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A trust is a tripartite relationship between the founder, the trustee and one or more beneficiaries. The founder sets up the trust structure whereby property is transferred and administered by trustees on behalf of the beneficiaries in accordance with the trust deed or will depending on the type of trust.
In South Africa there are two main types of trusts, a living (inter vivos) trust and a testamentary (mortis causa) trust.
As the name suggests, a living trust is a trust which is created during the lifetime of the founder. A living trust is created by drafting a trust deed and registering the trust with the Master of the High Court. This is a tedious process and not as simple as it sounds, thus it is imperative to have a good team of attorneys on your side with the necessary skill, time and knowledge to assist in the registering of your trust. At Weavind & Weavind, our team of attorneys has the necessary skill and knowledge not only to assist in the drafting of the trust deed, but also to assist in the registration thereof at the Master of the High Court.
In South Africa, there are two sub-categories of living trusts, namely vested and discretionary trusts. In a vested trust, the trust deed specifically sets out the benefits due to the beneficiaries. In contrast, discretionary trusts afford the trustees full discretion at all times about the benefits due to the beneficiaries.
On the other hand, a testamentary trust is one which is provided for in a deceased person’s will. In this regard, the will itself will stipulate that upon the testator’s death, a trust must be set up. A testamentary trust is often created to hold assets on behalf of minor children. However, for purposes of this article, the focus will be on living trusts as the benefits thereof are plentiful.
One of the biggest advantages of a living trust is the protection afforded to assets. As the assets are hypothetically “owned” by the trust, the insolvency of a trustee or beneficiary or even the founder him/herself does not negatively affect the assets vested in the trust. Thus, a trust can be seen as a safehouse for your assets.
Furthermore, a trust can play an important and useful role in estate planning as there are many more advantages to placing assets in a trust than just the protection of assets from creditors. As a living trust does not die, it is not liable for estate duty or other taxes and costs involved in the winding up of an estate that would otherwise be payable in the hands of the estate or the heirs. Thus, the growth earned on assets that are transferred to a trust is not subject to estate duty as the growth belongs to the trust.
Another benefit is that assets and/or benefits in a trust continue to be paid out to the beneficiaries even after the founder dies. This is in contrast to the position where a person has bequeathed assets and/or benefits to heirs in a will as the estate is frozen during the winding up process and dependants may only receive an income after the deceased estate is finalised.
It is therefore imperative for you to make an appointment with one of our skilled attorneys at Weavind & Weavind in order to commence the drafting and registering of your trust so that your assets and hard-earned wealth is preserved and protected for future generations of your family.
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