TESTAMENTARY TRUSTS

A testamentary trust in South Africa is a trust that is created by the testator’s will and only comes into existence on the death of the testator, at which point the nominated trustees apply to the Master of the High Court for letters of authority under section 6 of the Trust Property Control Act 57 of 1988 before they may act. Unlike a direct bequest under a will, the trust estate is treated as a separate legal person from the deceased’s estate (Hanekom v Voigt 2016 1 SA 416 (SCA)), so the assets pass to the trust rather than vesting directly in the beneficiaries — which is the practical reason testamentary trusts are used to safeguard inheritances for minors, vulnerable adults, or beneficiaries who are not yet ready to manage capital. Testamentary trusts are a distinct category under South African tax law and trust income is taxed at the trust rate (currently 45%), with section 7 of the Income Tax Act applying anti-avoidance rules to certain transfers to the trust within three years of the testator’s death.

What a Testamentary Trust Is, and How It Differs From a Living Trust

A testamentary trust is created by the testator’s last will and only takes effect on the death of the testator — it has no legal existence during the testator’s lifetime. The trust instrument is born at the moment the will takes effect, not before, and there is no registered trust, no trust deed in operation, and no trustees acting until the Master of the High Court has formally appointed them.

This is the core distinction from an inter vivos (living) trust, which is established during the founder’s lifetime by a separate trust deed and funded by donation. An inter vivos trust can hold assets, open bank accounts, and enter contracts while the founder is still alive; a testamentary trust sits dormant in the will and only springs into existence on death. The two are also treated differently for donations tax — inter vivos trust funding is a donation that may attract donations tax in the founder’s hands, whereas funding a testamentary trust from the residue of the estate is a bequest, not a donation.

Under Hanekom v Voigt 2016 1 SA 416 (SCA), the Supreme Court of Appeal confirmed that a trust (including one created by will) is a separate legal entity whose assets do not form part of the deceased’s estate on death — the bequest vests in the trust, not in the beneficiaries directly. The practical consequence is that the inheritance sits inside the trust until the trustees distribute it under the trust’s terms, rather than being paid out to named heirs at the conclusion of the estate administration. The trustees hold the assets in the trust’s name, the trust earns its own income, and the trust files its own tax return — the inheritance has, in law, moved out of the deceased’s hands into a new legal entity.

Who Typically Uses a Testamentary Trust

Testamentary trusts are not a default feature of every will — they add Master-of-the-High-Court compliance and ongoing administration — but they are commonly the right vehicle in the situations set out below.

Profile of testator	Why a testamentary trust is usually appropriate
Parents of minor children	A minor cannot receive a capital inheritance directly; the trust holds and administers it until the child reaches the vesting age specified in the will (commonly 18 or 21, sometimes staged at 25 or 30).
Testators with vulnerable or spendthrift beneficiaries	A beneficiary who cannot manage a large capital sum (special needs, addiction, immaturity) is protected by vesting in stages, or by giving trustees discretion to apply income and capital for the beneficiary’s benefit.
Blended families and second marriages	The trust can preserve capital for children of a first marriage while allowing the surviving spouse a usufruct or right of occupation over the family home.
Business owners	Shares in a family business can be left to a testamentary trust so that minority shareholdings pass to heirs without triggering control fragmentation, with the trustees exercising voting rights on behalf of the beneficiaries.
Testators wanting creditor protection	Assets in a properly constituted trust are generally less exposed to the personal creditors of the beneficiaries than direct bequests, because the assets are owned by the trust, not by the beneficiary.

Burger Huyser Attorneys’ Wills & Estates practice drafts testamentary trusts for clients across each of these profiles — usually taking instructions alongside the firm’s Family Law practice where the will interacts with a marriage contract, an accrual claim, or a maintenance obligation.

How a Testamentary Trust Is Created (the Will Drafting Layer)

The trust is constituted by a clause in the testator’s will. The will names the founder, the initial trustees, the beneficiaries, and the trust’s terms — often by reference to a separate draft trust deed annexed to or incorporated into the will. The clause is the operative legal instrument; the trust does not exist until the will takes effect, but the clause must be fully drafted while the testator is alive so that the trust can be constituted the moment the Master issues letters of executorship.

The will should specify whether the trust is vested or discretionary:

• Vested trust — fixes each beneficiary’s share in the trust assets, leaving trustees less room to vary distributions.
• Discretionary trust — gives trustees wider powers to decide the timing and quantum of distributions, which is usually preferable where beneficiaries are minors, vulnerable, or spread across generations.

