Time to revisit a trust as part of your estate plan?

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Proper estate planning is widely defined as the arrangement, securement, management and disposition of your estate so that you, your family and other beneficiaries may enjoy, and continue to enjoy, the maximum benefits from your estate and your assets during your lifetime and after your death, no matter when death may occur. This is therefore a great deal more than just the retirement planning performed by most financial advisors.

Can you use a trust to protect your assets while you are alive?

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Trusts are relevant today if they are used correctly. A very important consideration is the stage in your life that you create a trust. If you form a trust as part of your estate plan and create wealth in a trust, in stead of in your personal name, you can benefit from the trust during your lifetime, not only after your death.

Can you dictate to trustees in your letter of wishes?

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A letter of wishes is a way for you to inform others of matters to be taken into account after your death. It may, for example, contain guidance to the guardians of minor children detailing how you might want your children brought up in terms of education, religion or residence. A letter of wishes is a separate document to your will, but it accompanies your will. It is not legally binding but can guide your executors and trustees to ensure that your personal wishes are carried out.

Which laws impact trusts in South Africa?

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Trusts became part of South African law after the British occupied the Cape in 1806. South African trust law as we know it today was developed incrementally as a combination of English law, Roman-Dutch law and South African rules. The South African government is working on improving the regulation of trusts. Currently, the law of trusts in South Africa is not contained in any single set of legislation. Trusts in South Africa are, in fact, largely unregulated, which frequently leads to their abuse.

What to watch out for before you contract with a trust

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People are often nervous about entering into contracts with a trust due to the unique nature of trusts. Often a contracting party requests a resolution whereby the trustees authorise the trust to enter into a particular transaction. This is particularly true in the case of the purchase or sale of immovable property. In terms of the Land Alienation Act, any deed of sale of immovable property has to be in writing and the parties thereto or their agents have to be legally authorised to act at the time of signing of the contract.

Fair remuneration as trustee?

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A trustee must act in good faith, and at all times avoid conflict of interest between personal interests and official and fiduciary duties to the trust and to the beneficiaries. A trustee may not gain personally from the trust fund (other than reasonable remuneration), in his/her capacity as trustee. However, trustees may be rewarded for the execution of their official duties.

The use of Special Trusts

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The South African Revenue Service (Sars) recognise the use of trusts for purposes other than wealth transfer, and specifically for persons with disabilities and minor children who are not able to produce enough income to take care of themselves and who also cannot take care of themselves. Sars introduced the concept of a Special Trust to bring about more favourable tax treatment for such trusts.

Which powers to give to trustees in the trust deed

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A trust’s constitutional document is a trust deed. This is a contract that sets out the framework within which the trustees must operate, including their powers and limitations. The trustees’ powers, competencies and obligations, including a clear description of the trustees’ discretionary powers and duties, as well as their remuneration, must be clearly stipulated in the trust deed. The estate planner must ensure that the powers provided to trustees in the trust deed are in line with his/her intention for setting up the trust.