Providers Trust


The Provider’s Trust is a Testamentary Trust that is created through the Will of the Testator, solely for the maintenance and care of a child who suffers from any mental illness as defined in Section 1 of the Mental Health Act or any serious “disability”, as defined in Section 6B(1) of the the Income Tax Act 58 of 1962. The disability must make it impossible for the individual to earn enough money for their care or to manage their own financial matters.


The Providers Trust is an essential estate planning tool to provide and sustain financial support for an individual with a mental illness or disability that may impair them from the ability to financially support themselves. This Trust, therefore, allows the Testator to set up a Trust with the sole intention of benefiting their special needs beneficiary with peace of mind that their financial affairs will be well taken care of.


This kind of Trust enjoys special tax benefits that are not available to ordinary Trusts. More importantly, the special Trust provides the parents of such a special person with peace of mind that their child will be cared for when they are no longer around to provide care and financial assistance themselves.


The sole income Beneficiary of a Provider Trust must be the special needs individual, no other person may benefit from the Trust during the said Beneficiary’s lifetime.To set up the Trust, the person needs to have been diagnosed by a medical professional and should have had the disability for at least a year. The disability must also appear to be irreversible.


Setting up a special Trust during your lifetime or upon your death for a mentally disabled or incapacitated person (including a minor), allows for the safe custody of assets, while at the same time benefitting from lenient tax treatment from an Income Tax and Capital Gains Tax (CGT) perspective.Special Trusts are treated in a similar way to natural persons for tax purposes, and have the following additional tax advantages:

This type of Trust is a Type A Special Trust and is taxed at individual rates as well as qualifies for certain relief from Capital Gains Tax.

  • The sliding scale for normal Income Tax purposes as for natural persons ranging from 18% to 45% is applicable, and not the fixed rate of 45%, as applicable to other Trusts.
  • The annual exclusion for CGT purposes (R40000 a year) is available to special Type A Trusts.
  • The primary residence exclusion (R 2 million of the capital gains on disposal) for CGT purposes is available to special Type A Trusts.
  • On disposal of personal-use assets by special Trusts, capital gains or losses thereon may be disregarded for special Type A Trusts.
  • A special Type A Trust may disregard capital gains or losses on compensation for personal injury, illness or defamation of the Beneficiary of that Trust.