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Make sure you have a Testamentary Trust clause in your Will

by , 15 July 2013

It can be difficult contemplating your untimely passing, but it's crucial you make provisions for the event, just in case. You don't want the government taking control of the funds until your dependants reach 21, and with that, taking its cut of taxes. Here's why you should have a Testamentary Trust clause in your Will…

If you have young children and you run your affairs in your name, it’s imperative you have a Will. And in that Will you need to have a clause to form a Testamentary Trust for the benefit of your children, explains Gavin Fourie in The Trust Report

Without a Testamentary Trust, if you died, your entire estate would go to the Guardian’s Fund to be administered for your children until the age of 21

The Guardian’s Fund is a fund set up by government to look after and administer estates for minors.

Why you want to avoid the Guardian’s Fund

The problem with the Guardian’s Fund is:
  • There’s reduced accessibility to the funds. It’s very difficult to get money out of the Guardian’s Fund and, from a practical point of view, the administrator of your estate would have to approach the courts personally to request anything out of the ordinary or to sort out any problems.
  • You receive an interest rate on the investments that’s generally far less than you could get in the open market. This can be detrimental to your beneficiaries.
  • When the capital is ultimately paid out, it’s paid out to the beneficiaries in their personal names. This means the assets now form part of their own estate and would attract estate duty, Capital Gains Tax and executor’s fees upon their deaths...

It’s these problems that make it imperative that you set up a Testamentary Trust!

A Testamentary Trust is formed on your death

A Testamentary Trust is established in accordance with the terms of your Will when you die.

A Testamentary Trust:
  • Looks after the assets you accumulated during your lifetime on your death and is limited to specific beneficiaries.
  • Looks after your assets for the benefit of minor children in the event of the simultaneous death of both parents or in the event of a single parent’s death.
  • Looks after your assets for the benefit of elderly parents or siblings.

So make sure you include a Testamentary Trust clause in your Will so your children are looked after and the government doesn’t get a slice of your assets.




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