What is the difference between a Testamentary and an Inter Vivos Trust?
Inter Vivos Trusts are established while you are alive, and a testamentary trust is established on your death through your will. Trusts serve a specific purpose in estate planning, and that is to ensure continuity and protection of an asset. This comes at a price of maximum Income Tax and Capital Gains Tax, so trusts need to be used correctly to be effective. On a joint estate exceeding R7 million, an inter vivos trust can become useful to minimise if not eradicate estate duty which is currently levied at 20%. If you do have an inter vivos trust, then make sure that you and your spouse use your donations tax exemption and donate R100 000 each – per year to your trust to reduce the value on your personal estate.
