As part of one’s Estate planning, it should be considered if a Testamentary Trust, also known as a Will Trust, should be written into the Will. This type of Trust comes in being upon the death of the Testator.  The main reason is to protect assets and to ensure that the surviving spouse and childrens’ need are taken care of in a legal entity which is governed by the Trust Property Control Act.

Each Testator’s situation will be different, but below are some circumstances that would give rise to consider including a Will Trust in one’s Will:

  • Protection of minor beneficiaries who are under 18. If there is no Will Trust stipulated in a Will, an inheritance due to a minor will be paid into the Guardian’s Fund of the Master of the High Court. 
  • Disabled or mentally challenged children who won’t be able to earn an income or have a means to provide for their needs.
  • Protection and preservation of assets due to a beneficiary who may squander or waste such inheritance, or whose creditors may attack the personal estate of such beneficiary.
  • Protection of inheritance due to a beneficiary married in community of property.
  • Where an asset, such as a farm, can’t be divided amongst many beneficiaries.
  • Charitable Trusts can be created in terms of a Will to ensure a long term benefit for a provided organisation such as the SPCA or Cancer Association to name a few.

It is important that any specific wishes of the Testator be clearly documented in detail in the Last Will and Testament to assist the Trustees to carry out the wishes of the Testator when the Will Trust is formed.

Examples of specific clauses would be:

  • That the capital assets of the Testator be invested in certain income generating investments, for example shares, interest generating investment accounts, fixed property etc.,
  • The provision for which distributions to beneficiaries from the Will Trust would need to be made for example, to provide for the maintenance, education, healthcare and general welfare of stipulated beneficiaries. Such payments can be made regularly or on an ad-hoc basis.
  • The legal age of maturity has been reduced from 21 to 18 years. It may be a good idea to specify the age at which the beneficiary reaches maturity in terms of the Trust. For example, you might wish to specify that the beneficiary needs to reach the age of 25.

There are 2 types of Will Trusts. The first is a discretionary Trust where the Trustees are given discretion as to the allocation and distribution of income of the Trust. The second is a Vesting Trust whereby the beneficiaries have a vested right to income and/or assets of the trust.

The beneficiaries of a discretionary trust only have contingent rights to the income, assets or net trust capital of the trust. In considering who to appoint as Trustees, the Testator can nominate the Executor, an independent professional, such as an attorney or accountant, who can act together with other trustees, usually family members, in order to administer the Trust in accordance with the clauses of the Will.

If a Testator has given thought to wishes that he would like carried out for a stipulated period (say the coming of age of a child will entitle such child to receive an asset from the Will Trust) or even an indefinite period (where the Trustees will be required to administer assets to earn income to pay for the welfare of a surviving spouse until their death), such wishes should be documented clearly and specifically in the clauses of the Last Will and Testament to create such Trust. This would be the Trust Deed of the Will Trust. A professional person, such as a lawyer, should be consulted to ensure the Will Trust complies with applicable laws of South Africa and sets out the exact manner in which the assets are to be administered.

Sidney Penfold

Senior Accountant, Durban

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