Category: Chartered Legacy & Trust

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Update on delays in the Master’s Office

Most businesses have not been left unaffected by Covid. At Chartered Legacy and Trust our biggest challenges over the past year have been as a result of delays in the Master’s Office.

At Chartered Legacy we deal with the Master’s Office in the administration of our deceased estates as well as on various trust matters.

When South Africa went into Level 5 lockdown in March 2020 the Master’s Office closed, and only urgent matters were being dealt with. As lockdown was eased the Master’s Office opened but in a limited capacity and currently public access to their offices is very restricted. The result is that we are experiencing significant delays in receiving Letters of Executorship for new estates as well delays in the approval of Liquidation and Distribution Accounts. The Trust department at the Master’s Office seems to have been particularly badly impacted by lockdown and in some cases we have been waiting for over a year for feedback.

Other governmental departments such as the Deeds Registry Office and Municipal Council offices are also experiencing delays. The issuing of clearance certificates by the Council has delayed the transfer of properties which in turn create further delays when finalising estates.

We would like to assure our clients that we are being proactive in our approach and as a result we are slowly seeing results. We have processes in place and are following up regularly with the Master’s Offices. Should the situation require, we contact the Chief Master directly or The Fiduciary Institute of Southern Africa (FISA) which is the only professional body focusing solely on fiduciary practitioners in Southern Africa. This too is a slow process but is the avenue provided to us to escalate matters. We appreciate your patience while we work under these difficult conditions.

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The conundrum of a lifetime: Do I need one Will, or two?

One thing that 2020 has taught us is that we live in the global era. Increasingly, notwithstanding the various lockdowns imposed this year around the world, South Africans work, live, invest in, emigrate and travel to various countries.

As a result of our participation in the global economy, many of our clients or their family members and friends own
offshore assets, including bank accounts, investments, shares in private companies, vehicles, and fixed property to name a few.

While you’re focused on living your life and growing your wealth, it really does also pay to consider estate planning when you consider acquiring assets in foreign jurisdictions. Every country has its own legal framework governing property, investments, marriage, children, tax, Wills and succession. Many people forget to consider what will happen to their assets on death – and assets around the world bring some complications of their own to your estate planning! In this two-part series, we will unpack some considerations which affect whether you need one worldwide Will or multiple Wills to govern your offshore and local assets.

Fact: there is no one-size-fits-all answer

Whether your assets and estate require one Will or two is often a matter of professional opinion, convenience and practicality. For this reason, when you have assets in multiple legal jurisdictions, it is best to seek advice from your fiduciary legal specialist based on your unique circumstances and needs.

Different countries have different legal rules

Different countries have differing processes for winding up deceased estates and allow different levels of freedom to choose who inherits your assets. A Will drafted in South Africa is not necessarily applicable, appropriate or enforceable in other countries. Countries such as Spain, France, Mauritius and Portugal have a system of forced heirship (a set of legal rules which limit a person’s freedom to distribute his or her estate). Countries where Shariah law prevails present their own unique complications and forced heirship rules. Assets located in such countries might be subject to these forced heirship rules, so it is important for the person who drafts your Will to know about all your assets – and to get the correct information about all the legal jurisdictions in which they are held.

Considerations in favour of one worldwide Will

Normally, your South African Will covers your worldwide assets. It is always better to mention this expressly in your Will to avoid any doubt, but this will be the default position even if it is not explicitly set out in your Will.

One worldwide Will allows a consolidated and centralised approach to the administration of your estate after you pass away. You appoint one executor in your Will, and that person will be responsible for dealing with your assets wherever they may be situated in the world. This will be a beneficial approach if you do not have many offshore assets, if all your offshore assets are liquid (i.e. not immovable property), or where either your local or offshore estate may have some liquidity challenges that need to be managed.

Caution should be exercised in making use of only one Will; however, since not all countries’ legal systems are prepared to recognise a South African Will. Cross-jurisdictional language differences could preset major challenges and some assets may not be dealt with by your local executor, resulting in your executor needing to appoint an agent in a foreign jurisdiction to deal with those assets. This would naturally incur additional costs which your estate would be liable for.

