Asset Protection trusts include a large spectrum of legal structures that are set up in order to mitigate the effects of divorce, attacks from creditors, and bankruptcy on the part of the beneficiary.
Any form of trust that provides for trust property to be held on a discretionary basis falls within this category, for example a family trust that is designed to secure the interests and protect the property of a group of family members.
Types of Asset Protection trusts:
Family trusts can be either testamentary trusts, or inter vivos trusts. Their main objective is the protection and maintenance of trust property for the benefit of the family members of the founder.
These trusts are typically set up in a tax haven jurisdiction. In South Africa, this includes any non-South African or non-resident trust that has its place of effective management outside of the Republic. There are tax advantages and disadvantages with foreign trusts, and in South Africa there are both general and specific anti-avoidance provisions which can negatively impact the use of foreign trusts.
These trusts are inter vivos trusts. They are formed to ensure the continued operation of a business that has a profit incentive. The trustees should be independent of the beneficiaries.