Types of Trusts
There are three types of trusts under South African law:
- An “ownership trust”, under which the founder or settlor transfers rights of assets or property to a trustee(s) to be held for the benefit of the beneficiaries of the trust.
- A “bewind trust”, under which the founder or settlor transfers rights of assets or property to beneficiaries of the trust, but control over the property, is given to the trustee(s).
- A “curatorship trust”, under which the trustee(s) administers the trust assets for the benefit of a beneficiary that doesn’t have the capacity to do so, for example, a curator placed in charge of a person with a disability.
Trusts can be described in various ways:
- The way in which they are formed:
- Inter vivos trust is created during the lifetime of a person
- Mortis causa (testamentary) trust is set up in terms of the will of a person and comes into effect after their death.
- The rights they give beneficiaries:
- Vesting trust – the income (both of a revenue and capital nature) or assets of the trust are vested in the beneficiaries. The beneficiaries have the vested rights to the income or assets of the trust.
- Discretionary trust – the trustee(s) usually have the choice whether to and how much of the income or capital of the trust to issue to the beneficiaries. In these circumstances the beneficiaries only have contingent rights to the income or capital of the trust.