The Family Trust in South Africa – Do you have your Family Trust registered?
A family trust can play an important role in your family’s life. It may continue to do so after you passed away. The same like owning property, a car or a business, creating and running a family trust may sometimes be beneficial to both you and your family. The aim of this article is to bring the concept of the Family Trust to your attention.
What is a Family Trust in simple terms?
Basically, someone called a founder or donor would donate some money or property and appoint trustees to administer the property for the benefit of certain identified beneficiaries. The property would then be called the Trust Property. This arrangement and agreement is called a Trust. The terms of the agreement would be stipulated in a Trust Deed. The Trust Deed is a legal document. This document would then be registered with the Office of the Master of the High Court. The Trustees may only act in terms of the Trust Deed.
All property, money and so on that is donated to the Trust, by the founder or anyone else, does not belong to him or her. The property belongs to the trustees in their capacity as trustees for the time being of the Trust. So, if trustees change, the new trustees take on the responsibility to manage the Trust Property as initially agreed to by the initial Trustees and the Donor. And of course, the Trustees can only use the Trust Property as stipulated in the Trust Deed.
Example of the implementation of a Family Trust
Let’s say the Trust Deeds states that the Trust assets are to be used for the benefit of the Founder’s grandchildren. It is to be used for school fees, and tertiary education and the like. Therefore, the Trustees would then have to utilise the Trust property to pay for the school fees of the founder’s grandchildren. If the grandchildren are not at school yet, the Trustees may have to invest the Trust assets until such time it is needed for school fees.
When would a Trust Terminate?
The Trust Deed would stipulate when the Trust would terminate and what should happen to its assets at the time. If one applies the example above, it may state that the Trust terminates when the youngest grandchild completes University. Should this happen, then the Trust Deed may stipulate that the remaining Trust assets be distributed to all these grandchildren in equal shares.
Tax and legal implications of a Trust
The tax laws applicable to a Trust may differ significantly to that of an individual or a company. It is therefore important to consult an accountant or tax practitioner on such implications. If a Trust is an ideal vehicle to use to secure your family’s financial future, then creating a Trust sooner than later may be the best thing to do.
Speak to us should you wish to register a Family Trust
Should you wish to register a Family Trust, feel free to contact us.
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