Testamentary trusts come into existence after the death of the founder. They are commonly known as will trusts and, as such, are created in terms of the will of a deceased person.
Testamentary trusts are especially suited to the protection of the interests of minors and other dependents who are unable to take care of their own affairs. Testamentary trusts are usually created to hold assets on behalf of minor children, since minor children cannot, in terms of South African law, inherit anything. In the absence of a trust, assets from the deceased estate left to minor children are sold, and the money is paid to them when they reach adulthood.
Testamentary trusts are created at the winding up of a deceased estate, following a specific stipulation in a person’s will that a trust must be set up. Such a stipulation in the will serves the same purpose as a trust deed. The terms of a testamentary trust are typically not as detailed as with an inter vivos trust. Sometimes a full trust deed is attached to a will, instead of incorporating the usually shorter provisions of a testamentary trust in the body of the will. This serves to provide additional comfort and assurance that the testator’s wishes will be honoured.
A testator appoints the trustees in his/her will. Their roles as trustees usually end after a predetermined period, or at a determined date, such as a minor turning eighteen, or upon the death of an income beneficiary.
The child’s guardian does not necessarily have to be a trustee; in fact, it is often a good check and balance to have a separate, independent person – who is financially astute – as a trustee.
If for any reason the will is invalid, the trust will not come into effect. The Master of the High Court has the power to declare this type of trust invalid, unlike an inter vivos trust, where the Master of the High Court has no such power.
During the settlement period of the deceased estate, the appointed trustees apply for a letter of authorisation at the office of the Master of the High Court, where the estate is registered.
Generally, the terms of a will trust cannot be amended, but the Trust Property Control Act does give the Court certain powers to amend this type of trust instrument.