Why do I need a Trust?


A Trust is a very effective estate planning tool and protection mechanism against creditors.

Asset Protection:

Trust property does not form part of the personal estate of the Beneficiaries until vesting takes place, which in a discretionary Trust only occurs when the Trustees exercise this option, therefore these assets are beyond reach of the Beneficiaries’ creditors.

Estate Planning:

On death all assets in your personal estate attract taxes and estate administration expenses which could add up to a substantial amount, such as:

Capital Gains Tax (CGT) At death you are deemed to have disposed of all your assets at the market value of the assets on the day before you died. The difference between the market value and the base cost (value of assets when acquired or value as at October 2001) could result in a capital gain, taxable at a maximum of 10% of the total gain, taking into account certain exclusions provided for in the Income Tax Act.

Estate Duty Everyone gets a R3.5 million rebate and estate duty of 20% is payable on anything over and above that amount.

Executors Fee An Executor is entitled to a fee of 3.5% (plus VAT) on the gross value of the capital assets at time of death as well as 6% (plus VAT) on all income after death until winding up of the estate.Only the residue of the estate (in other words after the creditors, legacies, taxes and administration costs have been settled) are paid to the heirs.

Protection of minors Through Trusts you are protecting the interest of minor children until they are old enough to handle their own financial affairs. You can also ensure that no benefits to minor children are forfeited to the Guardians Fund.

Continuity The Trust can continue for future generations and adds continuity to the estate planning of the family. As a separate vehicle, the Trust is not affected by the death of the Founder, but will continue to operate as before.

Estate Freezing When a person dies, the estate is frozen and under control of the Executor. Winding up of the estate can take years and could leave your family in a desperate situation.

Would It Not Be Better If You Owned Nothing, Having All Assets Under The Protection Of Trusts

Why do I need a separate Residence Trust from a Family Trust?

The reason for having a separate family Trust and residence Trust is two-fold. Firstly the family Trust should never have any debt, and therefore if property were to be in the family Trust it would have to be paid off and never bonded again in the future. By having a separate residence Trust it allows one the flexibility of having one’s own home bonded or, if it is paid off, the ability to bond it in the future..

Do I lose control over my assets?

The settler is no longer the legal owner of the assets and is therefore not entitled to effect control thereon.

The settler, as Founder, can however retain some control over the assets by being appointed a Trustee of the Trust. The powers of control that Trustees possess are detailed in the Trust Deed, and through the wording of the Trust deed, i.e. negative control mechanisms such as being appointed as Trustee, the requirement to be present at Trustee meetings to establish a quorum, the requirement to sign, as Trustee, any documentation, control can be retained.

It is however very important to carefully consider the extent of control by the Founder. Should there be no clear distinction between control over and benefit from the assets, SARS could allege that the Founder has retained effective control of the Trust and its property. That property would then be deemed property of the Founder on his death for estate duty purposes. (Section 3(3)(d) of the Estate Duty Act 45 of 1955). Also, should the fonder retain effective control it would also expose the Trust and Trust assets to personal claims by third parties, such as divorce claims (Jordaan v Jordaan), or claims by creditors.


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