As you can see, there are many factors affecting the practicality of one worldwide Will, and caution should be exercised before using this estate planning strategy. Please keep a lookout for our next newsletter, dealing with the use of multiple Wills in your estate planning.

If you need an additional Will please contact Philene@charteredlegacy.co.za or your RetiremeantTM Specialist.

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The implications of signing over a Power of Attorney

Clients frequently ask us whether they should sign a Power of Attorney (“POA”). There are some very real implications to signing over a POA, so it is important to have an understanding of the legal consequences as well as the circumstances in which a POA can be used. Used in the correct way it can be a very helpful and practical document. Before signing over a POA, consider the following factors.

A POA is essentially a notice that gives a third party the permission to act on your behalf and make decisions for you. This can be for specific matters (‘special power of attorney’) or for all matters (‘general power of attorney’). Careful consideration should be given to the person you are granting a power of attorney, as you are giving them the authority to act in your stead.

The most common instance where power of attorney is signed over is with the elderly. There may come a time when a person is too frail to physically sign documents or is physically not able to visit the bank. A POA can prove very helpful in these circumstances to relieve some of the stress on the elderly and their family.

In South Africa, there has been an increase in power of attorney being signed over from people emigrating from the country. Often people find themselves in a position when they have left the country before all of their financial matters are completely finalised. In this instance, they would sign over authority to someone still in South Africa to assist with these matters without documents needing to be sent back and forth.

COVID has presented another example of where a POA can be useful. For the elderly or those with a co-morbidity who are encouraged to self-isolate, a POA allows you to delegate authority to a trusted person, meaning one can limit their contact with people outside of their home.

It is important to remember, however, that under South African law it is not possible to sign over power of attorney if someone becomes mentally incapacitated. When a person is no longer able to conduct their affairs due to mental impairment, a POA ceases to be valid. If someone acts on an invalid power of attorney, it can be considered fraud.

It would also be reckless to accept an instruction from an agent acting by virtue of a POA where one knows the POA to no longer be valid due to the person granting the POA being mentally incapacitated.

So what can one do when someone is mentally unable to deal with their own affairs, and POA is not an option? There are two options:

  • One can apply to the High Court to be appointed as the curator of the incapacitated person’s affairs.
  • One can apply to be appointed as the administrator of such person through the Mental Health Act.

A very important consideration is that when a curator or administrator is appointed for someone who is mentally incapacitated, the power conferred is absolute. This means that the person who becomes the curator has full power under the law to conduct the affairs of the incapacitated person indefinitely and as they deem fit. In contrast, a POA can be revoked or withdrawn at any point.

The above sets out the law as it currently stands in South Africa. Please contact your financial planner if you would like to discuss putting a POA in place. If you are concerned that a loved one may be showing signs of dementia, it may be time to start looking into some of the options discussed. The legal avenues available all take time to put in place, and it may become stressful when you are not able to deal with the assets of the mentally incapacitated person as the correct legal procedures are not in place.

Podcast

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The Purpose Paradox: meaning in suffering

At Chartered Wealth we understand that, for most of us, life is a delicate balance of joy and sorrow, pain and pleasure, hope and disappointment.

If life has purpose, then surely there is purpose in suffering and dying.

At Legacy & Trust, we naturally encounter loss and grief, as we draft Wills and settle Estates. And through this service, we have discovered a new way to serve our clients – guiding them through grief to recovery.

From resilience to fulfilment

Recovery coaching encourages us to find meaning despite the suffering and trauma we may experience. A Recovery Coach works with those recovering from a medical crisis or the loss of their significant others to death.

American therapist and author, Virginia Satir, says: “Life is not what it is supposed to be. It’s what it is. The way you cope with it is what makes the difference”.

Through meaning-oriented intentional care, recovery coaching supports good mental health at every stage of life, from childhood and adolescence through adulthood.

According to the World Health Organization, mental health includes our emotional, psychological, and social well-being. It affects how we think, feel, and behave, and influences how we handle stress, make choices, and form and maintain good relationships.

