It may occur that you do not want money left to an individual as sole property for their personal management for one or other reason. In this case you may wish to set up a testamentary trust.
Trusts are typically entities set up for the ownership or protection of assets. The trust will own the assets rather than the donor. As a result, the donor on longer controls the assets and will make the initial appointment of trustees to manage the trust in terms of the trust deed.
Broadly speaking, there are two types of trusts used for estate planning purposes:
1. An Inter-Vivos Trust
This type of trust is set up during the donor’s lifetime. A benefit could be the reduction of estate duty if growth assets are owned by such a trust. By transferring assets to a trust, you may, if permitted by the trust deed, still retain the benefits of the use of the assets held by the trust. The donor can be one of the trustees of the trust, together with selected professional and trusted people.
2. A Testamentary Trust
This type of trust is established in terms of your will. Your will should specify who the trustees will be, bearing in mind that trustees are not necessarily the same people who are your executors. A testamentary trust is effective in ensuring that the interests of all the heirs are protected. For example, it can ensure that a surviving spouse’s income requirements are met while protecting the assets used to generate this revenue for the ultimate beneficiaries. Trusts can also be used to protect the assets for the benefit of minor children or those unable to take care of themselves and avoid the monies being designated to the Guardian’s Fund. You would state in your will that the trustees will manage the money you have left to that person until the happening of an event such as the demise of a surviving spouse or the coming of age of a child. At this stage, the trust will terminate in part or in whole and the capital held within the trust will become the property of the said beneficiary or beneficiaries.