Be mindful if you use trust-owned assets

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Many people have set up trusts as part of their estate plans to either protect their assets during their lifetimes, or to ensure continued use of the assets upon their death. This is especially true for properties the estate owner desires to retain in the family for generations. In many instances, the estate owner and his family live in such properties transferred into the trust.

Does a trust eliminate estate duty?

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Although death and taxes are certain, people are always looking for ways to minimise taxes upon death. In certain instances, people are not even aware of the tax consequences upon death. They may have to pay in excess of 30% in costs and taxes – capital gains tax, estate duty and executors fees. If no provision was made for these costs and taxes, the executor may have to liquidate assets needed by the remaining family, to make these payments from the estate.

Is a testamentary trust the solution in estate planning?

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In the context of estate planning, a trust can be described as a legal relationship which has been created by a person (known as the founder, donor or settlor) through placing assets under the control of another person (known as the trustee) during the founder’s lifetime (an inter-vivos trust) or on the founder’s death (will trust, testamentary trust or trust mortis causa) for the benefit of third persons (the beneficiaries). Your assets can be bequeathed in terms of a testamentary trust or to an inter-vivos trust.

What are the types of trusts

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Trusts are typically classified in terms of the following:

The method of formation (inter-vivos trusts and testamentary trusts), the rights conferred on beneficiaries (discretionary trusts and vested trusts), or the purpose of the trust (Special trust, Charitable trust, Employee trust, etc.).

Can trustees be held liable?

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What is expected of a trustee: Trustees are the guardians of the trust assets and have a duty to manage these assets in the best interest of the beneficiaries. Trustees are akin to the managers of a company. They manage the assets of the trust for the purpose and the objectives set out in the trust deed, for the benefit of the beneficiaries. The trustees have a fiduciary duty to the beneficiaries of the trust.

How does this new attack from SARS on trusts work?

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Traditionally, people moved their assets into a trust to stop/freeze the growth in their personal estates for Estate Duty purposes. It was often the case that trusts did not have the liquidity to pay for these assets. The alternative was to sell the assets on loan account to the trust. This loan was generally never repaid. No interest was charged either, as an interest charge would inflate the estate of such person (which the trust structure was supposed to freeze) and income tax would be payable on the interest by such person.

Tips for women in trusts - How to protect your family’s legacy

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A woman was married to a specialist surgeon and one son was born from the marriage. Her husband created a trust for the family, but was advised by his attorney to serve as trustee with his brother, and to be appointed as the only beneficiary of the trust. The trust deed stipulates that he can, in his will, appoint “follow-up” beneficiaries. This obviously gave him flexibility to exclude his wife and son, should the need ever arise. Unfortunately, the person who drafted his will, was not aware of this stipulation in the trust deed and did not appoint the required “follow-up” beneficiaries in the will.

How easy is it (or not) to remove a trustee?

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Trustees are the guardians of the trust assets and have a duty to manage these assets in the best interests of the beneficiaries, as outlined in the trust deed. Choosing a trustee, without anticipating various negative outcomes, who may become problematic later, may cost you dearly.