A minor’s trust is one of the most practical tools in South African estate planning. It allows you to leave money or property to a child without handing full control to them before they are ready. Instead, independent adults called trustees manage the assets in the child’s best interests, pay for needs like school fees and medical aid, and protect capital for the future. If you have children or grandchildren, understanding how a minor’s trust works can make the difference between a smooth legacy and years of administrative headaches.
What is a minor’s trust?
A minor’s trust is a legal arrangement created to hold and manage assets for someone under the age of 18. It can be set up during your lifetime (an inter vivos trust) or in your Will (a testamentary trust that only starts on your death). The trust deed or Will sets the rules. Trustees then administer the money according to those rules and their fiduciary duties.
In South Africa, leaving assets directly to a child can cause delays and costs. Funds might be paid to the Guardian’s Fund or require a court-appointed guardian to access them for day-to-day needs. A minor’s trust avoids that. Trustees you chose in advance can access and apply money quickly, with records and accountability.
The purpose of a minor’s trust
The primary purpose is protection with access. Children need support now and capital later. A minor’s trust creates a safe container for school fees, medical costs, sport, clothing and other living expenses while preserving the principal for tertiary education, a first car, or a deposit on a home.
A second purpose is continuity. Trustees can keep assets invested sensibly over many years, even as markets move and personal circumstances change. The trust does not pause for executorship, divorce, or family disputes. It keeps paying bills and safeguarding the future.
A third purpose is fairness. Your deed can guide trustees on how to treat siblings even-handedly, how to set spending limits, and when to hold back capital for long-term goals.
How a minor’s trust works in practice
The trust is funded by life cover, savings, property or an inheritance. Assets are transferred into the trust’s name and held by the trustees for the child. Trustees meet regularly, consider requests, and minute decisions. They may pay funds to a caregiver for specific items, pay bills directly to schools and doctors, or purchase essentials themselves.
Most deeds set an age of vesting. Common choices are 18, 21, 25, or a staggered release over several milestones. Until then, trustees retain control. If the child shows special needs, academic promise, or financial vulnerability, the deed can let trustees continue to apply funds in a measured way rather than making a single large payout on a birthday.
Who are the players?
Founder or testator: The person who creates the trust or leaves instructions in a Will. They decide the purpose, beneficiaries, and the age of vesting.
Trustees: Usually two or more adults. It is wise to include at least one independent trustee with financial and legal insight. Their job is to act with care, keep records, avoid conflicts, and follow the deed.
Beneficiary: The child or class of children for whose benefit the trust exists. They have a right to be considered and, when vested, to receive benefits.
Clear roles and reliable governance are what make a minor’s trust effective and credible with banks, schools and service providers.
The benefits a minor’s trust provides
Fast access for real needs
With a properly drafted deed, trustees can pay school fees, medical expenses and everyday costs quickly. There is no need to approach the courts for every decision.
Asset protection
Trust assets are not the child’s property while they are minors. That protects funds from the child’s future creditors and from risky spending while they are still learning financial skills.
Investment discipline
Trustees can adopt an age-appropriate investment policy that balances growth and stability. The goal is to protect buying power over 5 to 15 years, not to chase short-term performance.
Tax and administrative alignment
Depending on structure and circumstances, a testamentary minor’s trust may qualify for more favourable tax treatment than an ordinary discretionary trust. Even where standard trust rates apply, trustees can plan distributions sensibly and keep administration tidy.
Fairness in blended families
Your deed can balance a spouse’s or caregiver’s needs with the child’s long-term interests, reducing potential conflict.
Minor’s trust vs the Guardian’s Fund
If a child inherits without a trust and no guardian can lawfully administer the funds, money may be paid into the Guardian’s Fund. That is safe, but it is not designed for flexible, responsive support. Withdrawals require applications and proof for each expense, and investment options are limited. A minor’s trust gives you chosen trustees, clear rules, and practical access for the child’s day-to-day life.
Common issues and how to avoid them
No independent trustee
Without an independent trustee, banks and auditors may raise concerns. Include a professional or suitably experienced independent person from the start.
Vague rules for spending
If your deed says little about education, health, transport, holidays or pocket money, trustees may guess. Provide guidance in the deed or in a non-binding letter of wishes. Clarity reduces friction and keeps expectations realistic.
Single lump-sum vesting at 18
Many 18-year-olds are not ready to manage a large payout. Consider a higher vesting age or a staggered approach, for example a portion at 21, more at 23, and the balance at 25, with flexibility for proven responsibility.
No plan for big one-offs
Laptops, braces, study abroad or a first car can cause spikes in spending. Ask trustees to keep a sinking fund for predictable big tickets and to model cash flow annually.
Weak record-keeping
Every decision should be minuted, with invoices and receipts filed. That protects trustees and proves that funds were used for the child’s benefit.
Funding a minor’s trust
The simplest route is life insurance payable to the trust or to your estate with a direction to the trust. You can also bequeath property, unit trusts or a share portfolio. If the trust will own a home for the child and caregiver, set rules on occupation, maintenance and insurance so that value is preserved.
Investment approach and cash flow
A minor’s trust needs enough cash to meet three to six months of expenses, with the rest invested for growth. Trustees should match investments to the child’s age and objectives. For younger children, growth assets help beat inflation over a long horizon. As tertiary study approaches, shift gradually to more defensive holdings to secure fees and living costs. A simple policy and an annual review are often enough.
When a minor’s trust ends
Most minor’s trusts end when the beneficiary reaches the vesting age or on a specific event such as finishing a degree. The trustees account to the beneficiary and transfer what remains. If the deed allows, trustees can retain some capital for defined long-term needs, but they cannot invent new purposes after termination. Good drafting up front prevents doubt later.
Compliance and transparency
Trustees must comply with banking and FICA requirements, keep a beneficial-ownership register, file annual tax returns, and prepare financial statements. These are not burdensome if you keep a neat compliance pack with IDs, letters of authority, the deed, resolutions, minutes and statements. Good hygiene keeps the trust responsive and respected by institutions.
How Crest Trust helps
At Crest Trust we help families design minor’s trusts that are practical and compassionate. We draft or review deeds, serve as independent trustee, create age-appropriate spending and investment policies, and maintain all registers and minutes. The result is a structure that pays for what matters now and preserves capital for the future.
If you want a structure that pays school fees on time, keeps medical aid current, and still preserves a meaningful nest egg for adulthood, a minor’s trust is hard to beat. Speak to Crest Trust for a design that fits your family, appoints capable trustees, and puts clear, practical rules in place from day one.
FAQs
How does a minor trust account work?
Money is held in a trust account titled to the trust and managed by the trustees. They approve distributions for the child’s needs, pay bills directly or reimburse a caregiver, and record every decision. Investments are managed under a simple policy, with enough cash for near-term expenses and the balance invested for growth until vesting.
Which trust is best for minors?
A testamentary minor’s trust created in a Will is often the most efficient because it activates automatically on death and aligns with your estate plan. In some families an inter vivos trust created during life is better, especially where there is a need for structured support now. The best option depends on timing, tax and the people available to act as trustees.
Can I withdraw money from my child’s trust?
Parents do not withdraw funds. Trustees decide on distributions and pay for the child’s expenses in line with the deed. If you are also a trustee, you must still follow formal resolutions and keep records. The money belongs to the trust for the child’s benefit, not to the parent.
What are the three types of trusts?
Common categories are inter vivos trusts created during life, testamentary trusts created in a Will and activated on death, and special trusts recognised for specific tax treatment in defined circumstances. A minor’s trust can be set up in any of these forms, though most are testamentary trusts linked to a parent’s Will.