RA/LA: Nominating minor grandchildren as beneficiaries

Tomtomtom

Tomtomtom

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Has anyone experienced how it works in practice if a grandparent nominates a minor grandchild as a beneficiary on their RA and then passes away?

I understand that trustees have the final decision on who the dependents are for purposes of distributing death benefits, but let's say there is no direct dependent: no spouse, children are grown, no special circumstances.

So, will trustees honour the nomination?

And then, where will they pay the funds? Direct to the guardian (parent) or to some sort of beneficiary fund? If the latter is common, what does that look like, who administers it? (I understand there's a Masters Office Guardians Fund that is to be avoided at all costs, but I can't find any info on who a Coronation or an Allan Gray would use.)
 
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Tomtomtom said:
Has anyone experienced how it works in practice if a grandparent nominates a minor grandchild as a beneficiary on their RA or LA and then passes away?

I understand that trustees have the final decision on who the dependents are for purposes of distributing death benefits, but let's say there is no direct dependent: no spouse, children are grown, no special circumstances.

So, will trustees honour the nomination?

And then, where will they pay the funds? Direct to the guardian (parent) or to some sort of beneficiary fund? If the latter is common, what does that look like, who administers it? (I understand there's a Masters Office Guardians Fund that is to be avoided at all costs, but I can't find any info on who a Coronation or an Allan Gray would use.)
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you set up a living trust (in your will) - the trust then dissolves upon a certain age.

Thats how ours is set up for our little one - same would apply to grand kids.

You have the grand kid as the beneficiary and whoever you want as a trustee to make the financial calls.

You need this set out in a will.

trustees have to honor it if its set out in the will
 
Snyper564 said:
you set up a living trust (in your will) - the trust then dissolves upon a certain age.

Thats how ours is set up for our little one - same would apply to grand kids.

You have the grand kid as the beneficiary and whoever you want as a trustee to make the financial calls.

You need this set out in a will.

trustees have to honor it if its set out in the will
Click to expand...

Yes I know there is the option of a testamentary trust but I am talking about a different situation.

In any case, my understanding is you can't necessarily nominate a trust as a beneficiary on an RA (vs. an LA, or endowment). And even if you can, the trustees (of the fund, not of your trust) still have the final call, regardless of the will. The will dictates the winding up of the estate, but RAs fall outside the estate.
 
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Tomtomtom said:
I know these basics. I am asking specifically about what happens when minor grandchildren are nominated in an RA, and what disbursement to them looks like in practice.
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🧾 Key Legal Framework​


South African RAs are governed by:


  • The Pension Funds Act (PFA), especially Section 37C, which overrides your nomination form.
  • This means the trustees of the fund must ensure fair distribution among dependants and/or nominees, not just follow your wishes blindly.


👶 Minor Grandchildren as Beneficiaries — What Happens?​


  1. Trustees Assess Dependants and Nominees
    • Minor grandchildren are likely classified as dependants if:
      • They were financially dependent on you, even partially; or
      • You had a legal duty (or voluntarily assumed a duty) to support them.
    • If not dependants, but you nominated them, they are still considered under Section 37C as potential recipients.
  2. Payout Cannot Go Directly to the Minor
    • Since minors cannot legally manage money, the benefit is typically:
      • Paid into a trust (if one exists or is specified), or
      • Paid into the Guardian’s Fund (administered by the Master of the High Court), or
      • Paid to a legal guardian or parent to manage on their behalf — only if the trustees are satisfied this will be in the child’s best interest.
  3. What Trustees Consider When Disbursing to a Minor:
    • The minor's current and future needs (education, care, living expenses).
    • The financial status of the guardian.
    • The existence of a testamentary trust in your will.
    • Other potential dependants or nominees.


💼 Best Practices If You Intend Minor Grandchildren to Benefit​


  1. Create a testamentary trust in your will with clear instructions on how the funds should be used.
  2. Nominate the trust (not the child directly) on the RA if your provider allows it.
  3. Ensure your will and nomination form are aligned — this supports the trustees' assessment.


