At Triosol Fiduciary Services, we recognize the significant challenge that arises when it comes to the management of estates and assets, especially in moments of loss. Our dedication lies in delivering compassionate and efficient late estate services, where we aim to guide you through each step of the process with empathy and utmost respect.
Moreover, our commitment extends beyond times of adversity. We take a proactive approach, assisting in the safeguarding and organization of your assets well before any unfortunate events unfold. By doing so, we ensure not only your financial security but also provide you with lasting peace of mind. Our goal is to be a steady and supportive partner in your financial journey, offering comprehensive solutions that prioritize your well-being and the preservation of your legacy.
Types of Trusts
A trust can be defined as a “legal entity created by a party (the founder) through which a second party (the trustee) holds the right to manage the trust’s assets or property for the benefit of a third party (the beneficiary)”.
There are two types of trusts in South Africa, namely testamentary trusts and living (inter vivos) trusts.
- A testamentary trust is set up in terms of the will of a testator and only comes into effect after the death of the testator.
- An inter vivos trust or living trust is set up during the lifetime of the founder and is a contract between the founder and the trustees(s). Inter vivos is a Latin phrase which means “while alive” or “between the living”.
You may need a trust if the following factors are applicable to you:
- You have minor children, and you want to leave your assets to them.
- Your assets (including life policies) exceed R3.5 million.
- Your assets consist of capital appreciating items.
- You want to control how/which assets are passed onto your heirs.
- You need asset protection planning.
Clearly the reasons for creating a trust vary, and this erases the idea of trusts being reserved for an elite group of wealthy people only. In reality, any individual who deems it necessary, can create a trust.
The two types of trusts, namely testamentary trusts and living trusts, have different sub-categories. The sub-categories are not mutually exclusive of each other.
Discretionary and non-discretionary trusts
1.a) Inter vivos discretionary trust
This type of trust is set up during the lifetime of the founder and in it the founder gives the trustees absolute power over trust assets and income for the benefit of the beneficiaries. This type of trust should interest you if your priorities are asset protection and estate planning. Living trusts are created by the drafting of trust deeds and registering the trusts with the Master of the High Court. The trust comes into effect as soon as it is registered.
1.b) Inter vivos non-discretionary trust
This is another sub-category of an inter vivos trust and is beneficial for estate planning. In this type of trust, the trustees do not have absolute discretion and must pay the beneficiaries upon request without the discretion to refuse. Also known as a fixed interest trust, the trustee, having no discretion in how the distributions are to be made to the beneficiaries, must follow the terms of distribution set out in the trust instrument.
It is a trust where the trustees invest only in those securities that were mentioned at the time of making the trust or invest only in certain specified securities. They also do not have any powers to determine the method of distribution of the trust to beneficiaries.
2) Testamentary trust
This kind of trust can be discretionary or non-discretionary. It is a trust which becomes valid when the testator passes away. The trust is usually set up to care for family members who are too young or mentally incapable of receiving bequests directly. Normally, these trusts terminate when the beneficiary reaches a certain age, according to the wishes of the founder, but in some cases could continue for the lifetime of the beneficiary, especially where there is mental or physical impairments.
Special trust
Any trust (inter vivos or testamentary) where the beneficiaries are not of the age to receive a bequest or is a disabled person, it is called a ‘Special’ trust and is taxed as if it were a natural person. It can be discretionary or non-discretionary depending on the wishes of the founder/creator of the trust.
Why trusts may not always be a good idea
The factors mentioned underneath should be looked at before deciding on setting up a trust or not:
- Cost to establish:
- Tax:
- Administration:
- This includes:
- keeping all records from inception of the trust to at least 5 years after the trust has been deregistered,
- maintaining a separate bank account for all trust cash flows,
- passing trustee resolutions on every transaction,
- maintaining an asset register,
- providing financial statements, income tax returns and bi-annual provisional tax returns.
- This can become very complicated and time-consuming, especially when the trust owns and controls multiple properties and assets.
- Relinquishment of control:
- Claiming money back from a trust:
How do you ensure that you are making the right decision?
Every person’s needs and requirements are unique and setting up trust structures may benefit some people but not others. In some cases, the use of a trust can be detrimental to your desired estate plan outcome, incurring unnecessary expenses and other complexities. For this reason, it makes sense to engage with one of our experts who understands not only the implications of these structures whilst you are alive, but also when you wish to leave an inheritance to your spouse and children when you pass away one day. Triosol specialises in estates and is well positioned to advise on best practice and pitfalls when considering using the various trust structures.
The Art of Trust Creation
Embarking on the journey to establish a trust is a significant step that demands careful planning and meticulous execution. At Triosol Fiduciary Services, we understand the importance of this process, and our dedicated team of specialists is here to assist you at every stage. We recognize that setting up a trust involves various considerations, from selecting the appropriate trust type to crafting a comprehensive trust deed and navigating the intricate registration process.
Our experts are well-versed in the complexities of trust establishment and are committed to ensuring that your trust is not only legally sound but also aligned with your specific wishes and objectives. We take pride in our ability to provide personalized guidance, addressing your unique needs and concerns throughout the entire process.
To get started on establishing your trust, we encourage you to book an appointment with one of our experts. This initial consultation allows us to understand your goals, answer any questions you may have, and provide tailored recommendations based on your individual circumstances. Our team will walk you through the different trust options available, helping you make informed decisions that align with your long-term plans.
At Triosol Fiduciary Services, we believe in transparency and client empowerment. Therefore, during your consultation, we will discuss the details of our services, outline the steps involved in setting up your trust, and provide a clear overview of associated timelines and costs.
By booking an appointment with our experts, you take the first step toward securing your financial future and ensuring that your assets are managed according to your wishes. Trust in Triosol Fiduciary Services to guide you through the complexities of trust establishment with expertise, professionalism, and a commitment to your unique needs. Contact us today to schedule your consultation and embark on the journey of establishing a trust that aligns with your financial goals and legacy aspirations.
While trusts offer significant advantages, they also entail complexities and considerations that must be carefully navigated. Triosol Fiduciary Services provides comprehensive guidance on the potential drawbacks of trusts, from the initial cost of establishment to tax implications and public perceptions. With our expertise, you can make informed decisions that align with your long-term financial goals.
We ensure our experts always stay abreast of changes in legislation and regulations, ensuring that your trust remains compliant and effective in meeting your objectives. Our proactive approach empowers you to adapt to evolving circumstances and preserve your wealth for future generations.
In essence, our comprehensive guide endeavors to empower you with the knowledge and insights necessary to navigate the intricacies of trusts in South Africa effectively. With Triosol Fiduciary Services by your side, you can trust that your financial security and legacy are in capable hands. Contact us today to learn more about how we can assist you on your journey towards financial security and peace of mind.