Page 24 - Nexia SAB&T Estate Planning Guide 2024

Special Trust Type B – this is a testamentary trust created by a testator by or in
terms of his Last Will and Testament, which is created solely for the benefit of a
person(s) who is a relative of that testator, and such person(s) are alive on the date
of death of that deceased testator (including those conceived but not yet born), and
the youngest of the beneficiaries is younger than 18 years on the last day of the
year of assessment. A trust will cease to be a Type-B trust as from the beginning of
a year of assessment in which the youngest of its beneficiaries turns 18 years old.
Vesting vs. Discretionary Trusts
n A discretionary trust gives the trustee(s) discretionary powers as to how and
when to allocate the income or capital of the trust to the beneficiaries. The
beneficiary does not have a vested right to the income until the trustees have
exercised their discretion, and paid over the benefit to the trust beneficiary.
The trustees may also be given discretion to nominate income and /or capital
beneficiaries from a group, as long as a “class” of potential beneficiaries has
been named, as well as how and when and the ratio of any such award is
given. This is an effective structure from the point of view of estate planning
– for estate duty savings as well as protection of assets from creditors, on the
basis that the trust assets do not form part of the estate planner’s estate.
n In a vested trust, the trustees are not given any discretion in the deed, and
the beneficiaries and their benefit(s) are fixed and predetermined. Any
income earned by the trust vests in the beneficiary. The beneficiaries may
claim their portion of the trust benefits from the trustee upon the happening
of a certain event (e.g. upon reaching the age of 18). The beneficiary has
a vested right to the income and capital, which cannot be contested by
anyone else. In the event of the death of the beneficiary prior to payment, the
deceased beneficiary’s interests (i.e. his personal rights) are transmissible to
his heirs, and these must be included in his estate for estate duty purposes.
Nature of office of trustee
n The trustee acts in an official capacity, which is fiduciary in nature. The
trustee must honour the trust placed in him, and always act in the best
interests of the trust beneficiaries and the trust.
n A natural person and a corporate person may be a trustee.
n The trustee is not personally liable for the debts of the trust and trust assets
do not form part of the trustee’s estate in the event of his sequestration.

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