Drawing Up a Trust-Friendly Will

One way of streamlining your estate plan is to align your will to the trust structures to which you are a beneficiary or a funder.

By including the following clauses in your will, you can generally streamline your estate planning process.

Eliminate the need for additional structures by bequeathing assets to an existing trust already set up during your lifetime for the benefit of the trust beneficiaries, who are also your heirs in terms of your will, rather than allowing for the establishment of another testamentary trust in your will.In this way you avoid creating an entirely new additional trust structure and the associated administration and costs. In some cases, another testamentary trust structure may be necessary if it serves a completely different objective or there are different intended beneficiaries to the existing trust already in place.

You are able to bequeath any outstanding loan amounts that the trust owes you in your will. The loan accounts are considered assets in your estate. If you bequeath these to the trust, which owes you the amount, the debt is effectively cancelled and does not have to be paid back to your estate by the trust. Assets previously transferred to the trust do not have to be transferred back to your own name by the trustees to repay the debt. Alternatively, the trustees do not have to raise the cash from elsewhere to repay the loan to your estate if the trust does not have sufficient available liquidity. In accordance with the fairly new paragraph 12(A) of the Eighth Schedule to the Income Tax Act 58 of 1962, the reduction or cancellation of your outstanding loan account by bequeathing it to the trust in your will may not trigger capital gains tax on the transaction as a debt-forgiveness, as long as certain conditions are met.

You may appoint a person, or persons, to act as a trustee in your will if the trust deed empowers you to nominate and appoint succeeding trustees to act in your place as trustee after your die. This allows you to appoint someone who understands your family dynamics or who knows the trust beneficiaries and their needs.

Article provided by Sanlam Private Investments Ken Newport, Fiduciary and Tax Assistant