🧮 Example in Practice​


Scenario:
You pass away with R1 million in your RA, and you've nominated two minor grandchildren.


Without a Trust:


  • Trustees investigate and decide it's in the children’s best interest to:
    • Pay R500k into each child’s account in the Guardian’s Fund (earning minimal interest).
    • Alternatively, they might appoint a legal guardian to receive and manage the funds under specific conditions.

With a Testamentary Trust:


  • The R1 million is paid into the trust.
  • Trustees of the trust (appointed by you) can distribute funds for school fees, living costs, etc., as per your instructions.


📌 Final Note​


Trustees must act equitably — even if you nominate minor grandchildren, other dependants (like a spouse or children) could still receive a share. The RA doesn't form part of your estate and isn't handled by your executor.
 
Snyper564 said:
  • Trustees investigate and decide it's in the children’s best interest to:
    • Pay R500k into each child’s account in the Guardian’s Fund (earning minimal interest).
    • Alternatively, they might appoint a legal guardian to receive and manage the funds under specific conditions.
Click to expand...


I've asked the AIs. I'm trying to clarify exactly this vague stuff about the Guardian's Fund vs appointing guardians - how does it play out in practice? There's a massive gulf between these scenarios.

@W@P how do I tag you, think you might have been in this exact situation?
 
Tomtomtom said:
I've asked the AIs. I'm trying to clarify exactly this vague stuff about the Guardian's Fund vs appointing guardians - how does it play out in practice? There's a massive gulf between these scenarios.

@W@P how do I tag you, think you might have been in this exact situation?
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As far as I know:

In my situation, I was an adult child nominated as a beneficiary when my parents passed away.
The RA's paid out to me in the form of a Living Annuity.

So I have 4 x I think LAs, paying out monthly, the minimum of 2.5% allowed that you can withdraw from an LA.
An LA works the same as an RA in the way that you can invest it with 10X, for example, in one of their LA funds.

If you are the minor's parent, the RA will be paid out to you, AFAIK. That you can then invest. I could be wrong.
The trustees follow the flow from top down and can decide who gets what. Even when a beneficiary is nominated.

Also just check. I cannot remember correctly, but you can, in certain circumstances, receive a portion of the RA as a cash payment and the rest is then converted to an LA. I could be totally wrong here, but I remember we did something of the sort when my mother passed. It was tax beneficial.
 
I'm a BA in financial services...

Ultimately you are only suggesting to the RA trustees what to do. But they will try really hard to fulfil the nominees as far as possible after the necessary due diligence.

So the best thing to do is make it as easy as possible for them to conduct that due diligence which in this case is to create the trust. Then in that case the funds are paid to the trust and the trustees of that trust manage the funds on the minors behalf.
So also appoint decent trustees that are solid and trustworthy.

The other options of appointing a guardian and especially the guardian trust are way more complicated. Just don't. Just set up the trust. Please.

The answer was in the AI:

Best Practices If You Intend Minor Grandchildren to Benefit​


  1. Create a testamentary trust in your will with clear instructions on how the funds should be used.
  2. Nominate the trust (not the child directly) on the RA if your provider allows it.
  3. Ensure your will and nomination form are aligned — this supports the trustees' assessment.
 
Tomtomtom said:
Ok thanks so your parents did not nominate your kids on any RAs?
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No, they did not.
I have also nominated my trust to be 100% beneficiary of all my RAs, LAs, any and all investments, including my life insurance and any other payouts, should I pass away. I made these changes after the latest passing of my father in 2024.

While dealing with his estate, I concluded, IMHO, that you should have fokkoll on your name as well.
20-25% estate duty sucks balls.

If I were to pass away now while my kids are still minors, their mother might want to get in on the action regarding the RAs and LAs.

My trust deed states that only bloodline descendants from my mother and father are to benefit from anything in the trust. No one else can lay claim to anything. No matter what. So if my kids impregnate a gold digger one day, and they part ways, she leaves with the clothes on her back and whatever my son decides to give her.