In the words of Medical Coach, Shiri Ben-Arzi, “to rise above circumstances is resilience, but to live beyond our circumstances is fulfillment”.

Serving our clients

We at Legacy & Trust have partnered with Lee-Anne van Rooyen, a practising organisational psychologist and coach. Having been in private practice for over 13 years, Lee-Anne has worked with many people to live meaningful and fulfilling lives despite pain and loss.

A cancer-survivor client wrote of her coaching sessions: “You have helped me through the darkest time of my life – to ground myself, access my own resources and make better quality decisions. I feel more empowered and simply so much happier every day because of our sessions. I’m glad to be alive”.

If you are, or a loved one is, recovering from a medical crisis, or grieving the loss of your significant other, we invite you to contact us regarding recovery coaching. We would like to host an event with Lee-Anne, and would like an indication of interest from our clients. Please email kerryn@charteredlegacy.co.za

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An Independent Trustee: why does my trust need one?

The ‘Independent Trustee’ has become a requirement for certain types of trusts in South Africa. Philene Spargo discusses important aspects of independent trustees that those involved in a trust should know.

In a trust, the trustees contractually agree to administer the trust assets for the benefit of the trust beneficiaries. Historically in South Africa, many beneficiaries and trustees have treated trust assets as their personal assets. This is undesirable as, once a trust acquires assets, those assets can no longer be used at the whim of the former owner without adverse legal consequences.

The role of trustee

A trustee, when appointed, accepts a legal duty of good faith to administer trust assets for the benefit of the trust beneficiaries. This means that trustees must exercise care, prudence, objectivity and sound reason in their administration of trust assets. However, this does not always happen.

The need for an independent trustee

The requirement for an independent trustee to be appointed to certain trusts in South Africa arose from the 2005 decision of the Supreme Court of Appeal in Land and Agricultural Bank of South Africa v Parker and Others. The court ruled that there was no proper separation of control and enjoyment of the trust assets. Simply put, the trustees had improperly administered the trust.

When is an independent trustee required?

Because of the Parker case, the Master of the High Court issued a Directive in March 2017: all South African trusts that meet certain criteria require the appointment of an independent trustee alongside the other (interrelated and potentially conflicted) trustees. The criteria are:

  • The trustees have the power to contract with independent third parties
  • The trustees are all beneficiaries, and
  • The beneficiaries are all related to one another.

So, most trusts in South Africa require an independent trustee to be appointed to act independently of the other trustees to reassure the Master that the trust is being administered legally.

Characteristics of an independent trustee

While the independent trustee does not have to be a professional person, he/she must:

  • be completely independent of the normal contracting parties of the trust, and not a family relation of an existing trustee, proposed trustee, beneficiary or founder in a wide sense
  • not be a beneficiary of the trust
  • ensure the trust functions properly and that the provisions of the trust deed are observed
  • exercise objectivity and be competent to scrutinise the conduct of the other trustees who are not independent
  • be knowledgeable about the law applicable to trusts
  • not be disqualified to act as trustee by the Trust Property Control Act
  • have knowledge and experience of the business field in which the trust operates
  • be aware that failure to observe his/her duties may risk legal action
  • understand the legal duties attached to being an independent trustee, and
  • always maintain his/her independence by not allowing the other parties to exercise undue influence over trustee decisions.

Looking forward

While there will be additional costs by having a professional, independent trustee involved in administration of the trust, the benefits of objectivity and compliance are significant.

Ideally, an independent trustee – either a natural person or a corporate – should specialise in fiduciary law. If you would like assistance with the independent trustee role for a trust with which you are involved, or have questions regarding trusts, the Chartered Legacy and Trust team can help you to navigate the difficult landscape of trust law and journey alongside you as you protect and preserve your family’s legacy.