The testator appoints trustees in the will and usually includes a substitution clause naming alternate trustees if the first choice is unable or unwilling to act. Trustees are typically given powers to invest, to apply income and capital for beneficiaries’ maintenance, education, and welfare, and (in a discretionary trust) to decide the timing and quantum of distributions.

Burger Huyser drafts the will and the trust clause together — drafting the trust in isolation, without amending the will to refer to it, is a common drafting failure that produces a trust that the Master will not recognise.

The Master’s Office and the Letters of Authority

The nominated trustees cannot act until the Master of the High Court in the province where the deceased was ordinarily resident at death has appointed them and issued letters of authority under section 6 of the Trust Property Control Act 57 of 1988. Until those letters issue, the trust has no legal personality — the nominated trustees have no authority to open bank accounts, to invest, or to distribute.

1. The trustees lodge a copy of the will, the liquidation and distribution account, and an application supported by the prescribed forms in the regulations to the Act (Forms J, J1, J2), together with security where required.
2. The Master vets the proposed trustees against the disqualifications in section 6(3) of the Act — insolvency, certain criminal convictions, or prior removal from a trust.
3. The Master may require security from trustees other than the parent or natural guardian of a minor beneficiary.
4. The Master issues letters of authority, which authorise the trustees to act in respect of the trust property.
5. After appointment, the trustees must lodge the trust instrument with the Master and comply with the ongoing reporting duties under the Trust Property Control Act and the Financial Intelligence Centre Act obligations where the trust carries on a business or holds significant assets.

The relevant Master is the Master of the province where the deceased was ordinarily resident at the date of death — so a Gauteng-resident testator has the Master’s office in Gauteng (Pretoria or Johannesburg, depending on the division) appointing the trustees and issuing the letters of authority, regardless of where the will was originally drafted.

Funding the Trust: What Passes In

The assets that fund the testamentary trust are specified in the will — typically a specific bequest, a residuary bequest, or a defined share of the residue of the estate. Common funding sources are a fixed cash sum, a defined asset (the family home, a share portfolio, a business interest), or a share of the residue after specific legacies have been paid out.

The estate must first be administered by the executor before any asset can move into the trust — the trust is funded only after the liquidation and distribution account has lain open for inspection and the Master has issued the estate’s letters of executorship. Funding the trust can interact with estate duty: assets passing to a testamentary trust are generally included in the estate for estate duty purposes under section 3 of the Estate Duty Act 45 of 1955, with the deduction available for bequests to a public benefit organisation only available where the trust qualifies.

Tax Consequences

Testamentary trusts are a distinct taxpayer under South African tax law, and the costs and compliance steps are worth understanding before the will is signed.

Tax head	How it applies to a testamentary trust
Income tax	Trust income is taxed at the trust rate, currently 45%, with no primary rebate and limited exemptions.
Capital gains tax (CGT)	The trust is treated as a separate person and pays CGT on its own disposals; on death, assets that vest in a testamentary trust are generally treated as acquired by the trust at the deceased’s date-of-death value, with no CGT event for the deceased.
Section 7 anti-avoidance	Section 7 of the Income Tax Act deems certain donations, trusts, and loans to be income in the hands of a donor or connected person. For testamentary trusts, it can apply where an asset is donated to a trust within three years of death and then used to fund a bequest, or where the testator retained a right in respect of trust income or capital exercised within seven years of death.
Donations tax and estate duty interaction	There is no donations tax on bequests under a will (donations tax applies only to inter vivos donations); however, assets that flow into a testamentary trust remain in the deceased’s estate for estate duty purposes, with a deduction available for property that accrues to a surviving spouse under section 4(q) of the Estate Duty Act.
SARS registration and filing	Trustees must register the trust with SARS, file annual income tax returns (ITR12T for trusts), and appoint a public officer.

When a Testamentary Trust Is Not the Right Vehicle

A testamentary trust is not always the right fit. The following situations generally point away from a trust and toward a simpler direct bequest:

• A small, easily-administered estate with adult beneficiaries who are capable of receiving capital directly — the trust adds Master-of-the-High-Court compliance costs and ongoing administration.
• A beneficiary who needs to receive capital immediately (for example, to settle a debt) — the trust’s distribution mechanics may delay payment.
• Where the testator wants the inheritance to vest absolutely in the beneficiary — that is a direct bequest, not a trust.
• Where the testator has not kept the will up to date — a testamentary trust can become dysfunctional if the nominated trustees predecease the testator and the substitution clause is outdated.

