An inter vivos trust is a trust created to come into operation during the lifetime of a testator (“inter vivos” means “between the living” in Latin). It differs from a testamentary trust (or will trust), which only comes into force when the testator dies.
Anne Klein, senior manager at Maitland and a member of the Fiduciary Institute of South Africa (Fisa), says that inter vivos trusts are typically created by high-net-worth individuals to protect their wealth, and to create a legacy.
“The trust is formed in terms of a trust deed, in which a donation or loan is made to trustees to be kept, in trust, for the benefit of potential beneficiaries,” Klein explains. “A trust established for a family can be compared to a valuable vintage vehicle, owned by a family to be used and cherished by future generations with the potential to be upgraded into a sports car, if required. A well drafted trust deed will make provision for a family’s dynastic make-up, that is, hereditary succession from generation to generation.”
Klein says there should be a separation between the actual control of, and the enjoyment of, trust assets. Trustees act in a caretaker capacity, and hold trust assets on behalf of beneficiaries. A knowledgeable adviser should be consulted before establishing a trust.
The Fiduciary Institute of South Africa: www.fidsa.org.za
Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information