Beyond the will: Engineering generational wealth through the family Trust
RACHEL SITHOLE AND FUNGAI CHIMWAMUROMBE
In the current economic climate, “owning” assets in one’s personal name is increasingly viewed by legal experts as a strategic liability.
For a high-net-worth individual, the personal ownership of real estate, shareholdings, and luxury assets creates a “bottleneck” upon death.
The solution is the Family Trust a vehicle designed for asset protection, tax efficiency, and perpetual continuity.
The Business Necessity of the Family Trust
For an entrepreneur, the Family Trust is not merely an estate planning tool; it is a critical component of corporate risk management.
- Asset Protection
A Family Trust is a separate legal persona. When assets such as company shares or commercial property are transferred into a Trust, the “Founder” ceases to be the legal owner. In a volatile business environment, this separation is vital. Should the business owner face personal litigation, bankruptcy, or aggressive debt recovery, assets held within a properly structured Trust are “ring-fenced” from the risks associated with the individual’s commercial ventures.
- Bypassing the Estate Administration Bottleneck
The administration of a deceased estate can be a gruelling process. During this time, bank accounts are often frozen, and no property can be sold or transferred without the Master of the High Court’s intervention. A Family Trust circumvents this entirely. Because the Trust never “dies,” the assets remain operational. Business continuity is preserved, and beneficiaries can access income and capital immediately without waiting for the appointment of an executor or the winding up of an estate.
Trust vs. Will: Understanding the Mechanics
A Will is a legal document that explains how a person wants their property and assets distributed after death. It has no legal effect while the person is alive and only becomes active once they pass away. After death, a will must go through estate administration, which is a court supervised process that confirms the validity of the will, settles debts, and oversees the distribution of assets. Because estate administration is a public legal process, the contents of a will generally become part of the public record. A will can also be used to name guardians for minor children and can be revised or revoked at any time during the creator’s lifetime.
A Trust, by contrast, is a legal arrangement in which a person transfers assets to be managed by a trustee for the benefit of designated beneficiaries. A trust can take effect during the creator’s lifetime and continue after death. Unlike a will, a trust typically avoids the need for estate administration, allowing assets to be distributed more quickly and privately. While alive, the person who creates the trust may retain control over the assets by serving as the trustee, depending on the type of trust established.
The key difference between a will and a trust lies in timing and administration. A will only governs asset distribution after death and requires court involvement, while a trust can manage assets both during life and after death, often without court supervision. As a result, trusts are often used to provide ongoing management, privacy, and efficiency, while wills remain a simpler tool for outlining final wishes and guardianship decisions.
The ‘Hybrid Strategy’: Why You Need Both
It is a common misconception that a Trust replaces a Will. For a comprehensive plan, both are ideal, but they serve different purposes.
- The Trust should hold your primary wealth generators: company shares, commercial buildings, and the family home. This ensures these core pillars of one’s legacy remain untouched.
- The Will acts as a “Pour-Over” vehicle for personal items not easily held in a Trust, such as vehicles, personal jewelry, or specific cash bequests. Crucially, a Will is the only legal document in which you can appoint Guardians for minor children.
The Risk of Conflict: When the Will and Trust Clash
A legal clash occurs when a Will purports to distribute an asset that is already owned by a Trust. For example, if a Will states, “I leave my commercial property to my eldest daughter,” but the title deed for that property is registered in the name of the “Chuma Family Trust,” the Will is legally unenforceable regarding that property.
In Zimbabwe, Registered Title prevails. If the Trust owns the asset, the individual no longer has the power to “will” it away. One must ensure that instructions in the Will and the powers in the Trust Deed remain in perfect alignment.
Conclusion
For the entrepreneur, a Will is a letter of intent, but a Trust is a structure of power. By moving core assets into a Family Trust, a business person ensures that their legacy survives the transition between generations.
Rachel Sithole is a partner at Zenas Legal Practice and can be contacted on rachel@zenaslegalpractice.com and +263 73 590 5092
Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Zenas Legal Practice and can be contacted at fungai@ zenaslegalpractice.com
