Wills, estates and trusts – what’s the difference?

Last updated on 12th December, 2017 at 05:14 pm

Wills, estates and trusts are complex concepts – we break down the differences and explain the importance of appointing the right trustees.

Wills

A Will is a legal document that specifies how the assets you’ve accrued during your lifetime should be distributed when you die. It allows you to choose your beneficiaries and you may also use it to appoint the executor of your estate. But, above all, a Will represents financial peace of mind to those you leave behind.

Estates

An estate is the collective assets and liabilities of someone who has died. The administration of deceased estates is the process of winding up the affairs of the deceased and ensuring that the specifications in his or her Will are carried out correctly. Each individual’s assets, family and wishes are unique, and that’s why the administration of a deceased estate is a highly technical and complex process that requires the assistance of a professional in the field.

Trusts

A trust is a legal agreement between an owner of assets and his or her trustees – the people appointed to look after the owner’s assets with the necessary care and to the benefit of the beneficiaries. Having a trust is an efficient and flexible way to ensure that your assets are well looked after in an objective way. If you want to ensure that your family will be taken care of when you’re no longer there (especially if your children are still minors), you should consider establishing a trust. There’s the added benefit that your estate and income tax obligations are kept as low as possible, so that your beneficiaries can enjoy the full benefit of your estate when you have a trust. It doesn’t stop with merely establishing a trust though. “It’s paramount that you appoint the right trustees,” explains Zainap Behardien, Manager of Testamentary and Inter Vivos Trusts at Sanlam. “You have to be sure that your appointed trustees will always act in the best interests of the beneficiaries and that the trust will be managed in accordance with legislation and stipulations of a trust deed.”

What makes a good trustee?

Appointing trustees shouldn’t be taken lightly and your trustees should at least have some of the following characteristics:

• Trustees must ideally be well educated and have a good grasp of the fiduciary responsibilities entrusted to them.
• They must be totally familiar with the contents of the original trust document.
• Trustees need to be good communicators as well as listeners as their responsibilities range from having to deal with people, their money and their future plans.
• They need to know when to call upon the assistance of other experts, especially when it comes to tax, property, legal and investment matters.
• Trustees need to be absolutely independent from both the owner of the assets and the beneficiaries, so that they can make up their own mind without feeling compromised.

By Liesl Peyper

To find out more about how Sanlam can help you set up your Will or a guardianship, click here.