A trust is essentially a legal entity that is established by means of a Trust Deed or Will , by a donor/founder in terms of which, inter alia, Trustees are appointed to administer the assets of the Trust for the benefit of the beneficiaries of that Trust.
Under South African law, there are two main types of trusts viz.
- An Inter Vivos Trust; and
- A Testamentary Trust.
What is an inter vivos trust?
An inter vivos trust is a trust that is established by the donor/founder during his/her
lifetime. This is an effective tool in separating personal assets from business/commercial
The establishment and administration of an Inter Vivos Trust must be done in compliance with the provisions of the Trust Property Control Act 57 of 1988. There is no limit to the number of Trustees, but it is a requirement that the Trustees must comprise of at least one independent trustee, who must be neither a beneficiary of the trust nor must he/she be related to any of the other Trustees and Beneficiaries.
Inter vivos Trusts are registered with the Master of the High Court, against payment of a R 250.00 fee to the Department of Justice and Constitutional Development and the submission of various forms (available on the Master’s Website) and supporting documents.
What is a testamentary trust?
A Testamentary Trust is established by means of a Will, in terms of which the Testator is the founder, and confers/bequeaths his assets to the Trust upon his death. These assets are then controlled by the trustees of the trust for the benefit of the beneficiaries.
The Will, (similarly to a Trust Deed), would ordinarily include provisions in terms whereof the Trust is to be named, and the Trustees appointed, and sets out how the Trust is to be administered. It also stipulates who the beneficiaries are. The trust is therefore only created upon the death of the Testator.
This is a useful estate planning tool and is usually used to control assets for education and maintenance where minor children are beneficiaries. These trusts mostly provide that on the happening of a certain event (e.g., the beneficiary attaining the age of 25), the Trustees must distribute the balance of the trust assets to the beneficiary.There is no limit on the number of Trustees and, unlike an Inter Vivos Trust there is no specific requirement for the appointment of an Independent Trustee. There is also no fee payable for the establishment of this Trust, and it is also registered with the Master of the High Court.
General steps for setting up a trust.
All trusts are established by a written document – viz. a Trust Deed for Inter Vivos Trusts, and a valid Will for a Testamentary Trust. The registration of all Trusts requires the abovementioned documents to be validly executed and submitted to the Master together with various standard registration forms and supporting documents. Generally, a Trust Deed must contain the following provisions: –
- Name of Trust.
- Purpose of the Trust.
- Nominate Trustees.
- Define Beneficiaries.
- Set out the rights and Powers of the Trustees.
Generally, a Trust must be registered with the Master’s office enjoying jurisdiction over the
area where most of the Trust’s assets are to be held.