Trusts

Protection of Assets A trust a beneficiary, to the use & enjoyment of its assets without personally owning the assets. As the assets are separate from your personal estate, the trust may protect the trust assets from creditors’ claims against you personally subject to the condition that the trust has not signed surety on your behalf.

 

Succession Planning As a trust may survive your death, or that of the trustees and/or beneficiaries, the use of a trust provides succession of interests in property as it may continue to exist for an indefinite period. Depending on the circumstances, the process of winding up a deceased estate may endure for a period of six months to more than a year. In the event that a trust owns the assets, the lengthy procedure is avoided as it simply allows for the transfer of the use & enjoyment of assets to surviving beneficiaries. The trust assets will not be subject to transfer fees, estate duty, executor’s remuneration & other such expenses, as more fully explained below. A trust therefore facilitates an efficient transfer of rights and expedites the redistribution of assets to beneficiaries at a fraction of the cost of deceased estate administration.

 

Benefits on Death By acquiring assets in a trust, the value of your personal estate is reduced. This implies that any growth in the trust’s assets is excluded from your estate in the event of your death. This reduces your estate’s capital gains tax (CGT) & estate duty exposure, & eliminates executor’s fees in respect of such assets. The trustee administers funds in cases where the dependant cannot do so (for example as a result of a physical or mental handicap) and avoids challenges or problems that are commonly associated with the Guardian Fund.

 

Tax CGT is levied on natural & juristic persons when an asset is alienated for value. In the event of death, CGT becomes applicable as you are deemed to have sold all your assets to your deceased estate. Further, on death a further tax imposed is Estate Duty which is currently levied at the rate of 20% of the value of any assets you have in excess of 2,5 million. However, this dilemma in both instances can be addressed by simply holding the assets in a trust, as it is structured to survive death. An executor is a person that attends to the administration & winding up of a deceased estate, who is entitled to a fee of 3.5 % of the gross value of the estate plus 6% of its income.

Protection of Minors If you pass away & a Testamentary Trust has not been provided for in your Will & your children are under the age of 18, their inheritance may be reduced to cash & the proceeds paid into the Guardian’s Fund. These funds are not invested in growth investments & may at times be difficult for your heirs to access. South African law does not allow persons under the age of 18 to inherit directly. This implies that your assets might not be distributed in accordance with your wishes, as it will be sold & the proceeds thereof will be held by the Guardians Fund until your young loved ones reach the age of majority. The solution to this problem is to have all your assets held by a trust, which will be managed by your appointed trustees in the interest of the minors.