Page 11 - Nexia SAB&T Trust Guide 2024
P. 11

Main Differences Between Inter Vivos and Testamentary Trusts
                         Inter Vivos Trust  Testamentary Trust
        Formation        During lifetime of   After death of testator
                         founder         by Executor(s)
        Instrument       Trust deed      Last Will and Testament
        Flexibility for amendments  Flexible  Not flexible
        Assets transferred into   During lifetime  After death in terms of
        trust (trust capitalised)        Last Will and Testament
        Master of the    Letter of Authority  Letter of Authority
        High Court

       Trusts are also described according to the rights given to
       beneficiaries
       Discretionary Trust: This type of trust gives the trustee(s) discretionary powers as
       to how and when and how much to allocate of 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, but
       only have contingent rights to the income, assets or net trust capital of the trust.
       A contingent right is a right that depends on a future event or the performance of
       an action by the trustees, such as the decision to make a distribution.
       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.
       In the event of a beneficiary’s death (or insolvency) before the trustees have
       exercised their discretion, nothing can be held in that beneficiary’s estate or pass
       to his heirs or creditors.
       Vested (Vesting) Trust: Here the trustees are not given any discretion in the
       deed, and the beneficiaries and their benefit(s) are fixed and predetermined.

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