There are two beliefs about trusts in South Africa and they are both wrong.
The first is that trusts are for wealthy people. Expensive to set up, expensive to run, and only worth it once you have enough that the tax tail starts wagging the dog. Most people hold this one, and for one kind of trust they are entirely right.
The second is that everybody should have one. This tends to come from people who sell them.
The honest answer is neither, and the test has nothing to do with how much money you have.
Two very different things wear the same name
An inter vivos trust is a living trust. You create it now, while you are alive, and it exists from that day forward as its own legal entity. It has trustees, it holds assets, it files a tax return every year, and it carries on after you die.
A testamentary trust is a clause in your will. It does not exist while you are alive. It has no trustees, no assets, no bank account and no tax return, because it is not a thing yet. It comes into existence only if you die while it is still needed, and if that never happens, it costs you nothing and quietly expires with the will.
Almost everything people believe about the cost and admin of trusts is true of the first one and false of the second. That distinction is the whole article.
Why your instinct about the living trust is correct
If you have ever been told an inter vivos trust is a hassle, you were told the truth.
Setting one up means attorney drafting fees, a Master's fee, and donations tax if you move assets into it. Running one means an independent trustee, annual financial statements and a SARS return every year, whether or not anything happened.
The tax is the part that surprises people. Income kept inside an ordinary trust is taxed at a flat 45%, with no sliding scale and no rebate. Capital gains carry an 80% inclusion rate, which works out to an effective rate of 36%. For comparison, the top effective capital gains rate for an individual is 18%. So money that sits in a trust is taxed at roughly double the rate of money that sits with you.
There is a mechanism that softens this, the conduit principle, where income vested in a South African resident beneficiary in the same tax year is taxed in that beneficiary's hands rather than in the trust. It works, but it requires the trust to be actively and correctly administered every single year.
Which is where most South African trusts fall down. Since 1 April 2023, section 11A of the Trust Property Control Act 57 of 1988 has required trustees to lodge a beneficial ownership register with the Master of the High Court. At the Master's last published count, in March 2024, only 10% of South African trusts had done it. That is a separate obligation from the register a company files at CIPC, and filing in the wrong place does not discharge it. A trust that exists on paper and is not properly run is not an asset. It is a liability with a name on it.
Now the part almost nobody knows
Here is what happens if you die while your children are still minors and you have not put a testamentary trust in your will.
Their inheritance goes to the Guardian's Fund.
The Guardian's Fund is run by the Master of the High Court and holds money belonging to minors until they turn eighteen. It is not a scandal and it is not a scam. It exists precisely because a seven-year-old cannot manage R3 million. But it is a blunt instrument, and three things about it are worth knowing before you rely on it by default.
The return is actually fine, and that surprises people. For the year to 31 March 2025 the fund allocated interest at 8.4%, up from 8.25% the year before. That is ahead of inflation and better than most people expect from a government fund. The problem with the Guardian's Fund is not what it pays. It is everything around what it pays.
Then it stops. Interest accrues from the start of the month after the money is deposited and ceases at the earlier of two things: the money being legally claimed, or five years after the date it became claimable. After that the capital simply sits there, not growing, while everything around it gets more expensive.
And nobody comes looking for you. At 31 March 2025 the fund held R22.3 billion on behalf of the people it is meant to protect. It does not actively trace beneficiaries, and there is no searchable public database a family can check. The money waits to be asked for.
So the default option pays a fair rate, stops paying it after five years, and then relies on a grieving family knowing to go and ask. None of that is anybody behaving badly. It is just not a plan.
A testamentary trust avoids all of it. The assets transfer directly into the trust on your death and the trustees you named administer them according to the instructions you wrote. Your children get money managed by people you chose, released on terms you set, rather than a lump sum on their eighteenth birthday with nobody steering it.
And the tax objection does not apply
This is the part that changes the arithmetic, and it is not widely understood.
That punishing 45% rate applies to an ordinary trust. SARS recognises a category called a special trust, which is taxed "on a sliding scale similar to natural persons" instead, although it does not qualify for the usual rebates.
There are two kinds. A special trust type A is one "created solely for the benefit of a person(s) with a mental or physical disability". A special trust type B is one "created solely for the benefit of a person(s) who is a relative of the person who died and who are alive on the date of death of that deceased person... and the youngest of the beneficiaries is younger than 18 years on the last day of the year of assessment".
Read that second one again. A trust set up in your will for your own children, while the youngest is still under eighteen, is a special trust. It is taxed on the individual sliding scale, not at 45%.
So the single biggest reason people avoid trusts does not apply to the one most families actually need.
The real test, and it is not a rand amount
After thirteen years of these conversations, the question that decides it is not how much you have. It is this:
If you died tomorrow, is there anyone in the picture who could not manage the money themselves?
Three situations answer yes.
Minor children. The most common by a distance, and the least likely to involve wealth. A couple in their thirties with two small children, a bond and R3 million of cover between them has a far stronger case for a testamentary trust than a wealthy single person with no dependants.
A beneficiary with a disability who cannot manage their own affairs. This is what the special trust type A exists for, and the tax treatment reflects that.
Someone who may lose capacity. A trust with more than one trustee keeps working when one person cannot act, which is the one thing a beneficiary nomination cannot do. If you have read my piece on why a power of attorney dies before you do, this is the structural answer to that problem, for assets held inside the trust.
If the answer is no, and your beneficiaries are competent adults who can receive money and manage it, then you probably do not need a trust and you should be sceptical of anyone insisting otherwise.
What to do about it
Three questions, and one phone call to whoever drafted your will.
First, does your will contain a testamentary trust clause? Most standard wills do not, and most people have never been asked.
Second, if you have minor children, where would your life cover actually land? Cover nominated directly to a minor creates the same Guardian's Fund problem as an inheritance, so the nomination and the will have to agree with each other.
Third, if you already have a living trust, is it compliant? Beneficial ownership filed, annual financial statements done, independent trustee in place, returns submitted. If any of those is a no, that is a more urgent problem than whether you need another trust.
None of that requires a product and none of it requires me. It requires an afternoon and a conversation with your attorney.
If you would rather work through your own position with someone first, book a free 30-minute call and we will go through it together.
The wealthy do not need trusts more than everyone else. They just get asked the question more often.
