Page 23 - Nexia SAB&T Estate Planning Guide 2024

Types of Trusts
1. Inter Vivos (Living) Trust: This is a trust created during the founder’s lifetime.
Established by a trust deed which sets out who the founder, trustees and
beneficiaries are, defines powers and duties of trustees and how and when
the trust is to be wound up. The founder may also be co-beneficiary and /
or trustee. The founder usually donates assets to the Trust. There are various
kinds of inter vivos trusts that can be set up, depending on their purpose, for
example, charity trusts (formed with an impersonal object), empowerment or
employee trusts and business trusts.
2. Testamentary Trust: This is a trust created in a Last Will and Testament and
comes into effect only on the death of the testator. Since the testator is also
the founder, he cannot also be co-beneficiary and /or trustee. If the Will is
invalid for any reason, the trust will not come into effect.
3. Family (private) trusts: (can be testamentary or inter vivos). The main object
is the protection and maintenance of trust property, for the benefit of minor
children, or family relations of the founder.
4. Special trusts: Section 1 of the Income Tax Act (no.58 of 1962), defines two
types of special trust:
Special Trust Type A – a trust created solely for the benefit of a person(s) with a
“disability”, as defined in section 6B(1) of the Income Tax Act*, where the disability
makes it impossible for the person(s) from earning enough money for their care or
from managing their own financial affairs: Provided that –
n Such trust shall be deemed not to be a special trust in respect of years
of assessment ending on or after the date on which all such persons are
deceased; and
n Where such trust is created for the benefit of more than one person, all
persons for whose benefit the trust is created must be relatives in relation to
each other.
*A “disability”, as defined in section 6B(1) of the Income Tax Act means – a
moderate to severe limitation of a person’s ability to function or perform daily
activities as a result of a physical, sensory, communication, intellectual or mental
impairment. The disability must be diagnosed by a duly registered medical
practitioner, and that disability must have lasted or has a prognosis of lasting
more than one year.

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