The Pitfalls of a Minor Child Inheriting an Immovable Property

As minor children have limited legal capacity, all juristic acts, including the sale or mortgage of an immovable property in the name of the minor, must be performed with the assistance of the natural or legal guardian until the child attains the age of majority, notwithstanding that the child is the lawful owner of the property. This means that the guardian will have to assist the minor in concluding a sale agreement and signing the necessary transfer documents.

In addition to the above, in such circumstances the Master of the High Court or the High Court itself, depending on the value of the property in question, will have to approve the sale or encumbrance of the property, by way of authorisation or a court order respectively in terms of section 80 of the Administration of Estates Act 66 of 1965.

Where the value of the property in question exceeds R250,000.00, a substantive application will have to be made to the High Court as the upper guardian of all minor children to approve a sale. This has to be done, regardless of whether the minor child is desirous of selling the property, as the High Court is mandated to ensure all such juristic acts are in the best interests of the minor child. What constitutes the child’s “best interests” will vary from case to case and is dependent on the facts before the court.

Such an application will entail briefing counsel to argue the matter on an ex parte or unopposed basis before the court, supported by affidavits. Litigation is costly and time consuming, and success is not guaranteed. The guardian of the child will have to put forth evidence to show that the proceeds of any such sale will be utilised for the benefit of the child, for example by distribution or investment of those proceeds that would be more beneficial than the retention of the capital asset. Worth noting is the requirement that any proceeds not utilised to purchase another asset for the child, such as a property or investment, will have to be paid to the Guardians Fund, which receives and manages money on behalf of those who lack full legal capacity, including children. To access funds administered by the Guardian’s Fund, the guardian of the minor will have to make applications to the Fund to obtain any monetary amounts, stipulating and motivating the purpose for which the money is to be used, for example for educational or maintenance needs. These applications are extremely cumbersome and must be accompanied by a set of supporting documents and a set of fingerprints of the claimant.

Although there is nothing in law preventing one from bequeathing an immovable property directly to a minor child, one should be aware of the laws surrounding the administration and management thereof that burden the natural or legal guardian of the child should the guardian wish to alienate the property.

An alternative to a direct bequest of property to a minor is through a testamentary trust. The testator can bequeath immovable property to a minor child, subject to the property being held in trust until the child reaches the age of majority or another age as specified in the will. The trustees of the trust will be able to freely administer the property without the involvement or the court and potentially the Guardians Fund, until such time as the property is to be transferred into the name of the child. In order to minimize the encumbrances created by law and to best protect a child’s interests, proper estate planning is accordingly essential where minor children are involved.

Should you require any further information on the above or assistance with the drafting of your Will, please get in touch with us.