South Africa: Trust – the best solution for you and your family?

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There are many advantages to creating an inter vivos (family) trust to protect your family’s future and many people choose to create an inter vivos trust for the distribution of their assets rather than leaving them in the will (also known as a will. trust). Several ways in which the creation of the Trust can help the family (and future beneficiaries) are, namely:

  • It can save on inheritance and / or transfer costs that would have been incurred if the assets had been bequeathed to the testamentary trust;
  • It will protect the assets and keep them for the beneficiaries.

When setting up an inter vivos trust, you need to determine whether it will be a discretionary trust or an acquisition trust. A discretionary trust confers conditional rights on the beneficiaries in that the trustees have discretion as to how the assets and / or income of the trust are distributed to the beneficiaries. In contrast, the income and assets of an acquisition trust vest in the beneficiaries.

There are many advantages to creating an inter vivos trust, a few of which are listed below:

  • Estate Planning / Succession Planning: In addition to the cost saving benefit mentioned above, the trust allows for easy administration of the assets owned by the trust rather than passing from parent to parent on death. The trust will also allow to have a minimum impact on a deceased’s family, as their affairs (and / or the assets and income pertaining to the trust) can be controlled and continuity ensured instead of being left in abeyance while The personal estate of the deceased is under the administrative process.
  • Tax Planning: Although the inter vivos trust is subject to income and capital gains tax, it can be administered in a way that mitigates these costs for all parties to the trust. There are also several advantages to saving on taxes by distributing income and capital gains. It is best that you seek advice from knowledgeable experts to ensure that you are maximizing the benefits of trust.
  • Asset Protection: As mentioned above, the trust can be created to protect and preserve assets while ensuring that creditors are not harmed. You may want to make sure that your assets are protected for the beneficiaries for various unforeseen events such as divorce and relationship disputes, bad business ventures and / or to ensure that assets are preserved for generations to come. .

Creating a trust is a complex exercise that requires seeking the right advice and ensuring that the trust deed covers the necessary basics and is tailor-made for your specific wishes.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought on your particular situation.

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