There are a number of different types of trusts. They can be classified based on, for example, whether the founder is still alive or deceased, the rights of beneficiaries within a trust, etc.
The two most common trusts used today are:
- Inter Vivos Trust (Living Man’s Trust)
- Testamentary Trust (Deceased Man’s Trust)
Inter Vivos Trust (Living Man’s Trust)
This trust is formed during your lifetime by drawing up, signing and registering a trust deed at the Master’s office.
The trust deed is a written contract between yourself and the trustees, regulating the relationship between the parties. It comes into existence after all parties have signed the trust deed (contract). The trustee will only be able to act in his capacity as trustee once the Master’s office has issued the Letter of Authority.
There are many forms of Inter Vivos trusts, depending on the purpose. The most commonly used is the Discretionary Inter Vivos Trust. In this trust, the beneficiaries do not have any fixed rights in any trust assets. They only have a hope to receive a benefit from the trust as the trustees have sole discretion regarding the distribution of trust assets to the beneficiaries.
Testamentary Trust (Deceased’s Man’s Trust)
Unlike an Inter Vivos trust, a Testamentary trust comes into existence at the time of your death. A Testamentary trust is created within your will, which must comply with the requirements for a valid will.
This type of trust is of great importance if you have minor children. The law wants to protect the money inherited by minor children from being eroded by third parties. To do this the law states that, if no other provision was made in your will, their inheritance needs to be paid over into the state regulated Guardian’s Fund, where it will remain until they turn 18. At age 18, they will be able to collect their inheritance from the Guardian Fund.
There are several problems associated with not having a Testamentary trust in your will. The inheritances of minor beneficiaries will have to be sold in order to get hard cash which will be paid into the Guardian’s Fund (which only keeps cash). The monies will not be easily accessible to help with the maintenance of such minors until they reach the age of 18. Little or no interest will be earned if the monies are paid to the Guardian’s Fund.
A Testamentary trust can be used to pay for the maintenance of the minor beneficiaries in a structured way.
Contact us for assistance with your trust needs.