The same goes for my ex-wife. She can only benefit from me and my kids' trust to the extent that we/the kids decide on. But there is no way that she can buy the new lover a new bakkie or kak like that when I am gone.

I am a bit unsure of what will happen in my case wrt my RAs and LAs, my minor kids, and their mother, who is their primary caretaker/guardian. How the trustees will decide after assessing my will, situation, and setup, should I pass away. I feel my things are in order in this regard.

AlmightyBender said:
I'm a BA in financial services...

Ultimately you are only suggesting to the RA trustees what to do. But they will try really hard to fulfil the nominees as far as possible after the necessary due diligence.

So the best thing to do is make it as easy as possible for them to conduct that due diligence which in this case is to create the trust. Then in that case the funds are paid to the trust and the trustees of that trust manage the funds on the minors behalf.
So also appoint decent trustees that are solid and trustworthy.

The other options of appointing a guardian and especially the guardian trust are way more complicated. Just don't. Just set up the trust. Please.

The answer was in the AI:

Best Practices If You Intend Minor Grandchildren to Benefit​


  1. Create a testamentary trust in your will with clear instructions on how the funds should be used.
  2. Nominate the trust (not the child directly) on the RA if your provider allows it.
  3. Ensure your will and nomination form are aligned — this supports the trustees' assessment.
Click to expand...
Points 1-3 are spot on imo.
 
AlmightyBender said:
So the best thing to do is make it as easy as possible for them to conduct that due diligence which in this case is to create the trust. Then in that case the funds are paid to the trust and the trustees of that trust manage the funds on the minors behalf.
So also appoint decent trustees that are solid and trustworthy.
Click to expand...

Yes that's all good and well if you can afford the admin of a trust (including a professional independent trustee etc.) but I am not convinced this is always going to be the ideal approach, depending on the size of estate, the state of the Master's Office etc.

Also, I think you're focusing on the typical parent -> child situation. I'm talking specifically about a bequest made by a grandparent. It's a gift, it's not a matter of life or death for the grandchild.

You say a testamentary trust makes it as "easy as possible" for the RA trustees, but I'm not sure I follow why that's the case, when the beneficiaries of a trust could themselves be named directly on the RA instead. This is why I'm asking, what does an Allan Gray or Coronation actually do when there is a real-life case of a minor grandchild named. There's no testamentary trust, but there's an obvious legal guardian. If this is way more complicated, how so?
 
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W@P said:
While dealing with his estate, I concluded, IMHO, that you should have fokkoll on your name as well.
20-25% estate duty sucks balls.
Click to expand...

Yes I've come to that conclusion as well, it sounds like you wait forever for the Master's Office to do anything, only to have the estate ransacked by SARS and the executor.

It seems some combination of endowment-type policies and LAs is most cost-effective and efficient. And not RAs so much given Section 37.

And for minor children it does sound like a trust makes sense in the case of the parent's will, but it's much less clear in the case of a grandparent who just wants to make a bequest to a grandchild.
 
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Tomtomtom said:
Has anyone experienced how it works in practice if a grandparent nominates a minor grandchild as a beneficiary on their RA and then passes away?

I understand that trustees have the final decision on who the dependents are for purposes of distributing death benefits, but let's say there is no direct dependent: no spouse, children are grown, no special circumstances.

So, will trustees honour the nomination?

And then, where will they pay the funds? Direct to the guardian (parent) or to some sort of beneficiary fund? If the latter is common, what does that look like, who administers it? (I understand there's a Masters Office Guardians Fund that is to be avoided at all costs, but I can't find any info on who a Coronation or an Allan Gray would use.)
Click to expand...

Funds for kids will go to the Government Fund unless listed in the will that you want a Trust for them. Parents will need to apply for the funds to pay for things etc.
 
Pho3nix said:
Funds for kids will go to the Government Fund unless listed in the will that you want a Trust for them. Parents will need to apply for the funds to pay for things etc.
Click to expand...

