A trust is a contract for the benefit of a third party. The person intending to set up the trust (the donor or founder) enters into a contract (a trust deed or will) with an administrator (or trustee) for the benefit of a third party (the beneficiary). A trust is created for various tax or legal reasons and may hold any kind of asset.

Since trusts can be used for many purposes, they are popular estate planning tools. Trusts are often used to:

  • Preserve and manage assets for your children or persons unable to manage their own affairs.
  • Minimize estate taxes and costs of death i.e. conveyancing costs, capital gains tax, transfer costs of movables and estate duty.
  • Create a pool of investments that can be managed by professionals.
  • Shield assets from potential creditors.
  • Set up a fund for your own support in the event of incapacity.
  • Shift part of your income tax burden to beneficiaries in lower tax brackets.
  • Provide benefits for charity.
  • Enjoy the benefits of continuity of investments and management over generations as well as the preservation of wealth.
  • Limitation of liquidity problems at date of death.
  • Peg or cap the value of assets held in your own name.
The type of trust used and the mechanics of its creation will differ depending on what you are trying to accomplish.

  • A trust is an extremely useful estate planning tool. This allows for proper management and control of your assets.
  • A trust can be used to preserve assets. A trust cannot die – it can therefore be used to provide ongoing management of your assets including contractual arrangements. A trust can be used to keep assets within a family and to pass these on from generation to generation. As long as the trustees keep the trust going and retain the assets for the unvested and unspecified benefit of the beneficiaries' descendants, no estate duty in respect of the trust assets need be paid on a descendant’s death.
  • A trust can be used for the separation and protection of assets against erosion through divorce or insolvency. A discretionary trust enjoys creditor protection in the event of the planner’s or the beneficiary’s insolvency. With regard to a vested beneficiary, the protection only exists in respect of those assets in which the insolvent has no vested right.
  • A trust can be used to protect beneficiaries incapable of managing investments such as minors or beneficiaries inexperienced in manage their own financial affairs or beneficiaries unable of managing their own financial and personal affairs (such as the mentally handicapped). This provides a measure of custodial support and protection of the assets.
  • Where a trust is created for a person unable to manage their affairs for a special reason, such as handicap, a Special Trust is created with special consequences. Tax consequences are such that any income received in the trust is taxed at preferential rates.
  • A trust can be used to protect surviving spouses who are either, by way of inexperience or incapacity, unable to manage their own financial affairs.
  • A trust is a convenient vehicle for special interests, such as charities, schools and educational bursaries.
  • A trust can be used as an estate planning vehicle to freeze the value of your estate for estate duty purposes. Growth assets are transferred into a trust against a loan account. The subsequent growth in the assets takes place in the trust and the planner’s estate is limited to the size of the loan account.
  • You can expect the decisions of the professional trustee to be impartial, not favouring any particular beneficiary, especially after your death.
  • Trusts offer one the opportunity to plan one's financial matters well past one's date of death by using trustees that one knows and trusts and that are able to see to the proper execution of one’s wishes into the future.
  • By transferring assets to a trust during your lifetime you may minimize estate taxes and costs of death. As the assets fall part of the trust capital and are no longer considered by be your personal assets, you will save costs on conveyancing, transfer costs of movable assets, estate duty and capital gains tax. By limiting the costs of your estate at death, you are solving a possible liquidity problem.
  • Trusts allow you to shift part of your income tax burden to beneficiaries in lower tax brackets.

  • Loss of control of one's assets. You no longer have total control of your assets and your protection lies in the wording of the trust deed and the trustees you have nominated.
  • A trust is an entity that has to be registered and can be accessed by the authorities.
  • The choice of trustee/s becomes very important and can lead to difficulties if not enough consideration is given to the future choice of trustees.
  • A trust is taxed at a flat rate of 41% on any income earned in the ordinary trust. (special trusts are levied at the beneficiaries' income tax rate). This may be expensive to the trust however all taxable income in the trust may be allocated to beneficiaries where it is taxed at the beneficiaries’ tax rate.
  • Although capital gains retained in the trust are taxed at a higher rate, any capital gains may be allocated to the beneficiaries where it is taxed at the beneficiaries’ tax rate.

We charge a minimum fee of R6,000 (VAT exclusive) for the drafting and registration of a trust. Depending on the complexity of the trust and the amount of time spent on drafting, consulting in respect of the trust and attendances to the Master to register same, our fee may increase based on a time/work basis.

Contact us today to get a trust set up.

Once we have received your full instructions, we will draft the trust deed and ancillary documents for registration with the Master as soon as possible. It ordinarily takes 3-4 weeks to register the trust with the Master however we will try to expedite registration.

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