A testamentary trust is a trust that is established in terms of a will of the founder after his or her death. A typical example of a testamentary trust is where one makes provision for underaged children.
Thus, the testament determines that underaged children are not allowed to receive the money themselves, but that the inheritance is left to a trust. This is also a way of protecting the children from themselves. The relevant worry usually accompanying this train of thought is that underaged children will not be able to use the inheritance responsibly.
If there is a trust the trustees can see to it that the funds are used responsibly, to the benefit of the children. The trust’s funds can go towards maintenance, education, training etc. until they are old enough to responsibly manage it themselves.
Where are the children old enough?
Although a person reaches adult status at the age of 18, most people feel that a person of 18-years old is not yet responsible enough and do not yet have the necessary skills to responsibly manage the funds out of a trust. The most testamentary trusts consider 25 years to be a meaningful age, some people even consider it as only 30 years. This age differs from will to will.
Who should I name as trustees?
The trustees are persons who will play a very important role in the lives of the underaged children. These persons usually have a very wide discretion about how the trust funds are to be used for the children. Many people prefer family members and others will rather choose an independent person, such as a financial advisor or a lawyer. There can also be different trustees who have different expertise. It would be advisable to choose both a person close to the children who will know their needs and an independent person who is not emotionally involved. In this way the trustees’ decision will always be balanced.
Another example of a testamentary trust is where an heir provides for a mentally handicapped or drug-addicted heir in a trust.
The deed of trust that will later be used to administer the trust is already inserted in the will and typically forms part of the will. No additional funds are requested for the registration of a testamentary trust with the Master of the Court. It is considered as part of the estate administration process.
The cost of drafting the will is usually not much. A well-drafted will can solve many future problems.
By Sanette Viljoen
https://regsdienste.solidariteit.co.za/en/how-do-i-create-a-testamentary-trust-for-my-children/
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)