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Managing Global Assets in your Estate Plan

It’s a global village. Technological advances allow us to live, do business and invest offshore with relative ease. Against the backdrop of local uncertainty, South Africans are increasingly looking at offshore investment options; our political climate makes investing in second residency schemes attractive. How, then, do these offshore investments impact our estate planning? Kerryn Franck, Director of Chartered Legacy & Trust, underscores the importance of having an international Estate Plan.

Investing offshore exposes your personal estate to foreign laws and jurisdictions. So, understanding the different rules that may apply to your worldwide assets is imperative as part of your estate planning.

Different countries have different succession and inheritance tax laws. Which law applies to your assets may depend on your nationality, domicile, residence and location of your property.

You can, of course, deal with all your assets in a worldwide Will. It is important, though, to consider whether it may be more practical and/or efficient to deal with offshore assets in a separate Will. I would urge you to discuss the many factors to be considered when making this decision with your planner; for example, property may be situated in a jurisdiction that has forced heirship rules and you may not be able freely to dispose of the property as you wish in your Will.

Even though you have a worldwide Will, you may still be required to report your estate in the foreign jurisdiction where the asset is located and apply for a grant of probate. This requires the services of a lawyer overseas – this can be costly and is an extra expense for your estate. A jurisdiction where a foreign language is spoken can further complicate matters.

Should you opt to have more than one Will, you need to ensure that your Wills are read together. A Will dealing with your offshore assets must not revoke all your previous Wills but only those dealing with your offshore assets. Revoking all Wills may result in your local assets being distributed in accordance with the laws of intestacy. When drafting separate Wills, you must also ensure there is enough liquidity in each of the various jurisdictions to cover the costs of administering that portion of your estate and the transfer of the assets.

Often a testator will have sent money offshore with the intention of it remaining offshore for the benefit of the nominated beneficiary. In this case, a detailed Estate Plan should be created to investigate whether all estate expenses and taxes can be paid locally. This is so that the offshore funds are not repatriated and the testator’s wishes are upheld.

When you do your financial planning, remember that a South African trust cannot hold or inherit offshore assets – note this when drafting your Will. A testator wanting to leave their assets to a local trust in their Will must investigate an alternative option for any offshore assets.

In short, if you have offshore assets, you must have an international Estate Plan in place.

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Changing circumstances? Change Your Will

Like most things in life, sometimes your Will needs to change.

Your Will details how you would like your assets to be distributed after you pass away. In part, it embodies how you would like to be remembered by those you love when you are gone.

Most of life’s significant “changes” may trigger a Will revision: birth of a child, death of a family member, divorce, marriage, re-marriage and relocation of you or your beneficiaries (within South Africa or abroad).
The executor nominated in your Will may also need to change – for example, if the nominated person moves offshore – or you may have a change of heart about your nominated beneficiaries. Any changes to your asset structures (for instance, as a result of retirement) can mean a review of your Will to ensure that it still fulfils your wishes. Here are details on some aspects:

Children

When a person under the age of 18 stands to inherit, we generally recommend that a trust be used to safeguard the inheritance for the child and prevent it from being administered by the Guardian’s Fund. When a child is to inherit, your Will may need to include provisions to create a trust through your Will if a registered family trust does not already exist. Parents should nominate guardians for their children in their Wills. When your children reach age 18, guardianship falls away and you can remove this provision from your Will.

Divorce

After a divorce, the law gives a “grace period” within which to update your Will. If you pass away within three months of the divorce, the law assumes that you were still going to change your Will and will treat your ex-spouse as though they passed away before you. However, if you have not updated your Will in the three months following your divorce, this protection lapses as the law assumes that you did not want to change your Will. As a result, your ex-spouse may inherit from you according to the provisions of your latest Will.

Offshore assets

Another reason to revise your Will may be if you acquire offshore assets. Most movable assets – cash, investments, vehicles, personal and household effects – situated in a foreign country can be governed by your South African Will, but exercise caution with immovable property and larger investments.

Depending on the jurisdiction, you may wish to draft an offshore Will and take specialist legal tax advice for those assets, since not all countries have the freedom of testation that South Africa does and various countries have different legal rules about how to deal with your assets on death. There are also special tax concessions regarding an offshore inheritance that is never repatriated to South Africa – if you have inherited an offshore asset, ask your financial planner for details!

