Most people who come to see me about forming a trust want either just their children or perhaps themselves and their children as the beneficiaries. Is this a good idea? No, and here’s why you shouldn’t do it –

If a trust has no beneficiaries, then the High Court has to decide what happens to the trust assets and it sometimes awards them to the State and that means that if you, your spouse and children all die in the same accident (which, unfortunately, is not beyond the bounds of possibility), then JZ and his cronies get another windfall.

So what should you do?

The first thing to appreciate is that, provided your Trust Deed is properly drafted as a discretionary trust (and, except for certain special purpose trusts, it should be), the trustees have absolute discretion as to how they deal with the trust assets and income or, putting it another way, the beneficiaries have no claim whatsoever against the trust. In fact, they do not even have to know that they are beneficiaries.

The next thing is that you can name individuals, or an identifiable class of individuals as beneficiaries (you can also name another trust or a company). If you name individuals, then you will probably want to add to the list as time goes by and that requires that you register an amendment to the trust deed with the Master of the High Court, which can be a pain. Also, if you include named minor children, you have to provide the names and IDs of their guardians, which might also change in the future.

So, better to keep the named individuals to a minimum. We usually recommend that we name you and your spouse and the relations of each of you within the first degree of consanguinity and the descendents of any beneficiary. Your relations within the first degree of consanguinity are your parents and children (i.e. one step up or down on the family tree). The second degree would include siblings, grandparents and grandchildren (two steps in any direction). Note that since we include the descendents of any beneficiary, nieces, nephews and grandchildren are included in our definition.