According to SARS, a vested trust (also known as a bewind trust) is a type of trust where the founder transfers ownership of assets to the beneficiaries of the trust, while the trustees are responsible for administering and controlling those assets. In this type of trust, the beneficiaries are considered the owners of the trust assets.
The trustees are only responsible for managing the assets for the benefit of the beneficiaries, and have no discretion as outlined in the trust instrument. The beneficiaries and their entitlements are predetermined and fixed. To ensure clarity, it is important to clearly define the income and capital beneficiaries in the trust instrument.
Any income and capital gains generated by the trust belong to the beneficiaries, who have the right to claim their portion of the trust benefits at a specific event, such as reaching the age of eighteen. Both the income and capital gains earned by the trust are taxable in the hands of the income and capital beneficiaries.
If a beneficiary dies before receiving their benefits, their personal rights and interests are passed down to their heirs and must be included in their estate for Estate Duty purposes.
