Trusts
Description of a trust
A trust can be described as a legal relationship which has been created by the founder who places assets under the control of trustees.
This either happens during the founder's lifetime (inter vivos trust) or at the death of the founder (testamentary trust). this article will focus on the advantages and disadvantages of an inter vivos trust.
Because a trust is not part of your estate, it can save you costs and taxes: there is no estate duty on trustees and therefore no fees for winding up an estate, including costly executor's fees.
The value of an asset, such as property, appreciates in the trust rather than in your personal estate. This can be to your advantage tax-wise.
Common types of trust
Testamentary trust: one set up in terms of a will. The will serves as the trust deed and names the trustees.
Living (inter vivos) trust: one set up during the lifetime of the donor. The donor transfers assets into the trust, which is managed by the trustees on bet1alf of the beneficiaries.
Special trust: also known as a special needs trust, this is one with a special purpose, which qualifies it for a lower rate of taxation. There are two kinds:
* Type A: A living trust that is set up for the benefit of an incapacitated or disabled person - child or adult, who cannot look after his or her own financial affairs.
* Type B: A testamentary trust that benefits relatives of the deceased who are minors. Both kinds of special trust are taxed at the rate applicable to individuals (between 18 and 40 percent), instead of the rate applicable to trusts (40 percent).
Inter vivos trust can be used to minimize estate duty. No estate duty should be payable on assets owned by the trust as a trust does not die. Estate duty is currently taxed at 20%. This estate duty saving can be substantially large especially for high net worth individuals who are worth millions of Rands.
Advantages of a trust
Reducing estate duty
Inter vivos trust can be used to minimize estate duty. No estate duty should be payable on assets owned by the trust as a trust does not die. Estate duty is currently taxed at 20%. This estate duty saving can be substantially large especially for high net worth individuals who are worth millions of Rands.
Protection against creditors
As the trust’s assets are not owned by the beneficiaries, creditors do not have a claim on the assets. This advantage is especially important for people who have exposure to potential liability. Companies as well as individuals are able to transfer assets into trusts. A few years ago, an airline company was liquidated and the creditors never had a claim on the airplanes. This was because the planes were in the name of a trust and the company rented these planes from the trust.
- * They preserve your assets after your death.
- * They can exist in perpetuity and provide continuity through generations.
- * The assets are separate from your name.
- * They can protect beneficiaries from themselves – for example, in the case of a spouse who is inexperienced in managing money.
- * They can protect business assets from creditors.
Trust Registration - Required documentations:
| Name of the Trust: | |
| 1 x Donor / founder: | Copy of ID document |
| Occupation | |
| Physical Address | |
| Postal Address | |
| Telephone and Fax Number | |
| Cell Number | |
| Email Address | |
| Trustees: | Minimum (2 Trustees) |
| Copy of ID document | |
| Occupation | |
| Physical Address | |
| Postal Address | |
| Telephone and Fax Number | |
| Cell Number | |
| e-mail address | |
| Beneficiaries: | Copy of ID Document |
| Copy of Birth Cert. (if minor) | |