Inter vivos trust vs testamentary trust

20 Dec 2022

A trust is a legal document that is set up and registered, whereby the trustees hold assets for the beneficiaries of the trust without owning such assets.

When dealing with the administration of property there are two main types of trusts namely: an inter vivos trust and a testamentary trust.

What is an inter vivos trust?

An inter vivos trust is a trust created during the lifetime of the owner of the assets. This type of trust may be utilised to protect assets intended for the beneficiaries over a long period of time. In addition, it may also assist the owner of the assets in keeping personal assets separate from commercial or business activities.

For an inter vivos trust to be properly set up, the requirements set out in the Trust Property Control Act 57 of 1988 must be complied with.

An inter vivos trust can, furthermore, assist in the administration of a deceased’s estate as the assets held in trust will simply be distributed to the beneficiaries of the trust by the trustees.

What is a testamentary trust?

A testamentary trust is set up in the last will and testament of a deceased. Ordinarily, the will would include instructions on the setting up of the trust. The trust is not created until the death of the deceased, where after the assets contained in the trust will be distributed by the trustees to the beneficiaries in accordance with the testator’s instructions.

General steps for setting up a trust

Trusts have a complicated process that needs to be followed in order to ensure that they have been validly set up. In general, the following steps may be followed when setting up a trust:

• Set out the purpose of the trust
• Elect the type of trust you intend to set up
• Name the trust
• Nominate and elect trustees and beneficiaries
• Transfer the assets
• Prepare registration documents
• Submit registration documents to the Master

It is important to note that when registering a trust, the Master’s office in whose jurisdiction the majority of the assets in the trust fall under will have to be used.

Conclusion

The requirements for setting up a trust can be tricky. Considering their aim is mainly to protect assets it is important to ensure that legal assistance is sought in order to ensure that the purpose of the trust is fulfilled.

Contact an attorney at SchoemanLaw for your contract law needs!

See also:

• Dealing with disputes between the trustees of a testamentary trust
• Types of trusts in SA and the advantages of setting one up
• Taxation of donors and beneficiaries of trusts
• Should I own my primary residence in my name, a trust, or a company?

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)