Vesting right

If a beneficiary has a vesting right in the trust assets or income, it means that he or she must receive whatever is indicated in the trust deed.

If the trust deed for instance indicates that you should receive R5 000 every month, then the trustees must adhere to this and ensure that you receive your money every month.

If you have a vesting right, you will be taxed on this amount whether or not you actually receive it. Actual receipt of the money is irrelevant.

Discretionary right

A discretionary right simply means that the trustees may distribute a certain amount (determined at the trustees’ discretion) to you.

This distribution is not based on any obligation placed on them by the trust deed.

The trust deed may for instance indicate that you need a living allowance. If the trustees agree that your living allowance should be R2 000, then this is what you will receive.

If you have a discretionary right, you will only be taxed on the amounts you actually received from the trust.

SOURCES :

Cronje & Cronje

Business Partners