WILLS WITH PURPOSE-DRIVEN TRUSTS
Your Last Will and Testament allows you to document how you wish your Estate to be distributed and to whom. There are many instances where a Trust structure can help facilitate the execution of your final wishes.
WHAT IS A TRUST?
A Trust can be defined as a legal entity created by a party (the Founder) through which a second party (the Trustee) holds the right to manage the Trust’s assets or property for the benefit of a third party (the Beneficiary).
Simply put, a Trust is an entity that can hold assets.
These assets may ultimately be what you want to leave behind as part of your Beneficiaries’ inheritance such as cash, houses, cars, investments etc. The Trustees are there to ensure the professional and responsible management of those assets – especially in the case of minors, mentally disabled persons, or where there are other concerns for the financial management capabilities of the Beneficiary.
TYPES OF TRUSTS IN SOUTH AFRICA
There are essentially two types of Trusts, namely Living (inter vivos) Trusts and Testamentary (mortis causa) Trusts.
LIVING (INTER VIVOS) TRUST:
A living Trust is created while the founder is still alive. A living Trust is created by the drafting of a Trust deed and registering the Trust with the Master of the High Court. The Trust becomes effective as soon as it is registered.
People use living Trusts to hold assets such as property, family wealth or company shares that they wish to protect and pass on to future generations.
TESTAMENTARY (MORTIS CAUSA) TRUST:
A testamentary Trust is set out in your Will and only comes into effect when you pass away.
At Capital Legacy, we ensure that we clearly understand what our Clients’ wishes for their loved ones are and offer testamentary Trust solutions that have a very clear purpose in order to fulfil their wishes. These purpose-driven Trusts are designed to meet the unique needs of your Beneficiaries.
At Capital Legacy, we ensure that we clearly understand what our clients’ wishes for their loved ones are. Therefore, we offer
Trust solutions that have a very clear purpose, to fulfil their wishes. These purpose-driven Trusts meet the unique needs of
Beneficiaries through proven methods. Here are a few of the purpose-driven Trust offered by Capital Legacy.
A Children’s Trust is created for Minor Children (under the age of 18 years) at the time of the Testator/Testatrix’s death and remains in force until they reach the age specified in the Will and are capable and mature enough to manage their own finances.
A Children’s Trust is classified as a Type B testamentary Trust which is allowed certain beneficial tax exemptions by SARS.
A Widow’s Trust is a testamentary Trust which is created to protect the surviving Spouse, who may be financially illiterate or potentially incapable of dealing with the funds inherited.
The Spouse should be the sole income Beneficiary of the Trust for the duration of their lifetime.
The purpose of the Widow’s Trust is to provide them with an income whilst preserving the capital of the Trust to ensure this inheritance can still pass on to the children.
A Provider’s Trust is established to ensure the ongoing financial support of an individual who may not be in a position to financially provide for themselves or manage their own finances.
An example would be children with special needs such as autism or Down’s syndrome.
In many cases, special needs children can out-live their Parents and the Provider’s Trust ensures their inheritance is not squandered by Guardians or other family members. Usually, special needs children require special medical care and ensuring their financial well-being is a Parent’s greatest concern.
WHAT ARE THE COSTS ASSOCIATED WITH TRUSTS?
Setting up a Trust is usually a costly process. However, Capital Legacy has created a solution to avoid these costs.
WE CHARGE A SET-UP FEE OF R5000, EXCLUDING VAT AND A MONTHLY ADMINISTRATIVE FEE.
If the Client appoints Capital Legacy as their Trustee, we waive the initial set-up fee and we charge a monthly fee of R896,75.
There are no attorney fees or other fees that are usually associated with this process. Where property needs to be transferred, the Client will be charged Conveyancing fees. The only other costs that the Client may have to pay are accounting fees. The Client can then choose to use our third- party accountant, or their own private accountant.
ROLE AND OBLIGATIONS OF TRUSTEES
There are six main duties that the Trustee must take note of when dealing with a Trust.
DUTY TO THE TERMS AND CONDITIONS OF THE TRUST
A Trustee must know and stick to the terms of the Trust, as it has been set out in the Trust deed. They are bound by the wishes set out in the Trust deed. In other words, the funds must be used in accordance with the founder’s wishes and not according to the Trustees’ whims.
DUTY OF LOYALTY
A Trustee must administer the Trust to the benefit of the Trust Beneficiaries. Their own interests may not be in conflict with those of the Beneficiaries.
DUTY TO MANAGE THE TRUST EFFICIENTLY:
A Trustee takes on the duty of managing the Trust, efficiently. In order to do so, a Trustee must have good knowledge of the terms of the A Trustee must manage the Trust efficiently. In order to do so, a Trustee must have good knowledge of the terms of the Trust, the Trust’s assets and liabilities, the circumstances of the Beneficiaries and the purpose of the Trust.
DUTY TO ACT IN PERSONAL CAPACITY:
Trustees may seek different types of advice from outside parties but must act independently. This means that, the final decision on Trust matters should be made by the Trustees.
DUTY TO CONSIDER THE BENEFICIARIES:
A Trustee may not be biased, and must consider all Beneficiaries, when making decisions.
DUTY TO ACCOUNT:
A Trustee must keep record of all Trust related accounts and administrative matters. Trustees must also respect Beneficiaries’ requests for any Trust related information.
Capital Legacy deals with thousands of Estates every year and assists hundreds of clients with their Trust requirements. As such,
we are able to give informed and experienced advice on the pros and cons of setting up a Trust.
Need advice on Trusts?
Contact our Technical advice team on:
5 FREQUENTLY ASKED QUESTIONS
- ARE THERE DIFFERENT TYPES OF TRUSTS?
Yes, there are two main types of Trusts, namely: testamentary (mortis causa) Trusts and living (inter vivos) Trusts. Testamentary Trusts come into effect once the founder has passed away. Living Trusts come into effect only on registration with the Master of the High Court.
- HOW DO THE DIFFERENT TYPES OF TRUSTS COME INTO EXISTENCE?
A testamentary Trust comes into existence at the death of the founder and a Living Trust is created during the lifetime of the founder.
- WHAT IS THE OBJECTIVE OF A TRUST?
To maintain the assets in the Trust to the benefit of the Beneficiaries.
- WHAT DOES IT MEAN TO BE A BENEFICIARY?
There are two types of Beneficiaries: Capital and Income Beneficiaries. Capital Beneficiaries are entitled to the money that is already in the Trust, while Income Beneficiaries are entitled to the income generated in the Trust.
- WHAT IS A “TRUSTEE” AND WHAT IS HIS/HER DUTY?
A Trustee is a natural person who is appointed to administer the Trust and the assets of the Trust.