A trust is a legal arrangement whereby control over property is transferred to a person or organization (the trustee) for the benefit of someone else (the beneficiary). You can register two types of trusts, namely the inter-vivos trust and the testamentary trust.
The inter-vivos trust is created between living persons, whereas the testamentary trust is derived from the valid will of a deceased person.
Read more about the registration of trusts or contact the Department of Justice and Constitutional Development on 012 406 4805 or email Chiefmaster@justice.gov.za(link sends e-mail).
What are the advantages of creating a Trust?
While the establishment of a Trust is an intricate process, estate planning experts say that there are several benefits of setting up a Trust as part of your estate plan.
Here are five benefits of setting up a Trust:
An estate’s financial concerns will remain private
By law, the financials of a Trust remain a private concern and are protected from the public inspection which is not the case when it comes to a deceased estate. Deceased estates must, by law, be advertised in the Government Gazette so that anyone who may have a claim against you can come forward and settle that claim upon your death.
It may minimize estate duties
A Trust should not be used solely for tax planning purposes, but it’s worth speaking to your financial advisor to find out whether you may be able to minimize the impact of estate duty on your assets upon your death if you decide to set up a Trust. An ‘inter Vivos Trust, for instance, created while the individual is still alive and when assets that have the potential to increase in value are transferred to the Trust, can help ensure that minimal estate duty is payable on the assets owned by the Trust.
More effective distribution of your possessions
Trusts are considered ideal vehicles to prevent mismanagement of inheritances. This can include minors or anyone who is incapacitated, or even a person suffering from a mental disorder. The appointment of the most appropriate trustees for your circumstances is of chief importance. Your trustees will administer control over the assets and protect it to ensure it benefits your beneficiaries, so you should choose carefully.
Enjoy enhanced protection of your assets
Depending on the type of Trust you opt for, any assets that you place in it are not owned by you or your heirs and beneficiaries. The benefit is simple: your loved ones can enjoy the use of your assets and no creditors can claim debts against the assets you place in the Trust.
Secure uninterrupted succession
It’s important to note that should one of your loved ones die, it does not impact the operation of the Trust. Your remaining loved ones will be able to continue enjoying the assets of the Trust, which won’t be the case if you bequeath assets to individuals upon your death.
Why should I appoint an agent to manage my Trust?
The setting up and administering of a Trust requires intrinsic knowledge of South Africa’s tax and succession laws. By appointing an agency, like your bank, to manage your Trust you can rest assured that the right Trust is selected and drafted.
How do I set up a trust in South Africa?
Living (Inter Vivos) Trust:
A living trust is created by the drafting of a trust deed and registering the trust (along with various prescribed forms) with the Master of the High Court. The trust becomes effective as soon as it is registered.