An inter vivos trust is established during a person’s lifetime to manage certain assets or investments, and support beneficiaries such as family members. The objective of this type of trust is usually to provide an income for the beneficiaries; to provide funds for housing, care, maintenance, education, general welfare, recuperation, health, entertainment or pleasure, or the advancement of the life of any beneficiary. It is also used to transfer assets to the capital beneficiaries (i.e. the beneficiaries who may receive trust assets and profit on the sale of trust assets) during both the lifetime and upon the termination of the trust.
An inter vivos trust is formed as an arrangement between the founder and the trustees. An inter vivos trust comes into being during the lifetime of the founder with the signing and registration of a trust. After the trust deed is signed by all relevant parties, the trust is registered with the Master of the High Court, in whose jurisdiction most of the assets are situated, or where the administration is to take place.
The trust deed will stipulate the initial donation that the founder has to make to bring the trust into effect. This will either be an amount of cash or certain assets. This critical step is often neglected. It is therefore important that this donation is made soon after the trust is created.
These trusts can be structured as either vested or discretionary inter vivos trusts.
Inter vivos trusts are ideal for keeping growth assets (shares, properties, and alternative investments) out of your estate and are superb mediums to limit Estate Duty and to protect assets from generation to generation.