It’s necessary to review your will and trust deed regularly

When someone has a will drafted or a trust registered, it is done given specific circumstances and at a point in time in one’s life. These circumstances do change. One could (and should) therefore review one’s will and trust deed on a regular basis, but at least once a year, to ensure that its terms are still relevant and representing one’s current circumstances. For example, one may have gotten divorced or married, one particular family member may become more reliant on financial support from the estate planner than others, children or other family members may have emigrated, which may introduce resultant tax complications for them as heirs and/or beneficiaries, etc. Laws may also have changed, which may warrant an amendment of the trust deed. The beginning of the year is a good time to review your will and trust deed.
 
Your will
Most people delay addressing their wills because it is an emotional document to prepare. However, proper estate planning includes the drafting of a will, which complements your estate plan. Your will should always be up to date and reflect your current wishes in terms of how you would like your assets to be distributed upon your death. It is critical to comply with all the requirements to draft a valid will, failing which it may be open to attack. People who believe they should inherit – but do not – will try to find a loophole to invalidate the will.
 
It is wise to draw up wills for trust beneficiaries (even as young as sixteen years) to whom the trustees make distributions without actually making payment. Without a will, the beneficiary will die intestate, resulting in the money potentially landing in the hands of unintended persons.
 
Ensure your will complement a relevant trust deed. If, for example, the trust deed allows trustees (typically the estate planner and their family) to appoint follow-up trustees, ensure that this has been done in your will.
 
Do not deal with trust assets in your will, as it no longer belongs to you. We often find that trust assets are still mentioned in wills. Similarly, resist instructions in your will to trustees of the trust directing them how to deal with trust assets. You will be treading on thin ice to have the trust disregarded by the South African Revenue Service (SARS), and as a result have the assets included in your estate for Estate Duty purposes.
 
Trust Deed
A good starting point is to review the definition of, and further terms dealing with, beneficiaries in the trust deed. Has circumstances changed that warrant a review of the beneficiaries? If you want a specific beneficiary to be favoured over others in a discretionary trust, say so in the trust deed, otherwise beneficiaries may put pressure on trustees to treat them equally. The trust deed in the instance of a discretionary trust should also clearly state that beneficiaries ought not to be treated equally, if that is what the estate planner wishes for. It is perfectly acceptable for a trust deed to provide that a beneficiary shall not receive a benefit until the happening of some event, such as reaching a certain age (Estate Dempers v SIR case of 1977). A trust deed can also provide that a beneficiary will only receive a benefit from a trust for a limited period. The beneficiary may then have an unconditional vested right for that limited period only, and such right will during that time form part of their insolvent estate or their assets during a divorce. You cannot vest income and/or capital in a beneficiary in a trust deed, but cease the vested right in the event of the insolvency or divorce of that beneficiary. A trust deed cannot restrict a beneficiary, for example, by prohibiting a beneficiary from marrying. A beneficiary can cede both a vested and discretionary right to another person or entity. One may very well want to prohibit such a cession expressly in terms of the trust deed.
 
Be mindful how you define ‘income’ in the trust deed, as it may include all “fruits” from assets, such as the occupation of a property, or it can narrowly only refer to actual revenue received such as rental income. The term ‘net income’ should also be clearly defined – gross income less expenses – and the trust deed should allow trustees to distribute both income and net income. This may be advantageous from a tax perspective when the conduit principle is used to distribute net income to beneficiaries, who will pay the income tax on the net income, and not on the (gross) income.
 
Income should also be clearly distinguished from capital in the trust deed, especially if different people are income and capital beneficiaries. Capital beneficiaries can benefit from the distribution of an actual trust asset or from a gain made on the disposal of trust assets. The treatment of unallocated income should also be defined to reflect the founder’s intention – whether it will form part of trust capital at the end of a financial year, if unallocated, or whether it will keep its nature as income. If the trust deed is silent, it may be assumed that income and capital will always retain its nature.
 
If the trust deed is dated before October 2001 (when Capital Gains Tax was introduced) you should have it amended, as the trust deed has to recognise this concept throughout it and it will be required to enable trustees to distribute a capital gain to beneficiaries using the conduit principle.
 
Conclusion
Read your will and trust deed to ensure it reflects your current circumstances with the assistance of a professional, specialising in this field. This is certainly not something you want to have done “for free”. Otherwise you may very well fall within the category of people the judge referred to in the Raubenheiner v Raubenheimer case of 2012 - “It is a never-ending source of amazement that so many people rely on untrained advisors when preparing their wills, one of the most important documents they are ever likely to sign.”