How to change your Will

Most frequently, the best way to update your will is to make a new one to replace the old. You can also draw a codicil to update your Will, but the original Will and original codicil must be kept together and must “talk” to each other by cross-referencing the codicil to the Will provisions. The simplest option, though, is to draw a new Will reflecting your current wishes – any outdated portions of your old Will can then also be revised.
It is never advisable to write on your Will to try to change the provisions. Handwritten wills, and handwriting on an original Will, will create problems for your beneficiaries and lead to delays in the winding up of your estate or your Will being declared invalid!

If you want to change your Will, or if you have any questions about changing your Will, the team at Chartered Legacy & Trust can guide you through the process and help you to navigate the legal labyrinth to leave a lasting legacy for your loved ones.

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Our greatest fear: the unknown. Our greatest feat: planning for it.

Karryn-frankCan you prepare for such a significant loss in your life?

In my career as a lawyer and head of Chartered’s Legacy & Trust in-house service, I have seen how the loss of a partner or spouse can strike people to their core, and paralyse their ability to make rational decisions or take confident action.

This is no surprise, if we consider the Kubler-Ross Grief Cycle’s five stages of grief: denial, anger, bargaining, depression and finally, acceptance.

When at the first state, denial, we wonder how we will go on, even if we can go on. One emotion often associated with this stage is fear; perhaps it is the fear of being alone, or the fear of how to meet our immediate and long-term financial obligations.

While it is almost impossible fully to prepare ourselves emotionally for the death of a loved one, we can certainly make financial preparations.  Our ongoing experience with the winding up of estates has provided us with valuable insight into how best to prepare financially for this transition. We have also added to our service offerings to assist our clients in this process.

Practical considerations

The issuing of the Letters of Executorship to be issued in an estate can take up to six weeks (often longer!).  Very little can be done on an estate until the Executor has been appointed. Even thereafter, it takes some time to open the estate late bank account and for assets to be realised to provide the estate with liquidity. All the while, expenses continue to run. Depending on what stage of life you are in, there may be bond repayments looming, school fees to be paid and maintenance obligations in terms of a divorce order.  Is there a way to plan for this?

When a person passes away, their bank account should not be accessed.  There are no joint bank accounts in South Africa, so even if you have signing powers on your partner’s account, you will not have access to these funds once he or she has passed away. This often leads to worrying about where funds will come from.  It is paramount for each person to have a bank account in their own name with sufficient funds in it to be able to carry the immediate expenses until the estate is liquid. If the surviving partner has their own liquid assets in their name which they can access in the short term, this is an enormous help.

A simple estate can take as long as a year to wind up. While funds can be accessed in an estate during this time, there are some assets that do not form part of an estate and which are readily available.  We refer to these as “deemed assets”.  These assets are dealt with outside the estate and are usually beneficiary nominated.  They can be accessed within weeks of a person passing away. Examples of these assets include life policies, living annuities and retirement annuities.  It is important, however, to distinguish which are retirements funds among these assets. Although retirement funds fall outside the estate and are beneficiary nominated, they are subject to the discretion of the Trustees of the fund. There will always be an investigation by the Trustees as to who was dependent on the deceased and they will award the funds accordingly … and this may not always be in line with the beneficiary nomination.  This can cause lengthy delays in payment of the funds.

At Chartered Legacy & Trust, we offer our clients an Estate Plan which helps to prepare you financially for the impact death will have on your estate and what taxes will become payable. The plan will highlight whether there is a liquidity shortfall in your estate to meet the financial obligations and, if so, which assets will need to be sold. This is an important exercise and one which we encourage all our clients to undertake.  As part of our Wills offering, we are now also assisting clients with the preparation of a Legacy Folder. The purpose of folder is that all the documents your Executor will need when winding up your estate are kept together and are up-to-date.  This will save your partner a huge amount of stress at a very emotional time. Having an up-to-date Legacy Folder will assist when negotiating your Executor’s fee.

