An inter vivos trust is most useful where there is a clear long-term purpose that justifies separating assets from personal ownership and accepting the governance and tax obligations that follow. Common examples include preserving family or business assets across generations, providing for minor or vulnerable beneficiaries, managing assets jointly for a family, or limiting exposure of properly transferred trust property to personal risks of family members.
It can also assist with continuity. Because trust property is administered by the trustees rather than by the founder personally, the trust can continue after the founder’s death or incapacity, provided the trustee composition and trust deed allow the remaining or replacement trustees to act validly. This can avoid having the trust’s own assets caught up in the administration of the founder’s deceased estate.
An inter vivos trust is not automatically worthwhile for every estate. If the objectives can be achieved more simply through a properly drafted will, beneficiary nominations, insurance, a testamentary trust or direct ownership, the additional cost and administration of an inter vivos trust may not be justified. A trust should be used for a defined planning purpose, not simply because it is perceived as a tax-saving vehicle.
See also: Is a family trust a must? | What are the disadvantages of a trust in South Africa? | What are the benefits of an inter vivos trust in South Africa?
Disclaimer: The information provided here is intended as general guidance only and does not constitute legal, tax, or financial advice. Every situation is unique, and legislation is subject to change. We invite you to reach out to our team at Wealth and Legacy Group for guidance tailored to your specific circumstances.