12 Apr THE PURPOSE OF A DISCRETIONARY LIVING TRUST
Also known as an ‘inter vivos’ trust, it is a living legal entity and our trust of choice as the core component of an estate plan. Estate planning in South Africa involves securing the futures of your loved ones with a carefully structured legacy that leaves no room for any uncertainty. Estate planning in South Africa is essential for everyone. Estate planning is complex – the earlier a person starts, the greater their chance of finishing stronger. All too often, misfortune strikes first and the opportunity to recover from the impact is lost. Adequate financial provision differs from one person to the next but its purpose is universal – to support one’s family comfortably during their lifetime, to cushion the blow of loss when the breadwinner dies and to help overcome unexpected circumstances or events in life. We can only encourage our clients to do the best they can with what they have through a discretionary living trust. It may be a less traditional solution but, in our professional opinion, it offers a safer, more secure and better protected financial future with the additional benefit of longevity.
A discretionary living trust’s primary function is:
○ Asset Protection:
- To put your assets and legacy beyond the reach of attack by unwelcome third parties.
- To protect your assets, legacy and children in the event of divorce, remarriage or the acquisition of a blended family.
- To provide for flexibility, growth potential and a wide range of potential calamities.
- To optimise significant tax breaks, such as estate duty.
○ Succession Planning:
- To secure multi-generational benefits for future heirs.
- To protect your heirs from themselves when you pass. For example, the trustees will not
approve reckless expenditure, misuse or abuse of trust property.
- To provide for and protect minors and special needs individuals.
- To determine and secure who gets what, when and how.
- To overcome the potential adversity your heirs may face when you pass and your accounts are frozen for the duration of the estate winding-up process (estimated to be 1 – 5 years).
- To provide for uninterrupted benefit flow to your heirs when you pass.
○ Disability Protection:
- To prevent the prospect of curatorship should you become mentally incapacitated in your lifetime.
- To overcome the potential problems associated with a court-appointed person having access to your personal affairs and money.
- To remove the tough decision and responsibility from your family.
- To maintain the status quo and quality of care while you recover.
- To ensure the standard of care should your health continue to decline.