There are many benefits to setting up an Inter Vivos (Family) Trust to safeguard your family’s future. Many individuals elect to establish an inter Vivos Trust for the distribution of their assets instead of bequeathing it in the will (also known as a testamentary trust). Several ways that the establishment of the Trust may assist the family (and future beneficiaries) are, namely that:
- It may save on the costs of estate duty and or transfer costs that would have been incurred had the assets been bequeathed in the testamentary Trust; and
- It will protect the assets and preserve them for beneficiaries.
When setting up an inter Vivos Trust, you need to determine whether it will be discretionary or a vesting trust. A discretionary trust affords contingent rights to beneficiaries in that the trustees have a discretion as to how the assets and or income of the trust is distributed to the beneficiaries. On the other hand, the income and assets of a vesting trust are vested in the beneficiaries.
Benefits of an Inter Vivos Trust
There are many benefits to setting up an inter Vivos Trust, a few of which are listed below:
- Estate Planning / Succession Planning: Apart from the benefit of saving costs as mentioned above, the Trust allows for easy administration of assets owned by the Trust rather than passing from one relative to the next upon death. The Trust will also allow for a minimum impact on the family of a deceased, as their affairs (and or the assets and income flowing into the Trust) will be controlled. Continuity is also ensured as opposed to it being held in abeyance while the deceased’s personal estate is under the administration process.
- Tax Planning: Although the inter Vivos Trust is subject to income and capital gains tax, it can be administered in such a manner to mitigate these costs for all parties to the Trust. There are also several benefits to save on taxes by appropriated distributing the income and capital gains. You should seek advice from the relevant experts to ensure you are maximising the Trust’s benefits.
- Asset Protection: As mentioned above, the Trust may be set up to protect and preserve the assets whilst ensuring that the creditors are not prejudiced. You may wish to ensure that your assets are protected for the beneficiaries for various unforeseen events such as divorce and relationship disputes, business ventures turned sour and or to ensure that the assets are preserved for generations to come.
Setting up a trust is an intricate exercise that requires seeking the appropriate advice and ensuring the trust deed covers the necessary bases and is tailor-made for your specific wishes. At SchoemanLaw, our Trust experts will be able to guide you through the process and provide you with the necessary tools to set up a trust. For any Trust-related questions, contact our experts at SchoemanLaw.