Avoiding the government Guardian's Fund is #1. But in the case of an RA that's not the only option. AI:

  • Paid to a legal guardian or parent to manage on their behalf — only if the trustees are satisfied this will be in the child’s best interest.
Click to expand...
 
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W@P said:
I am a bit unsure of what will happen in my case wrt my RAs and LAs, my minor kids, and their mother, who is their primary caretaker/guardian. How the trustees will decide after assessing my will, situation, and setup, should I pass away. I feel my things are in order in this regard.
Click to expand...

Your situation is much more complicated than the one I'm thinking of but my understanding is there's a big difference between an RA and an LA here, where an LA will just pay to your nominated beneficiary (the trust) with no questions, but the RA fund trustees will have to do some digging, and they can overrule your will and pay out to anyone they consider to be a dependent, especially in the case of e.g. a maintenance order.

Hence why I'm keen to know how they work in practice but it seems like papal conclave so far.
 
Tomtomtom said:
Yes I've come to that conclusion as well, it sounds like you wait forever for the Master's Office to do anything, only to have the estate ransacked by SARS and the executor.

It seems some combination of endowment-type policies and LAs is most cost-effective and efficient. And not RAs so much given Section 37.

And for minor children it does sound like a trust makes sense in the case of the parent's will, but it's much less clear in the case of a grandparent who just wants to make a bequest to a grandchild.
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But RA’s convert to LA’s without any implication as I recall?

Also what’s stopping a grandparent simply putting all this in their will? Then the RA has to go to them.

You can simply state “X RA held with Y is bequeathed to Z ID number”.

Makes far more sense to put this all in a will as it’s central and can’t be overridden by anyone.

And that can then be specified into a trust to be released to the child at maturity and on a needs basis before then.

Pretty sure if there is more than one kid in play you could have more than one trust for each.

Ultimately best to chat to a lawyer and get a will drawn up properly with your exact specifications.
 
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SauRoNZA said:
But RA’s convert to LA’s without any implication as I recall?

Also what’s stopping a grandparent simply putting all this in their will? Then the RA has to go to them.

You can simply state “X RA held with Y is bequeathed to Z ID number”.
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Well that's the misconception I had around RAs as well. Read up on Section 37. Your will counts for next to nothing as far as your RA goes. It's mere "input" into the decision the trustees make (at the RA fund, whoever they are).

You can do your heirs/dependents/beneficiaries a big favour if you retire from your RA before you die.

An LA is much simpler -- more like a life insurance policy, it just pays out (or transfers) to the nominated beneficiaries.
 
Tomtomtom said:
Well that's the misconception I had around RAs as well. Read up on Section 37. Your will counts for next to nothing as far as your RA goes. It's mere "input" into the decision the trustees make (at the RA fund, whoever they are).

You can do your heirs/dependents/beneficiaries a big favour if you retire from your RA before you die.

An LA is much simpler -- more like a life insurance policy, it just pays out to the nominated beneficiaries.
Click to expand...

Problem is you can’t convert the RA into an LA before retirement age.

My understanding was that it’s the other way around. Your beneficiary nomination on the RA is the suggestion and the estate will override that as input to the trustees (of the fund).

So ideally you what to have it written on both sides so nobody can make decisions for you.

If both your will and your RA itself says the same thing nobody can come up with any other random ideas to override your wishes.

Where the problem of “suggestion” comes in is when these things don’t align and your will says one thing but your RA another.

It means major legal hurdles for them if they wanted to override both those wishes, hence why they wouldn’t go there.
 
SauRoNZA said:
Problem is you can’t convert the RA into an LA before retirement age.
Click to expand...

Yes and that's I guess why Section 37 exists - it's intended for dealing with deaths of working-age parents, who might not even have wills.

Just read up on it, the fund trustees have the final say, and they can totally ignore your nominations and your will if they deem that to be correct in terms of the legislation.

For example if you've got two adult kids with an ex-wife but also a school-age kid with a girlfriend you didn't put in your will (by accident or otherwise), and only the grown kids are named on the RA, then I can guarantee the trustees will ignore your will and make sure that the little one is catered for.
 
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