Types of Trusts in South Africa: A Comprehensive Guide

South African law recognises two overarching trust types — inter vivos trusts (created by the founder during their lifetime, via a trust deed) and testamentary trusts (created by the founder’s will and taking effect on death) — both governed by the Trust Property Control Act 57 of 1988. Within those categories, the Income Tax Act 58 of 1962 creates two further tax-only sub-classifications, Special Trusts Type A (for beneficiaries with a permanent mental or physical disability) and Special Trusts Type B (for certain deceased estates), which are taxed on a more favourable basis than standard trusts. Trustees must be authorised by the Master of the High Court before they can act, the trust property is held in the name of the trust (not the trustees personally), and the trust itself registers as a separate taxpayer with SARS.

The Legal Framework: What a Trust Actually Is in South African Law

A trust is a separate legal entity — an arrangement, not a company — in which the founder (also called the settlor or donor) transfers ownership of assets to trustees, who hold and manage them for the benefit of defined beneficiaries. The relationship between founder, trustees, and beneficiaries is governed by a trust deed (for an inter vivos trust) or by a clause in the founder’s will (for a testamentary trust), together with the Trust Property Control Act 57 of 1988.

One procedural step unique to South Africa is that trustees cannot lawfully act until the Master of the High Court has issued written letters of authority authorising them. This is the registration that brings a trust into practical existence; the trust deed itself is signed privately between the founder and the trustees, but no trustee may deal with trust property, sign contracts on behalf of the trust, or open a trust bank account until the Master’s letters have been issued.

Unlike a company, a trust does not have separate legal personality in the strict sense. It cannot be sued in its own name; the trustees act as the office-bearers of the arrangement, which has consequences for litigation, contracting, and the attribution of liability. The common-law concept of a trust, overlaid by the Trust Property Control Act and the Income Tax Act, is the framework within which all the sub-types discussed below sit.

The Two Overarching Categories: Inter Vivos vs Testamentary

Every South African trust falls into one of two founding categories, distinguished by whether it comes into effect during the founder’s lifetime or on death.

Feature	Inter Vivos Trust	Testamentary Trust
When created	During the founder’s lifetime	On the founder’s death, by will
Founding document	Trust deed signed by founder and trustees	Clause in the founder’s will
Funding	Assets transferred into the trust at or after signing	Assets vest in the trust on death, after estate liquidation
Estate duty exposure	Assets fall outside the founder’s estate (subject to section 3(3)(a) of the Estate Duty Act 45 of 1955 and the donatio mortis causa rules)	Deemed to form part of the deceased estate for estate duty purposes
Typical use	Ongoing family asset protection, business succession, intergenerational planning	Protecting minors, surviving spouse, or vulnerable heirs after death
Registration	Master of the High Court, in terms of section 6 of the Trust Property Control Act 57 of 1988	Master of the High Court, in terms of section 6 of the Trust Property Control Act 57 of 1988

Discretionary vs Vesting: How Beneficiaries Are Defined

Trust deeds are further classified by how the beneficiaries’ interests are defined, and this distinction drives much of the planning and tax analysis.

A vesting trust (sometimes called a vested-interest trust) fixes the beneficiary’s interest from the outset. The beneficiary has a defined, indefeasible right to a share of the trust property, and the trustees have no real discretion over whether they benefit — only over how and when the benefit is delivered.

A discretionary trust gives the trustees a discretion to decide both whether and how much each beneficiary receives. Beneficiaries hold a mere spes (hope), not a vested right, which keeps the trust property out of the hands of any individual beneficiary’s creditors. This is the asset-protection feature that makes the discretionary trust the structure of choice for most South African family estate plans.

Hybrid structures exist — often described as a “vested discretionary” or “protective” trust — where vesting is delayed or subject to a condition. Drafting matters here because the SARS and creditor-protection consequences differ materially between a purely vested and a purely discretionary structure. Burge Huyser Attorneys’ Wills & Estates practice routinely advises on which balance fits a particular family and asset profile.

Special Trusts Under the Income Tax Act

The Income Tax Act 58 of 1962 creates two “special trust” classifications, which are taxed differently from ordinary trusts. The distinction is critical for estate-planning decisions because the difference in tax treatment is large.

