Definition, Purpose, Creation and Examples of Inter Vivos Trusts

An inter vivos trust, also known as a living trust, is a crucial instrument in estate planning, offering individuals the ability to manage and distribute assets during their lifetime. For those considering this financial tool, understanding its meaning, purpose, and practical applications is essential. 

The term “inter vivos” is Latin for “between the living.” In legal and financial contexts, an inter vivos trust refers to a trust established by a person (the founder) during their lifetime. The trust is managed by trustees for the benefit of one or more beneficiaries, with the terms and conditions outlined in a legal document known as the trust deed.

Unlike testamentary trusts, which come into effect upon the death of the founder, inter vivos trusts are operational while the founder is still alive, providing flexibility and control over asset management.

What is the Primary Purpose of an Inter Vivos Trust?

The primary purpose of an inter vivos trust is to provide a structured and secure way to manage and distribute assets. Key objectives include:

  1. Asset Protection: Safeguarding assets from creditors, legal claims, or financial mismanagement.
  2. Estate Duty Mitigation: Reducing the estate duty payable upon the founder’s death by transferring assets into the trust.
  3. Continuity of Wealth Management: Ensuring seamless management and distribution of assets in case of incapacitation or other unforeseen events.
  4. Support for Beneficiaries: Providing financial support for dependents or other beneficiaries in a controlled and sustainable manner.

What is an Example of an Inter Vivos Trust?

An example of an inter vivos trust in practice could be:

  • Family Trust: A parent sets up an inter vivos trust to hold investments and property for the benefit of their children. The trust generates income, which is distributed to the children as per the trust deed, while preserving the capital for future generations.
  • Business Succession Trust: A business owner creates an inter vivos trust to hold shares in their company. This ensures a smooth transition of ownership and management while protecting the business assets from potential disputes.

How Do I Create an Inter Vivos Trust?

Creating an inter vivos trust in South Africa involves the following steps:

  1. Drafting the Trust Deed:
    • Work with a qualified attorney to draft a trust deed that specifies the purpose of the trust, identifies the beneficiaries, and outlines the roles and responsibilities of trustees.
  2. Appointing Trustees:
    • Appoint individuals or institutions who will manage the trust’s assets in accordance with the trust deed. Trustees should be reliable, experienced, and impartial.
  3. Registering the Trust:
    • Submit the trust deed and other required documentation to the Master of the High Court. Once registered, the trust receives a Letter of Authority, enabling the trustees to act.
  4. Transferring Assets:
    • Transfer the specified assets into the trust’s name. This could include property, investments, or other valuables.
  5. Managing the Trust:
    • Trustees manage the trust’s assets and ensure compliance with legal and financial regulations while prioritizing the interests of the beneficiaries.

Inter Vivos Trusts in Real Estate

In real estate, an inter vivos trust can be used to manage property holdings effectively. For example:

  • A property owner transfers their real estate into an inter vivos trust to protect it from personal liabilities or to ensure it is managed for the benefit of their heirs.
  • Rental income generated by the property can be distributed to beneficiaries, while the property itself remains a trust asset, preserving its value for future generations.

At Burger Huyser Attorneys, we specialise in trust creation and estate planning. Our experienced team is ready to assist you in drafting and registering an inter vivos trust tailored to your needs. Contact us today to secure your assets and plan for a sustainable future.

Contact Burger Huyser Attorneys, and book a consultation.

To speak to one of our experienced attorneys in South Africa for immediate assistance, contact us on the numbers below:

Randburg call 061 516 6878; Roodepoort call 061 516 0091; Sandton call 064 555 3358 Pretoria call 064 548 4838;

Centurion call 061 516 7117; Alberton call 061 515 4699Bedfordview call 061 536 3223

DISCLAIMER: Information provided in this article does not, and is not intended to constitute legal advice. READ MORE