IS A TRUST BETTER THAN A WILL?

When it comes to estate planning in South Africa, many people wonder if a trust is better than a will. It is essential to seek professional advice before making a decision on which estate planning tool to use.

What is a trust?

A legal arrangement where a person (the trust founder) transfers assets to a trustee who manages them for the benefit of one or more beneficiaries. The trustee has a fiduciary duty to act in the best interests of the beneficiaries. A trust is a separate legal entity from the trust founder and can continue to exist even after the founder’s death.

Advantages of a trust

Protects assets from creditors and legal action. Trusts minimize estate duty, as assets held in a trust are not considered part of the founder’s estate for tax purposes. Trusts offer privacy and flexibility protecting the assets from family disputes and challenges.

Disadvantages of a trust

Costly to set up and administer.

What is a will?

A legal document that outlines a person’s wishes for the distribution of their assets after their death. The will appoints an executor who manages the estate and ensures that the assets are distributed according to the will’s instructions. It can be changed or revoked at any time during the testator’s lifetime. Advantages of a will Flexible and relatively simple and inexpensive to set up.

Disadvantages of a will Subject to challenges or disputes, and estate duties which reduce the amount of assets.