Formalities in trust deeds that assist with proper administration

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A family trust is by its very nature an intimate part of the financial and personal lives of a family, but the estate planner often loses sight of the fact that the trust - represented by the trustees - and the estate planner, are separate entities.

Do trust beneficiaries have any rights?

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Many people set up trusts, not really applying their minds. Often trust practitioners do not apply their minds and guide their clients either, use a standard trust deed template and just change the name of the trust, the names of trustees and use a standard template list of beneficiaries. Setting up a trust and selecting beneficiaries require a good understanding of trusts, as well as a proper consideration of one’s personal circumstances. There is no one size fits all solution.

Who can be a beneficiary of a trust?

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Beneficiaries are those persons who are initially named by the founder in the trust deed and are subsequently selected by the trustees from time to time, in terms of the trust deed stipulations, set by the founder.

Where are we with trusts and taxes after the Budget Speech?

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Not that it is anything new, but ‘trust owners’ were holding their breaths yet again before this Budget Speech. It appears not to be ‘trust owners’ alone, but the wealthy in general, who are worried, as government is desperate to plug a whole in its cashflow and budget, as well as trying to create a more equal society. And it is using taxes to drive its agenda.

What are trustees’ obligations?

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Trustees of a trust are akin to the managers of a company. They are the guardians of the trust assets and have a duty to manage these assets in the best interests of the beneficiaries, as provided for in the trust deed. They also have a fiduciary duty to beneficiaries in terms of the Trust Property Control Act.

Which assets should be held in a trust?

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Historically, estate owners were advised to move all paid up personal assets into their family trusts to save on Estate Duty, often on interest-free loan account. However, if upon your death the loan has not been repaid, the outstanding loan would constitute an asset in your estate.

How to move assets into a trust

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The general perception is that trusts are just for the wealthy. Therefore people believe that they have to build up wealth before it warrants setting up a trust. It can be a costly exercise to move assets, acquired by you, into a trust at a later stage.

Does your trust even exist?

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Have you ever read your trust deed? It is astonishing how many people have placed their entire wealth into trust structures, but have never even made an effort to confirm that their contents are factually correct, expressing their wishes properly, and remaining relevant over time.