A trust entitles a beneficiary to the use and 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 claims brought against you personally subject to the condition that the trust has not signed surety on your behalf.

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 a trust may continue to exist for an indefinite period.

The process of winding up a deceased estate could endure for six months or more, and the heirs and beneficiaries of your estate could be adversely affected by delays that may arise during the process. If assets are owned by a trust, they should not fall within your personal estate and will therefore not necessarily be subject to the usual estate administration procedure. This would allow for the simple transfer of the use and enjoyment of the trust assets to surviving beneficiaries.

The trust assets will further not be subject to transfer fees, estate duty, executor’s fees and 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.

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 personal estate in the event of death. This would reduce your estate’s Capital Gains Tax (CGT) and Estate Duty implications, and eliminates executor’s fees in respect of such assets.

An executor is a person that attends to the administration and 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.

CGT is levied on natural and 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. 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 R3,5 million. The implications in both instances can be addressed by holding the assets in a trust as it is structured to survive death.

If you pass away and a Testamentary Trust has not been provided for in your Will and your children are under the age of 18, their inheritance may be reduced to cash and the proceeds paid into the Guardian’s Fund. These funds are not invested in growth investments and 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 and 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.