Advocate Sankie Morata CFP, Chief Executive of Sanlam Trust

One of the greatest acts of love you can show your vulnerable dependents is to ensure their well-being after you’re no longer there to care for them. People with special needs, dementia, or chronic illnesses, for example, require sensitive consideration when it comes to estate planning. Your passing could represent a turning point in their lives, and your estate planning should be approached accordingly, to ensure their ongoing access to the care and assistance they need to maximise their quality of life.

Advocate Sankie Morata CFP, Chief Executive of Sanlam Trust, says, “Considering that South Africa is home to about 3.3 million people with disabilities and about 200 000 elderly people with dementia, this is an issue that matters in our society. Planning for the needs of vulnerable heirs may call for skilful use of the assets you leave behind. It’s wise to work with a trusted financial adviser, who understands your family’s unique needs, to take stock of your assets and liabilities.

“Here are some important questions to consider: If you are the primary caregiver, where will your dependent live after your passing and who will be responsible for their financial support? Or, if you are involved in every detail of their medical needs, who will ensure that their medical care continues seamlessly? Or, if you’re a single parent with a child who needs special care, who is the right person to take over their guardianship?”

To guide caregivers who want to start this process, Adv Morata shares some suggestions:

1. Put your wishes in writing with a will

Drafting a will is generally the first step in estate planning. This is where you should explicitly describe what financial and practical provisions are in place for your vulnerable dependents and specify your wishes for their future. If you’ve created a trust to support their financial care, it’s important to name the trust and trustees – the people who manage the money in the trust. A trust could be an inter vivos trust (a trust established during your lifetime), or a testamentary trust (a trust established by means of a will that comes into effect after your passing).

2. Consider setting up a trust designed for vulnerable dependents

Trusts are financial tools that can help you plan how your loved ones will be cared for, especially if dependable trustees are involved. Two key types of trusts worth considering:

• Testamentary Trusts: A testamentary trust comes into effect after you pass on. It holds funds for specific purposes, such as medical expenses or education for your heirs. You can say exactly how you want your assets to be managed, which can prevent family disputes later.

• Special Needs Trusts: This is a type of testamentary trust, specially designed for dependents with disabilities.  It includes benefits such as tax exemptions and can be tailored to the unique needs of beneficiaries, for example, children with autism or cerebral palsy. A trust can supplement the benefits which your loved one may receive from governmental assistance programmes and can also hold real property and cash.

• Families should also consider directing life insurance pay-outs to a trust to provide sustainable, well-managed sources of financial support for their vulnerable dependents. It may make sense to name the trust, and not specific individuals, as the beneficiary of the life insurance policy, to ensure the funds are used appropriately.

3. Nominate trusted guardians and trustees

It is important for families to choose a reliable guardian or trustee who will understand their dependent’s needs and have their best interests at heart. Note that a child’s guardian will be the surviving parent, unless special circumstances apply. The same person can fulfil both roles, or you can appoint separate guardians, who take care of your loved ones every day, and trustees, who have a duty to manage the trust assets on the beneficiary’s behalf, and in accordance with your instructions and the law. You can appoint multiple trustees and often it’s a good idea to have a professional co-trustee alongside a family member.

4. Make sure money is properly managed

It is critical to decide who should manage the financial and healthcare decisions on behalf of vulnerable family members, who may not be able to make their own decisions. As part of your estate planning, specify who should be assigned power of attorney in this regard. This is a person with legal authorisation to act in the best financial interests of a vulnerable individual. In South Africa, power of attorney provides a legal mechanism to delegate decision-making authority to trusted agents to deal with specific, complex matters.

If a dependent has dementia, for example, it’s advisable to get early legal agreements in place, with their consent, if possible, to ensure that future decisions are in their best interests.

5. Work with a financial adviser

Families with vulnerable dependents should also consider appointing a financial adviser who can help them identify gaps in their financial planning, including issues such as insufficient savings or insurance, to ensure that there are available funds (also known as ‘liquidity’) to cover vulnerable dependents’ needs, such as medical care, education, therapy and living expenses.

Morata concludes: “Estate planning isn’t just about finances – it’s about providing for the quality of life you want for your dependents. It’s an incredibly powerful act of love. At Sanlam Legacy, we are committed to helping you navigate the complexities of estate planning with sensitivity and expertise so that you can live with confidence.”

ENDS