Trusts

A trust is a type of investment arrangement that allows an individual to hold assets, without owning them, for the sole benefit of the nominated trust beneficiaries.

Trusts do not have legal personality as they are merely an accumulation of assets. However, in some circumstances, trusts are regarded as having separate legal identities.

Many people use trusts to hold shares in businesses and to ensure the continuity of asset ownership. Additionally, trusts can be used to hold and protect personal or business assets, which is particularly beneficial in the event of divorce, liquidation or sequestration.

Generally, trustees are nominated by the founder in the trust deed and are responsible for administering the assets in the trust according to the trust deed as well as the relevant laws.

Furthermore, trustees are not permitted to derive any direct or indirect advantage from a trust unless it is expressly permitted by the trust.

Documentation Required for Opening a Trust

All documentation must be up to date and correct:

Letter of Intent

A record of the trust founder’s wishes that serves as a guide for trustees when exercising discretionary powers.

Minutes

Detailed records of all the trustee’s decisions should be kept.

Loan Account Reconciliation

Any loan balances owed to the trust founder or funder will qualify as assets in the estate.

Acknowledgement of Debt

Records must be kept of the terms and agreements of any loans provided to the trust.

Sale Agreements

Sale agreements record and detail any assets sold to the trust, including the purchase consideration.

Trust Deed

The trust deed should be flexible enough to allow for changes or alterations when legislation or requirements change.

Annual Financial Statements and Tax Returns

Copies of all annual financial statements and returns must be kept.

Types of Trusts in South Africa

Testamentary Trusts

These trusts are creating at the winding up of a deceased estate following a specific stipulation in the deceased person’s will that a trust must be set up.

Testamentary trusts are commonly created to hold and protect assets on behalf of minor children who, according to South African law, cannot inherit anything in the absence of a trust.

Inter Vivo or Living Trusts

These trusts are established by an individual during their lifetime to manage certain investments or assets and to support beneficiaries. Inter vivos trusts can be discretionary or vested trusts.

Olemera – Financial Advisors in Johannesburg

Olemera’s qualified financial advisors can assist you with setting up local and offshore trusts to ensure the efficient management and administration of your assets for the benefit of your beneficiaries.

For more information on trusts and how they fit into the financial planning picture, please don’t hesitate to contact us.

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