Our aim at Chartered is to relieve you of any financial fears or concerns you may have after losing your spouse or partner. By planning and having a good understanding of the estate process, you can alleviate worry for your loved ones left behind.  We are here to assist so life can continue with as little financial disruption as possible.

The oldest and strongest emotion of mankind is fear, and the oldest and strongest kind of fear is fear of the unknown.                                                            H P Lovecraft

Kerryn Franck is the Director of Chartered Legacy & Trust.  She and her team work to create peace of mind for their clients by creating Estate Plans that accurately reflect their clients’ wishes.

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Have you created your Living Will?

Have you created your Living Will?

Let your wishes for your medical care live on through your Living Will

Philine_post Planning for death can be like making that dreaded dentist’s appointment: you don’t want to do it, but you must, because you know it will save much pain going forward!

A Living Will guides your family and doctors in honouring your wishes for a dignified death when you are no longer able to express those wishes. It affords your family peace of mind during an extremely difficult time.

What is a Living Will?
A Living Will is a written statement detailing a person’s wishes regarding their future medical treatment, when they are unable to give their informed consent regarding such treatment.

A Living Will often stipulates that you not be kept alive through artificial life support should you have no reasonable chance of recovery from a general condition or vegetative state. An Advance Directive deals with the medical treatment a person would like (or not like) administered to them concerning a specific medical condition or ailment. So, the Living Will and Advance Directive deal with your end-of-life wishes while you are still alive. Don’t incorporate your Living Will into your Last Will and Testament – it is a separate document serving a different purpose.

Legal position in South Africa
In South Africa, all patients have a right to refuse treatment, but may not ask or expect a doctor to end their life. Doctors have taken an oath to save lives, so cannot be forced to abide by a Living Will where they feel that there is hope of recovery for a patient.

The Living Will is not a binding legal document; rather it communicates your wishes to guide your family when they have to take decisions about your medical treatment in the final stages of your life.

Why do I need one?
Despite medical advances extending life, the natural decline of health at life-end means you may find yourself with an irreversible medical condition severely restricting your quality of life. Many people do not want, for example, to be on permanent life support or in a permanent vegetative state. Then, a medical professional may look to your family for guidance. Here, a Living Will or Advance Directive, while not legally binding, can save your family from enormous emotional stress and even financial burden.

Your Living Will can also record your wishes about organ donation and cremation or burial.
What must your medical professional check?

1. The signatory to the Living Will or Advance Directive was over 18 years.
2.The patient had the mental capacity to make their own decisions when they signed their Living Will.
3. The patient was fully informed about their condition and proposed treatment.
4. The patient did not change their mind after signing the document.

How to get a Living Will in place
There are many standard Living Wills that can be downloaded from the internet and completed according to your wishes.
At Chartered Legacy & Trust, we can prepare your Living Will at no additional cost when we draft your Will. Speak to your RetiremeantTM Specialist today about getting your Last Will and Testament and Living Will updated or in place if not already done!

Once complete, you can send copies of your Living Will to your family and doctors, so that they are immediately aware of your wishes. Your treating doctor must have access to your Living Will in order to carry out its directives.

Dealing with death is never easy, but having your affairs in order through your Last Will and Testament and Living Will can ensure you receive dignified and humane medical treatment according to your wishes while facilitating a smooth transition for your family.

 

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Preserving Your Legacy

It is our goal at Chartered Legacy & Trust to ensure that your wishes, as expressed in your Last Will and Testament, are given effect to after your death.
How best to achieve this depends on your particular family circumstances and who your nominated beneficiaries in your Will are; for example, you may be financially supporting an elderly parent who no longer has the mental capacity to manage her own financial affairs. How do you ensure that the money left to her in your Will is managed correctly and used for the purpose for which you intended?

A way of addressing your concerns in the aforementioned example would be to create a testamentary trust (also referred to as a trust mortis causa). A testamentary trust differs from a discretionary or inter vivos trust in that it is created in your Last Will and Testament, and only comes into effect on your death and only if the circumstances as at the date of your death still require it.

