apply to court, at some expense, to be appointed as the legal guardian.

Usually, the will provides that the person who will manage the trust created in terms of the will (the trustee), and looks after the children (the guardian) are one and the same.

Who should you appoint as a legal guardian (relative, best friend)?
Guardians nominated in a will can choose if they wish to accept the office of guardian. On that basis, you should always approach a close family friend or relative, you know you can rely on, and who will accept the office of guardian.

Ideally, the legal guardian should know the family well and can be depended on to act in the best interests of the minor children.

When does the guardian’s legal role end?
The legal guardian must administer the property that the minor children inherited, until each child attains majority (turns 18). The last dying parent may feel that a child of 18 is not mature enough to manage the property, and the will may provide that the guardian’s role will end only when the child turns, say, 21.

Would the guardian also be responsible for the children financially?
A legal guardian is entitled to be paid for administering the minors' estate. This can be set out in a will or is determined in accordance with the tariff laid down by the Master of the High Court.
There should be sufficient funds in the trust, created in terms of the will, to provide for the maintenance of the minor children. It would never be the responsibility of the legal guardian to provide for them, financially. The last thing the parent would want is that the executor must sell a fixed property to raise sufficient funds to maintain the children. If it means taking out a life policy to provide for the children, that is a good idea.

‘Maintenance’ generally means maintenance, education (including higher education), vocational training, setting him up in a business or a profession, accommodation, holidays, travel, general welfare and benefit and reasonable pleasures.

The will should provide that the legal guardian does not have to put up security to exercise his duties and that he or she can manage the funds of the minor children. If the will is silent, the guardian is obliged to pay the cash funds into the Guardian’s Fund, managed by the state. In that event, the guardian would have to approach the Master of the High Court, cap in hand, for funds to maintain the children. This should be avoided at all costs.

The will should also provide that the guardian may (or may not) sell or mortgage any of the minor children's immovable property. If the will is silent, the guardian needs permission from the High Court or, if the property is worth less than R10,000, by the Master. Ideally, the will should give the guardian extensive powers.

Can you stipulate things in your will that your children’s legal guardian must abide by, e.g., where they should go to school or what religion you’d prefer them to follow?
The will can give directions to the guardian, concerning the schooling of the children and what religion they should adhere to. However, it's not likely that a court would enforce these directions, if the guardian fails to adhere to them. This would be especially the case when the children become old enough to make their own decisions.

How often should you revisit the issue of who is your kids’ legal guardian and why (changing circumstances, etc)?
If your nominated guardian passes away, the will should provide for an alternative guardian. Otherwise, you should amend your will, as circumstances change.

June 20, 2017

What does it mean to go insolvent?

In case you don't really know what is involved, I explain what insolvency is about.

A sequestration order places an insolvent person's estate in the hands of a trustee, who must sell the assets and distribute the cash among the creditors.

If you have your back to the wall and can’t pay your debts, you can voluntarily surrender your estate by showing that:

·               Your estate is insolvent;
·               You own sufficient realisable property or cash to meet all the costs of sequestration; and
·               Sequestration will be to the advantage of all your creditors.

A court will not grant an order of sequestration if you have so few assets that your sequestration would lead to your creditors receiving a negligible dividend. At present, you need to show an advantage to creditors of at least 20c in the Rand. So, if you owe creditors, say, R100,000, you must come up with cash or assets of at least R20,000. On top of that, you need to provide for legal fees of about R20,000. (if you don’t qualify, debt review is an option).

If you qualify, you must publish a notice of intention of going into voluntary sequestration, in the government gazette, not more than 30 days and not less than 14 days before your application is to be heard in court. The notice must also be published in a newspaper circulating in the area in which you live or, if you are a trader, the area in which your principal place of business is located. You must send a copy of the notice within seven days of its appearance in the Government Gazette to each of your creditors.

Before the notice is published, you must comply with the formalities required by law - for example, prepare a full statement of income, liabilities and assets in a standard form, which must be verified by affidavit. The form must be made available for inspection by your creditors at the office of the Master of the Supreme Court and the magistrate's court for the area in which you live or carry on business. All your possessions, including bonded property, must be declared and given an estimated value.

If the court grants an order sequestrating your estate, the Master of the High Court will appoint a trustee to locate and sell your assets, for the benefit of creditors.