wills & trusts

About trusts
Benefits of a trust
Types of trusts
Fees
FAQs

What is a trust?

A trust can be used to safeguard a minor child's inheritance, support a surviving spouse, provide for dependants with special needs or children from previous relationships, protect against insolvency by preventing creditors from claiming trust-held assets, and more. Trusts are powerful, versatile tools that can be used during your lifetime, or in your will as part of your estate planning, to ensure your wishes are carried out after you pass away. We can help you set up the appropriate trust for your needs.

Purposes of trusts

Trusts can be used for many different purposes. Here are five of the most common uses.

Purposes of trusts

Children’s trust

Safeguards the inheritance of minor dependants (younger than 18). You can stipulate the age a child must reach before managing their funds or inheritance themselves, it does not have to be 18 or 21.

Provider's trust

Makes provision for financial support to children or dependants with mental or physical disabilities, or special needs, who cannot manage the inheritance themselves.

Guardian's trust

The Sanlam Trust Guardians Trust can be nominated by a policyholder to receive the proceeds of a life insurance policy on behalf of a minor child. This prevents the money having to be paid to the Master’s Guardian Fund.

Widow's trust

Protects the surviving spouse, especially in the event of the main-income earner passing away or the surviving spouse not being willing or able to manage the inherited funds themselves.

Inter vivos trust (Living trust)

Established during your lifetime to manage your assets for the eventual benefit of your intended heirs and beneficiaries.

Future-use trust

A dormant inter vivos / living trust created at the time of death, but outside the estate administration process. Can be used for cash benefits from policies.

Benefits of a trust

The benefits of trusts can be as varied as the trusts themselves. Here are a few of the main benefits to keep in mind:

Safeguarding a minor child’s inheritance and preventing it from being paid into the Master’s Guardian Fund
Providing for a surviving spouse for the rest of their life
Ensuring long-term financial support for dependants with mental or physical disabilities and special needs
Ring-fencing assets for children from a previous relationship from assets for your current family that may form part of your deceased estate
Potentially lowering your tax liability in terms of estate duty, capital gains tax and personal income tax
Inflation protection for assets such as shares, unit trusts and endowment policies that can grow faster than inflation and attract estate duty if held in your name versus in a trust, whereby the value is excluded from your estate
Insolvency protection by way of preventing creditors from laying claim to assets like property held in trust, provided that transfer of the assets to the trust was done with lawful intent

Types of trust

Two of the most commonly used trusts in South Africa are living (inter vivos) and testamentary trusts. Part of setting up a trust involves appointing trustees to manage assets and act in the best interests of beneficiaries of the trust. Trustees have a legal duty to administer and distribute assets responsibly and according to the terms of a trust agreement.

Types of trusts

Living trusts (Inter vivos)

A trust is established while the founder is alive and is part of a financial plan. Its objectives include:

- Protecting assets from insolvency and irresponsible heirs - Reducing estate duty by transferring assets to the trust - Setting up a charitable trust for chosen charities

Court orders are required to set up Road Accident Fund trusts, curatorship trusts and medical negligence trusts.

Testamentary trusts

Testamentary trusts are set up in your will and activate upon your death. You can specify a termination date, like when a beneficiary graduates university. These trusts only come into effect after the founder's death. Trusts for beneficiaries under 18 are taxed differently to those with disabled beneficiaries.

Trust fees

To make sure your trust is set up correctly and most cost effectively (including tax considerations), it is important to consult with a professional. Our experts understand the costs and implications and can explain these to you in plain language. Trust fees include, but are not limited to, costs for the drafting and registration of a trust deed, Master’s fees, management fees, auditor fees, property management fees, and attorney fees.

FAQS

Have questions?

What are the duties and responsibilities of a trustee?
In terms of South African law, trustees are required to act objectively and in the interests of beneficiaries. Trustees must comply with specific regulatory requirements:
No secret profits: Trustees may, under no circumstances, make secret profits or speculate with trust assets
Negligence: Trustees must have the necessary expertise and demonstrate due care when administering trust assets
Good faith: Trustees must always act in good faith to each other and the beneficiaries
Compliance with trust deed: Trustees are legally bound and obligated to carry out the stipulations of the trust deed or will, in which their aims, powers and responsibilities are documented
What is involved in administering a trust?
The administration of a trust entails receiving, controlling and protecting trust assets, requiring that investments are made according to the trust deed, the needs of beneficiaries and sound investment principles. Trust administration also entails that trustees handle all transactions and invest assets without speculating and – if required by the trust deed or will – make regular maintenance payments to beneficiaries. In terms of the law, trustees are expected to report to:
Fellow trustees, beneficiaries and guardians of minor children
South African Revenue Service (SARS)
Master of the High Court, if requested
Financial Intelligence Centre (FIC) in the event of any suspicions of money- laundering by the settlor or related party.
Lastly, the administration of a trust entails that trustees must provide advice to fellow trustees and beneficiaries. Trustees administer a trust themselves. If they are unable or unwilling to do so, they may contract agents to take care of the administration on their behalf.
What trust fees apply to the founding and management of a trust?
Certain fees are payable during the founding and management of a trust since this is handled by specialists. The fees include:
Drafting and registration of the trust deed and (living trust only)
Master’s fees
Acceptance fee for receiving and protecting trust assets
Management fee (percentage of assets under management, collected on ongoing basis)
Tax preparation fee
Termination or partial termination fee
Auditor fees
Property management fees
Attorney fees

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