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PFA Ruling: Minor's Care Giver to access the full amount of the death benefit due to the minor child

07 March 2008 Pension Fund Adjudicator

RULING CONCERNING ENTITLEMENT OF A MINOR’S CARE GIVER TO ACCESS THE FULL AMOUNT OF THE DEATH BENEFIT DUE TO THE MINOR CHILD UNDER THEIR CARE AS OPPOSED TO PLACING SUCH BENEFIT IN TRUST.

The Pension Funds Adjudicator has issued a landmark ruling in the matter of A.K.KOWA (COMPLAINANT) vs CORPORATE SELECTION RETIREMENT FUND (FIRST RESPONDENT) AND LIBERTY LIFE (SECOND RESPONDENT) regarding the minor’s grandparents right to have full access to a death benefit that is due to the minor. The effect of the determination is to give a care giver, namely, a grandparent, in the relevant circumstances access to the death benefit that is due to a minor child. Further, the determination compels the Fund to apply their minds to the facts of the matters to determine whether or not a benefit is to be paid out, rather than to of course pay a minor’s benefit into trust.

The facts of the matter are briefly the following:

Facts

The complainant is the mother of the deceased who passed away on 25 November 2005. The deceased was employed by Paul’s Muesli CC (“the employer”) from 1 November 2000 and was a member of the first respondent from 1 November 2005 until he passed away. Upon his death, a total lump sum death benefit of R62 158.47 became available for distribution to his beneficiaries. The deceased completed a nomination form on 21 November 2000 in terms of which he nominated the complainant to receive 100% of his death benefit. After completing its investigation regarding the circle of beneficiaries the board of trustees decided to pay the complainant an amount of R3000.00 on the basis that she was nominated as a beneficiary by the deceased. The balance was placed in a trust for the benefit of the deceased’s minor child, Kabelo Justice Kowa. A monthly income of R300.00 is being paid to the complainant from the trust for the maintenance of the deceased’s minor child.

The complainant who is the caregiver of the deceased’s minor child has however alleged that the trustees erred in deciding to place the minor child’s share in a trust for the following reasons:

* The complainant contends that the deceased nominated her as the sole beneficiary of his death benefit. Therefore, the complainant requests that the respondents should pay her the whole amount of the death benefit in the form of a lump sum as she is taking care of the deceased’s minor child;

* Further the complainant submitted that this is because the deceased’s wife also passed away she is the sole caregiver of the minor;

* Even Further, the complainant argues that the amount of R300.00 per month that is being paid to her is not enough to buy food and to pay for school fees for the minor child.

The respondent in their responded as follows:

* in terms of section 37C legal dependants are considered before nominees  

 

* Further, that the trust makes provisions for school fees to be paid in addition to the monthly income of R300.00 that is being paid to the complainant (care giver).  

 

* In this matter, the critical point is that the complainant is only a caregiver for the deceased’s minor child and she is not a legal guardian.  

Determination and reasons therefore

Subsequent to considering all the facts and evidence the Adjudicator held the following:

WITH RESPECT TO THE PRINCIPLE ON DISTRIBUTION OF DEATH BENEFITS

* The board of trustees have a legislative duty to identify the beneficiaries of a deceased member and also vests the board with discretionary powers on the proportions and manner of distributing the proceeds of a death benefit and in doing so must give proper consideration to relevant factors and to exclude irrelevant ones from consideration.

* The Board must not unduly fetter its discretion by following a rigid policy that takes no account of the personal circumstances of each beneficiary and of the prevailing situation.

WITH RESPECT TO THE COMPLAINTS ENTITLEMENT TO THE BENEFIT IN HER PERSONAL CAPACITY AS A NOMINEE

The complainant even though being a nominee does not necessarily imply that the whole amount of the death benefit will be awarded to her and she is therefore not entitled to 100% of the benefit

WITH RESPECT TO THE PLACEMENT OF THE MINORS BENFIT IN TRUST

With regards to the placement of the minor child’s share in a trust, section 37C(2)(3) of the Act regulate the mode of payment of a death benefit to a minor dependant or minor nominee. When paying a benefit to a minor, the benefit is normally paid to the guardian of the minor, unless there are cogent reasons for depriving the guardian of the duty to take charge of her/his minor child’s financial affairs and the right to decide how the benefit due to the minor should be utilised in the best interests of the minor child However in the present matter the minor child was not survived by any legal guardian as both of his parents passed away. The deceased’s minor child is being cared for by the complainant who is his grandmother. It is clear that the complainant is acting as the minor child’s guardian as she is taking care of his daily needs, as a caregiver and not a legal guardian of the minor child.

However it is important to note that guardianship is used in two senses, firstly in the broad sense where it is equated with parental authority and includes all other responsibilities and secondly in the narrower sense which refers to that portion of parental authority which relates to the control and administration of the child’s estate Thus, any person who administers and safeguards a minor’s property and property interests should be regarded as a guardian.

However, this should depend on the nature of the relationship between the person concerned and the minor child.

In this instance, the complainant is the grandmother of the deceased’s minor child. It is clear that the complainant is the one who attends to all the daily needs of the deceased’s minor child. It is also clear the relationship between the complainant and the minor child is not temporary as in the case of a temporary care-giver. Therefore, I find that the complainant is in the same position as that of a natural guardian.

* Therefore in conclusion, the approach of the board of trustees in this matter leaves much to be desired. The board fettered its discretion by automatically placing the minor child’s share in a trust without investigating the ability of the complainant to administer the affairs of the deceased’s minor child.

* Further, the amount involved and the cost implications of placing the minor child’s share in a trust, vis-à-vis those other suitable options, are highly relevant considerations that the board of trustees should take into account (see Dhlamini v Smith and Another [2003] 7 BPLR 4894 (PFA) at paragraph 23). In casu, the only reason advanced by the board for its decision to place the minor’s share in a trust was because the complainant is not a legal guardian of the minor.

The Adjudicator therefore ordered the following:

* The decision of the board of the first respondent to place the minor child’s share in a trust is hereby set aside.

* The first respondent is directed to re-exercise its discretion in respect of the mode of payment to the deceased’s minor child having regard to the factors mentioned in this determination.

* The first respondent is further directed to determine whether the complainant should be deprived of the right to administer monies on behalf of the deceased’s minor child having regard to the factors stated in this determination within six weeks of the date of this determination.

Click here to read the full determination  (PDF file 63kb)

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