Some Basics on Wills and Trusts

Share on facebook
Share on google
Share on twitter
Share on linkedin

Some basics on wills:

  1. You have to be at least 16 to make a will
  2. If your will is handwritten, the person doing the writing may not be a beneficiary in that will
  3. No-one under age 14 may be a witness to your will
  4. No beneficiary to your will (like a child or spouse) may also be a witness to your will.Get others to witness
  5. Witnesses must sign in the presence of each other and the testator/person whose will it is
  6. A will must be witnessed by 2 witnesses
  7. You must date your will
  8. Very important: In the absence of a valid will your estate will devolve by the laws of intestate succession (i.t.o. The Intestate Succession Act), which has a set formula by which it will dispense with your estate) , so make a will.
  9. If you have potential heirs who are still minor (under the age of 18) it is vital that your will makes provision for a testamentary trust to be set up.Failiure to do this means money  bequeathed to them will be administered by the Guardian’s Fund which you want to avoid.
  10. The fact that your will is being drafted at no cost does not imply that the financial advisor, bank or attorney who drafts it should necessarily be appointed executor.That option/choice remains with you.Your chosen executor, such as a family member or child, may, should anything happen, seek out professional assistance and negotiate a reduction in the suggested executor’s fee which is currently 3,5%

Some basics on Trusts:

  1. Should you set up a trust?What are the reasons to consider one?
    1. A key motivator is usually estate planning.If you’re going to leave an estate worth more than R3,5 million, 20% of every rand above that amount is payable as a tax known as estate duty.As an example, an estate worth R10 million, after the allowable deduction of R3,5 million, will owe taxes equal to 20% of  R6,5 million.This means that the value of your estate will be reduced by the sum of R1,3 million payable in taxes.If the assets had been in trust at date of death, that estate duty would be avoided.
    1. For those with business interests and risk, holding assets in a trust may also offer creditor protection in the event of an insolvency
  2. What are the basic forms of trust out there?
    1. An “ownership” trust sees the founder of the trust transferring assets to the control of a trustee or trustees (which may include themselves ie, you can be a founder and trustee of a trust).The trust assets are held for the benefit of defined or determinable beneficiaries of that trust such as children.
    1. A “bewind” (Dutch word) trust, in terms of which the founder transfers assets to the beneficiaries of the trust, but control of the assets remains with the trustee/s
  3. How and when are trusts formed?
    1. A trust formed during the lifetime of the founder of that trust is known as an “inter-vivos” trust
    1. A “Testamentary” trust is one formed or set up in terms of the will of a person, and thus only comes into effect after their death.
  4. Once you’ve formed the trust and placed assets into it, what rights do the beneficiaries have?
    1. In a “Vesting” trust , all income, whether of a revenue or capital nature, vests in the beneficiaries
    1. In a “Discretionary” trust, the trustee/s have the discretion as to how much, or even whether, income, capital or assets are distributed to beneficiaries.
    1. This makes a discretionary trust more popular in many instances.
  5. What kind of trust should yours be and with what purpose?
    1. A trust may have different key purposes or objectives.As examples – which are self-explanatory – there are:
      1. Asset-protecting trusts
      1. Trading trusts
      1. Charitable trusts
    1. These options should be discussed during the planning of your trust.
  6. How is trust income taxed?
    1. Either in the hands of the founder, beneficiary or trust itself depending on the circumstances of the income of the trust.Proper tax advice is essential in this regard.Depending on how things are structured there could be tax advantages or pitfalls depending on how the trust is set up.