8 things every testator should know about testamentary trusts

A TESTAMENTARY trust, sometimes referred to as a mortis causa or will trust, is one of the most effective and widely used estate planning tools in South Africa.

- ALEX ODENDAAL

Created through a stipulation in the testator’s will and activated upon their death, a testamentary trust provides a structured and legally recognised way to protect assets for beneficiaries. Here, we take a practical look at how testamentary trusts work and what every testator should know before including one in their estate plan.

Why set up a testamentary trust?

The most common purpose is to protect assets intended for minor children who cannot legally inherit until the age of 18. However, the uses go far beyond this. For example, parents of a special-needs child can set up a Type A special trust to provide for their child in a tax-efficient way. Further, where a testator fears that beneficiaries may squander their inheritance, assets can be housed in the trust and managed responsibly by appointed trustees. Testamentary trusts can also be useful where an indivisible asset, such as a holiday home or farm, needs to be shared among multiple heirs.

How is a testamentary trust created?

Unlike a living trust (inter vivos trust), which is established during one’s lifetime through a trust deed, a testamentary trust is created through the testator’s Will. In this case, the Will becomes the trust instrument and the testator is recognised as the founder or settlor.