Type	Qualifying beneficiaries	Tax treatment
Special Trust Type A	A beneficiary who has a permanent mental or physical disability that prevents them from earning an income, or a beneficiary who is in the care of a person or institution and relies on the trust for maintenance	Taxed on the same sliding scale as a natural person, in terms of paragraph 6 of the Seventh Schedule to the Income Tax Act 58 of 1962 — the favourable rate band applies
Special Trust Type B	Created solely for the benefit of a deceased estate’s minor beneficiaries, where both parents are dead and the trust is wound up once all beneficiaries turn 18	Taxed on the same sliding scale as a natural person for 12 months after the parent’s death; reverts to the flat trust rate thereafter

A trust that does not qualify as either Special Trust Type A or Special Trust Type B is treated as a “standard” trust and is taxed at the flat trust rate of 45% on its net income. This single number — 45% — is what makes trusts useful for protecting assets rather than for reducing the headline tax rate, and it is the figure that drives most estate-planning conversations about whether a trust is the right vehicle at all.

Other Trust Types Worth Naming

Beyond the categories above, the trust landscape in South Africa includes several structures that are described more by their dominant feature than by statute. The following are the ones most often encountered in practice.

• Bare trust / bewind trust — a minimal trust where the trustee holds title but has no discretion; the beneficiary has a direct right to the property on demand. The trust offers little asset protection and SARS treats it, for some purposes, as effectively not a trust.
• Family trust — a colloquial term, not a legal category, typically describing an inter vivos discretionary trust set up for the founder’s family.
• Business trust — established to hold shares in an operating company, with the trust as the controlling shareholder. Common in succession planning for owner-managed businesses, and usually combined with a shareholders’ agreement.
• Trading trust — a trust that itself carries on a trade. This triggers special anti-avoidance rules: section 7 of the Income Tax Act 58 of 1962 can attribute the trust’s income back to the founders or beneficiaries, and SARS scrutinises these structures carefully.
• Charitable trust — a trust set up exclusively for a charitable purpose (poverty relief, education, religion, etc.). Non-profit and exempt from income tax under section 10(1)(cN) of the Income Tax Act if registered as a public benefit organisation (PBO), but the founder cannot reserve any benefit for themselves or their family.
• Revocable vs irrevocable — an inter vivos trust can be drafted as revocable (the founder can unwind it and reclaim the assets) or irrevocable (once assets are in, the founder cannot reclaim them). Revocable trusts offer weaker asset protection because the founder retains effective control.

Choosing the Right Type: Common Scenarios

The trust-type decision is usually driven by a concrete scenario rather than by abstract taxonomy. The table below maps the most common planning situations to the structure that typically fits.

Scenario	Typical trust type	Why
Asset protection for a family during the founder’s lifetime	Discretionary inter vivos family trust	Standard trust, taxed at 45% on retained income, but assets are out of the founder’s personal estate and out of the reach of individual beneficiaries’ creditors
Protecting a minor or surviving spouse on death	Testamentary trust or Special Trust Type B	Taxed at natural-person rates for the protected window, avoiding the flat 45% trust rate
Looking after a child or relative with a permanent disability	Special Trust Type A	Taxed at natural-person rates for the beneficiary’s lifetime, so the trust can accumulate income efficiently for their care
Holding a family business for succession	Inter vivos business trust as shareholder of the operating company	Often combined with a shareholders’ agreement; supports continuity across generations
Charitable giving	Registered charitable trust with PBO status	Section 10(1)(cN) income-tax exemption and section 18A tax-deductible donation receipts for donors

Tax Treatment at a Glance

The summary below brings the headline tax consequences of each category together so the planning trade-offs are visible at a glance.

Trust category	Income tax on retained income	Estate duty inclusion (founder)
Standard inter vivos trust	45% flat trust rate	Generally excluded from founder’s estate if properly structured
Testamentary trust	45% flat trust rate (Special Trust Type B for a limited window)	Deemed part of the deceased estate
Special Trust Type A	Natural-person sliding scale	Not applicable — the beneficiary’s trust, not the founder’s
Special Trust Type B	Natural-person sliding scale (12-month window)	Not applicable — created by will, post-death
Charitable trust (registered PBO)	Exempt under section 10(1)(cN) of the Income Tax Act	Not applicable

What a Trust Is Not

Trusts are surrounded by a great deal of folklore, and several common beliefs need to be set aside before deciding whether to establish one.

• Not a company. A trust has no separate legal personality; trustees act as office-bearers, which means contracts, litigation, and tax registration are handled in the trust’s name through the trustees.
• Not a way to escape tax permanently. Standard trusts pay 45% on retained income, and SARS has wide anti-avoidance rules under sections 7 and 80A–80C of the Income Tax Act 58 of 1962 that can re-attribute trust income to the founder or beneficiaries in particular structures.
• Not a magic shield against creditors. A court can set aside a fraudulent disposition under section 26 of the Insolvency Act 24 of 1936 or under the common law, and a discretionary trust only protects beneficiaries who do not yet have a vested interest.
• Not an alternative to a will. Inter vivos trusts and wills are complementary estate-planning tools, not substitutes for each other — most well-drafted estate plans use both.

