Tag Archives: Trusts

How to register an inter-vivos trust?

Posted on by

cm_09_a2In South Africa there are mainly two types of trusts that are registered. An inter-vivos trust can be created between living persons, and a testamentary trust is created in the will of a deceased.

An inter-vivos trust is registered at the office of the Master of the High Court in whose area of jurisdiction the main assets of the trust are or will be held.

The first step is to draw up a valid trust deed. A trust deed is a contract between the founder of the trust and the trustees, for the benefit of a third party or parties, known as the beneficiaries. In terms of the trust deed, the founder agrees to transfer certain assets to the trustees of the trust for the benefit of the beneficiaries. The trust deed must stipulate who the first trustees of the trust are going to be. In many instances the Master will insist on at least one independent trustee to be appointed. This means that the independent trustee will receive no benefit from the trust assets apart from the specified and reasonable trustee remuneration. The beneficiaries must be specified in the trust deed, as well as their entitlement to either the capital of the trust, the income of the trust assets, or both.

A trust deed is a valid contract and therefore subject to all applicable laws. Furthermore, there are significant tax, financial and other consequences of being involved in a trust, whether as trustee, founder or beneficiaries. Therefore it is imperative to seek professional advice when drawing up this deed.

The duly signed and witnessed trust deed must be submitted to the Master of the High Court, together with the completed and signed Acceptance of Trusteeship for all trustees and certified copies of their identity documents. This Acceptance of Trusteeship states the basic information of the trustees that the Master requires, as well as certain declarations made by the trustee. If the Master requires the trustees to furnish security, proof of the bond of security by those trustees must be provided to the Master when the trust is registered. Form JM21 sets out certain requirements and information that must be supplied to the Master together with the other documents set out in this paragraph. This information includes details on the professions or business occupation of the trustees to be registered, any previous experience that these trustees might have in the administration of trusts, the name and branch of the bank where a bank account will be opened for the trust, and so forth. An original undertaking by an auditor or accounting officer must accompany form JM21. Lastly, proof of the payment of the prescribed fee of R100 must be submitted.

On receipt of the above documents in accordance with all the requirements, the Master will issue a Letter of Authority to the trustees. The trustees may then act on behalf of the trust.

Any amendments to the original trust deed must be placed on record with the Master of the High Court where the original trust deed is on record.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

The advantages and disadvantages of trusts

Posted on by

CM_06_03Trusts have various advantages, but unfortunately there are also disadvantages. Although this is not a complete synopsis of all the pros and cons, it gives a general overview of what’s involved.

Advantages:

  1. Growth taking place in the Trust assets settles in the Trust and not in your personal estate.
  2. By selling the assets to the Trust, the amount owed to you by the Trust will remain outstanding on the loan account and shall be regarded as an asset to your estate.
  3. A Trust offers protection against problems should you become mentally incompetent.
  4. A Trust remains confidential as opposed to documents like wills and records of deceased estates which are public documents and therefore open for inspection.
  5. A Trust can offer financial protection to disabled dependents, children or beneficiaries with special needs.
  6. A Trust can evade the administrative costs of consecutive estates by making provision for consecutive beneficiaries.
  7. A Trust can lighten the emotional stress on your family when you die because the Trust will continue without any of the formalities that are required from a deceased estate.
  8. By choosing your Trustees well you can ensure professional asset and investment management.
  9. The Trust will enable you to have a degree of control over the assets in the Trust after your death, via the Trustees.
  10. After your death and before the estate has been settled the Trust can provide a source of income for your dependent(s).
  11. You will prevent your minor child’s inheritance from being transferred to the Guardian’s Fund.
  12. You will avoid the problem of trying to distribute assets equally among the heirs.
  13. Levels of income may be varied according to the changing needs of the beneficiaries at the discretion of the Trustees.
  14. Due to the assets remaining the property of the Trust and not the beneficiaries it need not be included in people’s estates as part of their assets when they die, which effects a saving in Estate duty.
  15. The Trust assets will be protected from creditors for the same reason.

Disadvantages:

  1. You don’t have full control of your assets, as the other Trustees also have a say in the matter.
  2. A Trust is registered and the authorities can gain access to it.
  3. You could possible choose the wrong Trustees. You could expect problems if the Trustees are vying heirs. This shows how important it is to have at least one independent Trustee.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)