How to go about setting up a trust fund

2013-10-15 00:00

WHEN a person dies or gets divorced or is sequestrated their status changes and invariably their estate, in one way or another, is affected.

For instance everyone has an estate when they die. Trusts and wills are vehicles used to pass assets to loved ones or donate to one’s favourite organisation after death.

There are two forms of trust:

• a living trust; or

• a testamentary trust.

A living trust is set up during the person’s lifetime, while a testamentary trust only comes into play and takes effect after the creator of the trust has died.

Trusts enable the person creating and funding the trust to determine who receives the money, when they receive it and if conditions are stipulated then the conditions must be met.

For example: you want to leave R500 000 to your only son, but you are concerned that before you set sail around the world, he would have spent the entire half a million. You can create a trust to parcel out the money to your son as you see fit. The trust can give him a little bit each year for a duration of time and the final lump sum at a stage of his life when you believe he will be able to protect the money as if he had actually earned it himself.

You can also add conditions as to how the money in the trust is disbursed, such as the fact that your son will receive money until a certain age and then receives the rest if he graduates from college or meets some other sort of criteria.

One of the primary uses of trusts is to protect your property even after it becomes part of someone else’s estate.

If you are interested in forming a trust, you have to evaluate your situation and determine the sort of trust that matches the purpose you would like to achieve.

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