Drafting and Administration: Where Burger Huyser Fits

Burger Huyser Attorneys’ Wills & Estates practice drafts the will and the testamentary-trust clause together, including the trust’s terms (vested or discretionary), the beneficiary class, the trustee powers, the vesting age, and the trustee appointment and substitution clauses. The firm administers deceased estates — including preparing the liquidation and distribution account that triggers funding of the trust — and can act as the nominated trustee or co-trustee through its trust administration service line. Ongoing trust administration — annual SARS returns, beneficiary reporting, asset management in accordance with the trust instrument — falls under the firm’s existing trusts work.

Where the testator is still alive and the will is being drafted, the firm’s Wills & Estates attorneys will usually take instructions jointly with the firm’s Family Law practice where the will interacts with a marriage contract, accrual claim, or maintenance obligation. Director Anna-Mi Nel heads the firm’s Family Law Department and oversees the deceased-estates work that connects directly into trust administration.

If you are drafting a will and wondering whether a testamentary trust is the right vehicle, or if you are an executor winding up an estate that includes one, Burger Huyser Attorneys’ Wills & Estates team can help. The firm drafts wills and testamentary trusts, administers deceased estates, and can act as nominated trustee or co-trustee through its trust administration service. To set up an initial consultation, contact the head office at 49 First Avenue, Linden, Randburg (tel 011 888 0246, after-hours 061 516 6878) or your nearest branch across Gauteng — Sandton, Pretoria (Menlyn), Centurion, Bedfordview, Alberton, Roodepoort, or Midrand. The firm carries a 4.8/5 average across 250+ Google reviews (Trustindex verified “Top Rated Law Firm in South Africa”) and has a deep bench across the practice areas a testamentary trust typically interacts with — Family Law (where the will interfaces with marriage contracts and accrual claims) and General Litigation (where trust disputes are defended).

Frequently Asked Questions

What is a testamentary trust and how is it different from a will?

A testamentary trust is a trust that is created by the testator’s last will and only comes into existence on the death of the testator, whereas a direct bequest under a will transfers an inheritance straight to the named heir. Under Hanekom v Voigt 2016 1 SA 416 (SCA), the trust is treated as a separate legal person from the deceased’s estate, so the inheritance vests in the trust — not in the beneficiaries directly — and the trustees then administer it for the beneficiaries under the trust’s terms.

Who should consider setting up a testamentary trust?

Testators with minor children, vulnerable or spendthrift beneficiaries, blended families wanting to protect a first-marriage inheritance, business owners leaving shares to heirs, and anyone wanting a degree of creditor protection for the inheritance. A small estate with adult beneficiaries who can manage capital directly usually does not need one — the trust adds Master-of-the-High-Court compliance and ongoing administration that may not be justified.

Does Burger Huyser draft testamentary trusts?

Yes — Burger Huyser Attorneys’ Wills & Estates practice drafts the will and the testamentary-trust clause together, including the trustee-appointment and substitution clauses, the beneficiary class, and the trust’s distribution terms (vested or discretionary). The firm administers the deceased estate that funds the trust and can act as nominated trustee or co-trustee through its trust administration service.

What is the tax rate on a testamentary trust in South Africa?

Testamentary trusts are taxed as separate persons under the Income Tax Act and trust income is taxed at the trust rate, currently 45%, with no primary rebate available. Capital gains on disposals by the trust are subject to CGT in the trust’s hands. Section 7 of the Income Tax Act can pull certain income back into the deceased’s or donor’s hands where the anti-avoidance rules apply — including where assets are donated to a trust within three years of death that are then used to fund a bequest.

How long does it take to set up a testamentary trust after the testator dies?

The trust only comes into existence on death and the trustees must wait until the estate has been administered by the executor before the trust can be funded. Estate administration typically takes six to twelve months (longer for complex estates), and the Master of the High Court then appoints the trustees and issues letters of authority under section 6 of the Trust Property Control Act 57 of 1988 before the trustees can act — so the trust is usually operational within twelve to eighteen months of the testator’s death, with the precise timing driven by the Master’s vetting of the nominated trustees and the lodging of the prescribed forms.

Can a testamentary trust be challenged by an excluded heir?

A testamentary trust created by will can be challenged like any other provision of a will — most commonly on the grounds that the testator lacked testamentary capacity, was unduly influenced, or that the will was not properly executed. In addition, the dependants of the testator may bring a claim for maintenance under section 2(1) of the Maintenance of Surviving Spouses Act 27 of 1990 (surviving spouse) or section 1(1) of the Intestate Succession Act 81 of 1987 (children of the deceased), which can override the trust’s terms where the testator has not made “reasonable provision” for those dependants.