Trusts: distributions to minors

[Mike W]

Please can you assist me with regard to distributions to the beneficiaries of a trust.

My questions are:
1 What are acceptable "costs of happiness and well being" from a SARS point of view?
School fees, holidays, gifts, extramural expenses etc seem to be common.
But what about entertainment: going to the movies, eating out, cell phones? In our opinion as the trustees, all these expenses are for the benefit of the child. Do you know of a list that I could see?

2 If I distribute R3,000 to a minor child (over and above actual expenses as in 1 above) but do not pay it into that child's bank account (thereby creating CR: Loan Child A with matching DR: Trust bank A/C) can that money be loaned to another beneficiary (thereby creating CR: Loan Child A with matching DR: Loan Child B)?

Many thanks for your time,

Regards Mike

[Nickolai Naydenov]

Mike, you clearly state that the distributions will be made to a minor so I need to find out did the child's parents pass away, are a guardian or a trustee maybe?

[Mike W]

Nickolai, in Vivo trust.Trustees are dad, mom and 1 independant. Beneficiaries are child 1 (15 yrs), ch 2 (12yrs), ch3 (7yrs), mom & dad.

[Nickolai Naydenov]

Mike this is very difficult. I am not an expert on this. Trustees must follow what the trust deed stipulate. Trustees must then be able to justify what they pay out and for what. All need to be in reason.

Point two however sound very suspect. *Not sure how one can distribute funds to a beneficiary but then not pay it to such a beneficiary.

[Dave A]

Point two however sound very suspect.

Agreed. In fact it's hard to see an independant trustee being able to justify sanctioning such a transaction as being in the best interests of the beneficiary, particularly when the beneficiary is a minor.