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South Africa

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Trusts for protection: How to make sure it happens

Trusts may appear complex, but they can offer a host of benefits ranging from asset protection to estate planning and asset consolidation.

Trusts can protect assets from:

  • Claims by your creditors
  • Claims by a spouse divorcing you
  • Claims for alleged malpractice against you
  • Minor children spending family assets
  • Unscrupulous advisers leading your spouse astray after your death
  • Your spouse spending your children’s education fund after your death
  • Your children’s spouses or in-laws getting their hands on your family assets
  • Unnecessary taxes on foreign assets
  • Political and country specific risks
  • The delays of a deceased estate administration process
  • Executors fees of 3.99% on assets on your death
  • Capital gains tax on one third of the capital gains on your growth assets on your death
  • Estate duty of 20% on certain of your assets on your death
  • Being frozen on your death with no access to liquidity to your surviving family members to pay the bills
  • Being a part of the consequences of an in-community of property marital regime.
  • How can you ensure you will enjoy the applicable protection?

The trust must be established as an irrevocable trust, which means:

The Founder of the Trust must not have the right to cancel the initial donation made to the trust nor be able to revoke his instruction to create the trust.

There must be no vesting of trust assets in you, either in terms of the trust deed or in terms of trustee resolutions:

If you have the right to a percentage or share of trust capital or income, you have vested rights to that percentage or share. If the trust deed provides that the trustees have to distribute certain assets or a certain share of the capital or income to you, you most probably have vested rights thereto.

You must not have any control over trust assets:

Our courts (and in some cases SARS auditors) have inter alia held that you are seen to have too much control under the following circumstances:

  • If, as a trustee and founder, you have a casting vote
  • If the majority of trustees may not discharge you from your position as trustee
  • If the majority of trustees may not discharge you from your position as trustee
  • If you have the power to hire and fire trustees on your own
  • If you run trust payments and receipts through your own bank account
  • If you use your personal assets as security for trust liabilities.

You must ensure that you refrain from dealing with trust assets as if they are your own:

  • For instance, if you are reflected as the sole signatory on the trust bank account without having been properly authorised by the trustees to do so.

An independent trustee should be appointed:

  • An independent trustee is someone who is not a beneficiary of the trust and not related to a trustee or beneficiary of the trust.

If you would like to obtain advice as to whether your trust provides you with any applicable protection, kindly contact Marteen Michau at marteenm@spi.sanlam.com.


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