Frequently Asked Questions

What are the main types of trusts in South Africa?

The two overarching categories are inter vivos trusts (created during the founder’s lifetime via a trust deed) and testamentary trusts (created by will, taking effect on death). Within those, the Income Tax Act 58 of 1962 recognises Special Trust Type A (for beneficiaries with a permanent mental or physical disability) and Special Trust Type B (for minor beneficiaries of a deceased estate), both of which attract more favourable tax treatment than standard trusts. Day-to-day, trusts are most often described by their dominant feature — family trust, business trust, trading trust, charitable trust, or bare trust.

What is the difference between an inter vivos trust and a testamentary trust?

An inter vivos trust comes into effect during the founder’s lifetime and is funded by assets the founder transfers into it; a testamentary trust is created by a clause in the founder’s will and only takes effect on death, after the estate has been liquidated. Testamentary trust assets are deemed to form part of the deceased estate for estate duty purposes, while properly structured inter vivos trust assets generally fall outside the founder’s estate.

What is a Special Trust Type A and who qualifies?

A Special Trust Type A is a trust created solely for the benefit of a beneficiary who has a permanent mental or physical disability that prevents them from earning an income, or a beneficiary in the care of a person or institution who relies on the trust for maintenance. It is taxed on the same sliding scale as a natural person under paragraph 6 of the Seventh Schedule to the Income Tax Act 58 of 1962, rather than at the flat 45% trust rate.

What is a Special Trust Type B?

A Special Trust Type B is a testamentary trust created solely for the benefit of minor beneficiaries of a deceased estate, where both parents are dead and the trust is wound up once the youngest beneficiary turns 18. It is taxed at natural-person rates for the first 12 months after the parent’s death, then reverts to the flat trust rate.

What tax does a standard South African trust pay?

A standard trust (one that is not a Special Trust Type A or Type B) pays income tax at the flat trust rate of 45% on its net taxable income. This is a key planning point: trusts are generally useful for protecting assets rather than for reducing the tax rate, and SARS has wide anti-avoidance rules that can attribute trust income back to the founder or beneficiaries in certain structures (especially trading trusts under section 7 of the Income Tax Act 58 of 1962).

Do I need to register a trust with the Master of the High Court?

Yes. Trustees of an inter vivos trust cannot lawfully act until the Master of the High Court has issued letters of authority confirming them, in terms of section 6 of the Trust Property Control Act 57 of 1988. A testamentary trust is similarly registered after the Master’s office confirms the appointment of trustees named in the will. This is a registration of the trustees’ authority, not of the trust deed itself — a common point of confusion.

Can a trust protect assets from creditors?

Only in the right structure. A discretionary inter vivos trust, where beneficiaries have no vested right but only a discretionary hope of receiving a benefit, generally keeps trust property out of the hands of any individual beneficiary’s creditors. A vesting trust or a bare trust, where the beneficiary is entitled as of right, does not offer that protection. Even a discretionary trust can be set aside by a court if it was funded with the intention of defrauding creditors, in terms of section 26 of the Insolvency Act 24 of 1936 and the common law.

Can a single trust be more than one type?

Strictly speaking, a trust falls into one of the Income Tax Act categories (standard, Special Trust Type A, or Special Trust Type B) at any given moment, but it can shift categories over time — for example, a testamentary trust can begin as Special Trust Type B and revert to standard trust status after the 12-month window or once all beneficiaries turn 18. In colloquial use, family trust and business trust can describe the same instrument if the family is using it to hold a business.

If you are weighing which type of trust fits your situation — inter vivos, testamentary, special, or business — Burger Huyser Attorneys’ Wills & Estates team drafts and registers trusts across Gauteng from the Linden head office (49 First Avenue, Linden, Randburg, 011 888 0246) and routes Centurion and Pretoria enquiries through the Centurion branch (012 644 4990). Initial consultations cover which trust type your estate plan actually calls for, the Income Tax Act consequences (including whether a Special Trust Type A or Type B classification is available), and the cost of drafting, notarial transfer, and Master’s office registration. The firm carries a 4.8/5 average across 250+ Google reviews (Trustindex verified) and has a qualified notary and conveyancer on staff to attend to property transfers into the trust at the same time. Get in touch to book a first conversation.