Inter-Vivos Trusts & Testamentary Trusts

What is a Trust?

A trust is a long-term structure with which to protect assets from generation to generation. Simultaneously, a trust results in a saving in terms of estate duty which is the levy payable on all your assets when you pass.

1. Inter-Vivos Trust

An inter-vivos trust is a trust which is set up during the lifetime of an individual which is also known as a living trust or a family trust.

The large advantage of an inter-vivos trust is that the assets contained in such a trust are exempt from one’s estate in the event of summons being issued against it.

Assets which enter the trust through purchase or transferred by donation, the capital growth which takes place in the trust is also excluded from your estate. The effect is that the assets in the trust can grow without causing higher estate duty for your estate.

The largest disadvantage of an inter-vivos trust is that you lose the full control of the asset transferred to the trust. You at best will become a co-trustee or beneficiary of the trust and all trustees of the trust will have a say in how the trust assets are administered.

2. Testamentary Trust

A testamentary trust is different from an inter-vivos trust, in that it is set up according to ones will once that individual dies. The main aim of this type of trust is to protect the interests of the beneficiaries of these assets, these frequently being minors.

Trustees of a testamentary trust are bound to manage the trust in terms of the stipulations in the will of the deceased.

This means that the trust will be administered in the best interests of the beneficiaries at all times.

Testamentary trusts are usually terminated at the time stipulated in the will, be it at age of majority or any other stipulation. In contrast, inter-vivos trusts may operate indefinitely.

Conclusion

Should you have any questions about either inter-vivos or testamentary trusts or need assistance regarding setting up a trust, kindly contact us and we will gladly assist you with the aspects of your trust.