What is a trust?

A trust is not a natural person and neither should it be confused with a legal person like a company or close corporation.  It is “sui generis”, meaning it is of its own kind.  A trust is formed through a deed, an agreement, entered into between an owner of assets (referred to as a Founder) and trustees (persons who will administer the assets donated to the trust by the Founder and future assets received or acquired by the trust).  The agreement between the Founder and the Trustees is for the Trustees to administer the trust assets for the benefit of specified persons (referred to as Beneficiaries). 

What types of trusts are there?

There are various types of trusts, the main distinction being “inter vivos” trusts and “mortis causa” or testamentary trusts.  An inter vivos trust is a trust that a Founder creates which functions during his or her lifetime.  A testamentary trust on the other hand is a trust that is contained in a deceased person’s will and is only created after the Founder’s death.

Won’t the Trustees abuse my assets?

The Trustees act in accordance with the powers given to them in the Trust Deed as well as certain legislation and laws that govern trusts.  This therefore creates a reasonable expectation that the Trustees will administer the trust assets for the true benefit of the beneficiaries as they cannot simply do as they please. 

When is it very advisable to have a trust?

A trust can come in handy in various circumstances.  The most common ones are if you have assets you want to leave for generations to come (i.e. accumulation of wealth in a trust) or farm property you want to leave to many heirs (i.e. bequeathing certain assets to a trust so that there is no need to register the asset in the names of each of the heirs) or minor children (children below the age of eighteen years), it is advisable to have a trust or to create a trust in your will.  This will avoid scenarios where the minor’s inheritance is paid out to the minor’s guardian directly, which guardian may not use the funds or assets received to the minor’s benefit or where assets are left to many heirs but cannot be registered in their names due to prohibitive legislation such as the limit on the number of registered owners of farm land.
How can a trust help with my estate planning?

If you form an inter vivos trust and accumulate assets in that trust, those assets will not form part of your estate on your death as the trust you created, as Founder, is a separate person from you.  This means that when estate duty is calculated on your estate, the value of the assets in the trust will not be taken into account thus reducing the value of your estate and the amount of estate duty that would be payable.

Can creditors attach assets in a trust I founded?

If a trust if properly formed and managed, its assets will not form part of your estate. As such, creditors would not be able to attach those assets.

When does a trust terminate?

A trust terminates according to what the trust deed provides for, which will take into account the object of the trust deed.  If a trust was created for the benefit of minor children, the trust deed may provide that the trust will terminate when the youngest child attains the age of eighteen (or a different specified age).  If a trust was created for the accumulation of wealth for many generations to come, it may say that the trust shall continue indefinitely.  A trust deed may also say that the trust shall terminate after a predetermined time period.

I want to create a trust, how do I do it?

There are various types of trusts and tax considerations to take into account when creating a trust.  There is no umbrella solution for everyone.  The creation of a trust therefore requires careful consultation to ensure that the trust deed is suitable for the objects of the trust.  Please contact us to schedule a consultation for us to properly assist you in the creation of the trust you require.