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Trusts and Estate Planning

I get to read lots of trust deeds, occasionally one will be well written, but most are just the usual copy and paste stuff by someone who doesn’t apply his or her mind to the job. Here’s what you should be out looking for –

1) If the founder is your parent and not you, ask the person who drafted the deed why that is. If they tell you it is in case the trustees want to award you, as a beneficiary, a fixed property and because there is some doubt as to whether you are a relation of yourself within the third degree of consanguinity, then you are talking to someone who knows what he is talking about. If he doesn’t give you that answer, then he’s a copy and paste artist. And anyway, why on earth would the trustees ever want to take a property out of the trust when you went to all this trouble to get it in there?

2) If the beneficiaries are just you, your spouse and your kids, ask him/her what happens if you all die together. The answer is that the trust then has no beneficiaries and its assets are forfeit to the State or whatever other distribution the courts decide upon. Rather ensure that you have a wide class of beneficiaries including your wider family. You can safely do that as beneficiaries have no rights whatsoever.

3) If the founding donation is R100 or any other amount of money, the trust is obliged to deposit it in a bank account of its own. That R100 will be gone in two months of bank charges and you’ll never need the bank account again, so you’ll spend forever paying bank charges out of your own pocket just because the initial donation was cash and not something worth R100, like postage stamps.

4) In the clause about a trustee ceasing to be a trustee, make sure that the other trustees cannot vote you, or your successor(s) in terms of your will, out of office.

5) Make sure that you are entitled to appoint a replacement trustee or trustees by way of your will.

6) If there is a Testamentary Disposition clause which entitles you to determine the final distribution of assets when the trust is wound up, it is a waste of ink and could be argued to render this a non-discretionary trust, then down comes your firewall. The reason that it is a waste of ink is that the trustees could first distribute all but R1 of the trust assets and then close down the trust. Your disposition would then dictate how they split the R1. Big deal!

7) If there’s a clause that says trust assets may be awarded to a beneficiary, but the trustees may retain control of them, then under those circumstances, your drafter will have inadvertently turned the trust into a bewind trust, which could cause all sorts of unnecessary complications.

Oh, and don’t forget to write a new Will, usually (but not necessarily) leaving everything to your spouse (your spouse’s will leaving everything to you) and, if you die within three days of each other or as the result of the same event, you leave everything to the trust.


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