What is a Trust - A trust is a legal entity which holds assets (without holding ownership over them) for the benefit of trust beneficiaries. Therefore a trust arrangement represents the transfer of ownership of the assets to the Trust and control (management) of the trust assets to the Trustees from the donor (or founder).
Trustees do not hold the trust assets in their professional or personal capacities, but for the benefit of the trust beneficiaries.
The trustees owe, in terms of common and statute law, a fiduciary duty to the trusts beneficiaries. Trustees are required to administer the trust solely for the benefit of the trusts beneficiaries.
A person who is deemed ineligible or disqualified by the Trust Property Control Act connot be a trustee. The Master of the High Court, Which has jurisdiction, ensures that those who should benefit from the trust do not solely control the trust.
In regard to Family trusts, where the trustees are all beneficiaries (who are all related to one another), the Master of the High Court can insist on appointment of an independent outsider as one of the trustees.
A trust beneficiary is entitled to the benefit(s) under the trust arrangement, from the flexible or assigned rights which are determined by the trust deed.
All trusts are required to have ascertainable beneficiaries. Trust beneficiaries are usually natural persons, although a juristic person (such as a company) may also be held as a beneficiary of a trust).
All trusts are governed by the Trust Property Control Act of 1988. The constitutional document for a trust is called a trust deed. In this the framework in which the trust must operate (including powers and limitations), are set out.
Trusts must be registered with the Master of the High Court (in the relevant jurisdiction) where the trust’s assets are situated. Trustees may only act once the Master has issued letters of authority allowing them to act.
A trust does not have a personality as it is simply an accumulation of assets.
However, in some cases, for example, for tax purposes, it can be regarded to have a separate legal identity.
Despite the lack of legal personality, it may have legal capacity and the trustees may perform juristic acts so long as the trust deed allows this.
A trust may be used to hold and protect personal or business assets, especially beneficial in event of subsequent liquidation, sequestration or divorce. A trust may be used to hold shares in businesses and for ensuring continuity of ownership of assets.
Assets may be placed in a trust by donation of assets selling of assets to a trust. Trusts are subject to income tax which is now at a rate of 40% as well as capital gains tax.
The trusts income may be distributed to the trust beneficiaries through what is known as the conduit principle, by which the tax is only paid at the individual marginal tax rate of the recipient beneficiary.
Subject to some limited exceptions, no estate duty will be payable by the trust on the assets transferred to a trust on the death of the transferor.
There are two main types of trusts:
Created by, between and for living persons through an agreement.
Example- a family trust; an employee share ownership trust; and
Created in terms of a will.
Trusts can be kept in safe custody and administered or governed by a particular statute. For instance by a financial institute (Companies Act 2008 and the Financial Institutions Act 2001).
See here for other Trust variations
A trust may only be terminated by:
On dissolution, the trust’s assets will devolve as contemplated in the trust deed.
Subscribe to our Newsletter
Estate Agent Training
Bond & Transfer Calculator
It happens most often that some properties are transferred and sold from a deceased estate, with the purchaser having to transact with the heir or the executor of the deceased estate. In other instances, there is no sale involved, but that the property must be transferred from the deceased estate to the heir who is entitled to inherit such property.
Read More ...Posted by Cor van Deventer on Monday, April 19, 2021 Views: 48
The primary purpose of having a valid will is so that the testator can have the benefit of prescribing the division of his assets to only the beneficiaries he/she desires. In this way, having the assets of the deceased in the wrong hands after his/her death is avoided.
Read More ...Posted by Cor van Deventer on Tuesday, January 26, 2021 Views: 187
The sale of the assets is one of the most prominent ways of distributing assets. However such sale needs to be at market value, which can be achieved by getting two different valuations and declaring the average. However, the sale of assets such as property and company shares will invite Transfer Duty and Capital Gains Tax.
Read More ...Posted by Cor van Deventer on Thursday, January 21, 2021 Views: 155