Children’s Trust

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A Children’s Trust is essentially a Testamentary Trust that is created by a very specific Trust clause in the Will, through which the Testator bequeaths assets to the Trust for the sole benefit of their minor Children and/or minor Beneficiaries who are set to inherit in terms of the Will.


By not making provision for a Children’s Trust in a Will, problems may arise when funds are bequeathed to a minor, as minor’s do not have the legal capacity to inherit. In this instance, the minor’s inheritance runs the risk of being entrusted to the nominated Guardian, and therefore not protected from misuse or unnecessary overuse. Alternatively, the inheritance can be held by the Guardian’s Fund, which falls under the administration of the Master of the High Court. These funds are not freely accessible and are usually invested below-market interest rates. This can easily frustrate a Guardian who is trying to release funds for a minor’s maintenance and benefit.

By creating a Children’s Trust, you can protect the inheritances left to minors by ensuring that these risks are mitigated and that the interests of the Beneficiaries are well protected when they are unable or incapable of doing so themselves.

If the Trust is managed by a professional Trustee, you can rest assured that the money will be used as you intended until the moment the Trust ends – a date that can be determined in the Will.


A Testamentary Trust is an essential estate planning tool which considers minors. Not only does it make the process of administering the fund much easier, it also protects the rights of the minors by providing your Trustees with certain rights and obligations in dealing with the assets.Any person (unborn or alive) can be a Beneficiary of the Trust and there is no limit to the number of minors you can have as Beneficiaries. It is therefore important to speak to an attorney who specialises in estate planning to ensure your loved ones are adequately protected


A Children’s Trust will terminate at a specified age that gets determined in the Will. On termination of the Children’s Trust, the Beneficiaries of the Trust will receive all the Trust income and capital in their personal capacity.

The Trust clauses in the Will award a wide scope of powers to the Trustees in order to ensure proper administration of the Trust.

Some examples of powers awarded to Trustees include:

  • Buying and selling Trust property;
  • Determining distributions to Beneficiaries;
  • Hiring and firing professional advisors, tradesmen and contractors; and
  • Opening/operating bank or building society accounts or facilities.

Trustees are required to exercise their powers independently and objectively. Trustees hold a fiduciary position and therefore must always exercise their powers to the advantage of the Beneficiaries and act within these powers. When Trustees act contrary to the provisions of the Trust deed, their acts are ultra vires (“beyond the powers”) and are therefore invalid.


Trusts can serve a dual function of protecting assets as well as creating certain taxation benefits.

Assets are transferred into a Trust as stipulated in a Will. Assets are bequeathed to a Trust to assist with the Estate Duty saving to the Heirs.

Trustees may create tax efficiencies based on the timing and amounts of distributions made to Beneficiaries.

Where income received by the Trust is paid out to the Beneficiaries within the same tax year, it is treated, for tax purposes, as if it had never been received by the Trust, but rather directly by the Beneficiaries. It is, therefore, advisable for distributions to be made to the Beneficiaries in the same year as the income is received.

The Trust acts as a conduit through which income flows. Income flowing through a Trust to Beneficiaries retains its identity. Therefore, interest received by the Trust is also treated as interest received by the Beneficiary and is thus taxed in the Beneficiary’s hands.

Where income is taxed in the hands of the Trust, any subsequent distribution thereof will not attract tax in the hands of the Beneficiary as well.

Setting up a Testamentary Trust for the Benefit of minor children provides some income tax benefits as well as preventing any funds being held by the Guardian’s Fund on behalf of the minor.