When must I create a Testamentary Trust?

There are various situations that would justify creating a testamentary trust in your Last Will and Testament. Here is a list of some of these circumstances:

1. Your beneficiaries are your minor children or grandchildren

In terms of South African law, beneficiaries under the age of 18 years are not able to inherit in their personal capacity. The law requires that their inheritance be paid into the Guardian’s Fund which is under the control of the Master of the High Court. The funds are available to the minor but application must be made to the Master of the High Court and the use of the funds is at his discretion.

As an alternative, you can make provision in your Will for any inheritance due to a minor to be paid into a testamentary trust created and set up in terms of your Will. Minor beneficiaries still have access to the money, but at the discretion of your nominated trustees and under their control. The monies remain in trust until the beneficiary reaches an age predetermined by you or at the trustees’ discretion, at which point their inheritance can be transferred into their names.

This is of particular relevance where parents of young children die simultaneously in an accident. Their estates can then be paid into a testamentary trust setup in terms of their Will which is then managed by the nominated trustees for the benefit and maintenance for the surviving children.

2. Your beneficiary is a disabled or dependent child or family member

If you have a child or a family member who:

  • has a physical and/or mental disability; and/or
  • is financially dependent on you; and/or
  • is incapable of managing their own affairs

A testamentary trust can be set up on your death to provide for such a person until their death or a date specified by you. The trustees of your testamentary trust will step into your shoes and ensure that your beneficiary is taken care of and looked after in the way you would have looked after them yourself.

Your children/beneficiary may be majors, but lack the necessary maturity or experience to take responsibility of their inheritance. They may not be financially savvy, declared insolvent or there may be a spouse whom you feel is a negative financial influence over your nominated beneficiary. Payment of their inheritance into a testamentary trust protects the inheritance until the beneficiary is in a better position to manage their own affairs.

A testamentary trust set up for minors or persons with a mental disability can be registered with SARS as a special trust and taxed as an individual provided they are the sole beneficiaries of the trust during their lifetime.

3. You want to benefit from Section 4A – Estate Duty Abatement

As a way of reducing the amount of estate duty payable on the death of the surviving spouse, on the death of the first dying spouse, the estate duty abatement (currently R3 500 000) can be bequeathed to a testamentary trust. The beneficiaries of the testamentary trust will be your surviving spouse and descendants, and they will have discretionary access to the funds for their maintenance. The benefit of this is that the money grows in the testamentary trust and not in the hands of the surviving spouse, where the growth may attract estate duty on the death of the surviving spouse.

Basic Structure and Formalities

So how do you go about setting up a testamentary trust?

The basic structure and formalities applicable to a Last Will and Testament will still apply when you creating a testamentary trust in your Will. However, your Will becomes more lengthy as it must include all the relevant trust provisions necessary for the creation of a trust. The trustees derive their powers from the trust deed therefore there must be sufficient detail in the Will.

When it comes to creating a testamentary trust:

  • Your intention must be clear that you would like to create a testamentary trust and the provisions of this testamentary trust must be listed in your last will and testament;
  • The reason and goal of the testamentary trust must be clear;
  • Beneficiaries must be named specifically;
  • The assets must be identified, which are to be subject to the control of the trustees of your testamentary trust;
  • Trustees of the testamentary trust must be listed;
  • Termination of the testamentary trust must be determined or determinable;
  • Beneficiaries to inherit the capital of the trust must be named in order for the assets to be paid to them on the date of termination of the testamentary trust.

There are costs involved in the setting up and the running of a testamentary trust just as there are in the case of an inter vivos trust. This must be kept in mind when considering whether the amount to be paid into the testamentary is sufficient to cover the costs. A further caveat is that as a testamentary trust forms part of your last Will and Testament is cannot be amended.

Finally …

While we may find considering our own mortality either morbid or macabre, the proper planning can save our beneficiaries so much strife and so many difficulties. Having an objective and expert partner is invaluable in creating a practical and accurate way of ensuring your loved ones are cared for once you are no longer around.

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