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Trusts and Estate Planning

Who should be the beneficiaries of your family trust?

Lot’s of clients say that the trust is for their children as beneficiaries, but that is fundamentally unsound.

There’s no question in my mind that the beneficiaries must include the client and their spouse as well as their children. The reason is that you simply do not know what the future holds, so be ready to deal with the unexpected. You might be quadraplegic this time next year! You can’t possibly predict that, but it happens to some, maybe you.

OK so now we’ve got the immediate family on board – mum, dad and the kids. Is that enough? A most definite “No”. Why? Because mum, dad and the kids tend to travel together and people travelling together sometimes, regrettably, die together. No, of course we don’t want to contemplate such a tragedy, but let’s not be silly either. The problem is that the assets of a trust which has no beneficiaries are foreit to the State and JZ has had his fair share already. So before we put more food in the trough, let’s appoint at least two more beneficiaries. Probably siblings of mum and dad or some other fairly close family members.

Don’t worry, the beneficiaries of a trust have no claim whatsoever, against the trust so you’re not watering down the goodies, just keeping them away from JZ. This is exactly the same as saying that the trustees have absolute discretion in how they deal with and distribute the trust assets and income.

The only influence that the beneficiaries can exert is if they feel that the trustees are not fulfilling their fiduciary obligations towards the trust (in other words that they are acting for the benefit of someone other than a beneficiary). They can take the matter to the courts. But they cannot claim any trust assets or income.

Should you wish to make an appointment, please feel free to visit Derek’s diary and book a time that suits you.

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