Who May Need a Trust?
Four issues you can resolve with a family trust, but not in your Will.
- Minors-If a minor is an heir to an estate where there is no will, or if there is a will but no trust clause, the inheritance must be paid into the Guardians' Fund of the Master of the High Court.
- Persons that cannot take care of their own affairs-If persons are not able to take care of their own affairs due to physical or mental conditions, their assets must be placed under the protection of a curator.
- To protect assets-A trust could be structured in such a way that it does not vest in your hands and will therefore not form part of your estate. In the event of your insolvency, creditors will not be able to lay claim to these assets.
- Complex Family Structure- If you are divorced, or if you want to keep certain assets in your family, it could complicate inheritances and make your will very complex.
Wills and Trusts are both estate planning tools. However, there are distinct advantages to using a Trust over a Will. Here are five ways in which a Trust is better than a Will to pass your estate to your beneficiaries.
1. A Trust can be used to potentially save Estate Duty – a Will cannot. Estate administration is the process of changing ownership of assets to beneficiaries when someone passes away. Finalising a deceased estate, takes a protracted period. Living costs and expenses of dependants cannot be paid during this period as the estate is frozen. A Family Trust is an excellent estate administration tool because assets that are owned in the name of a Trust are immediately accessible to the Trust's beneficiaries.
2. A Trust can provide Asset Protection for the inheritance you leave to Beneficiaries – a Will cannot. Many people worry that the inheritance they leave to their children will be lost to their children's creditors such as a divorcing spouse, unpaid credit card bills, a bankruptcy, a business loss, or a lawsuit. Sadly, this is often the case when assets are distributed to beneficiaries via a Will. A Trust allows the founder to safeguard an inheritance from the reach of the beneficiaries' creditors by keeping the assets out of the name of the beneficiary.
Ownership of the assets remains in the Trust. The beneficiary will have access to the assets per the directions in the Trust Deed. By leaving assets to your heirs via a Trust rather than outright via your Will, you can ensure that the assets you worked so hard for will be available to your children and future generations.
3. Leaving assets to a person with disabilities in a Trust is the best way to ensure the preservation of capital and benefits to pay for expenses and necessary living costs
4. A Trust can Administer Assets for Minor Beneficiaries without Court Intervention – a Will cannot. Leaving money directly to a minor creates an administrative nightmare because the law provides that a minor does not have the legal capacity to receive assets. These funds must be paid to the Guardians Fund until the child reaches the age of 18. This means costs and long delays in accessing funds for your children when they need it most. It also means that when the minor turns 18, he or she will be entitled to receive all of those assets and will be free to do with them as he or she wishes.
Creating a Trust to receive assets passing to a minor, or even to a young adult beneficiary, is the best way to ensure that the court is not involved in the process, that the person you want to manage assets for the beneficiary is able to do so, and that the beneficiary can use the assets only for purposes you decide are important and/or at ages that you dictate.
If you want to know more about whether a Trust is right for your situation, contact Louwrens Koen Attorneys to discuss your goals.