Things to consider when you sell your assets to a trust
~ Written by Phia van der Spuy ~
May 8th, 2020
When assets are sold to the trust, the trust does not usually pay for the assets due to a lack of liquidity in the trust; instead, the trust creates a loan account and owes the seller the money. Many people are of the view that by selling an asset to a trust, they remove it from their personal estates, but they forget that this loan account will be seen as an asset in the transferor’s personal estate in the event of an insolvency and for Estate Duty purposes. In the event of an insolvency, all the assets held in trust may be subject to the claims of the estate planner’s creditors, if the loan account is called up and the trust is unable to repay the loan amount (Magnum Financial Holdings (Pty) Ltd (in liquidation) v Summerly case of 1984).