So many Trustees have found themselves in court due to Trusts not managing a Trust properly as required by the Trust Property Control Act No 57 of 1988.

A Trust can have a many benefits but Trustees need to understand:

  • What the purpose of a Trust is.
  • The costs of running the Trust.
  • What are the duties of Trustees?
  • Who must the Trustees be?
  • How are assets transferred to a Trust?
  • Administration requirements of a Trust
  • Tax implications of a Trust.

The list above is just a few of the many things to consider.

If you are thinking of using a Trust for Tax Planning, you are a few years too late. SARS has imposed higher tax rates on Trusts than that of an individual. As from 1 March 2015 interest and income received by a Trust is taxed at a flat 41%. Individuals are currently taxed according to the marginal tax tables where taxes are lower.

Capital Gains Tax within a Trust is also higher than in the hands of a natural person. SARS does allow income, interest, capital gains and dividends to be distributed to beneficiaries, and they are then taxed at their personal tax rates.

However, if you are considering using a Trust as an Estate Planning solution, you ensure your family is looked after. You also protect your assets from creditors.

Registering a Trust can be costly and you need to consider the costs of the Trustees remuneration, accounting fees and other running costs. You need to make sure that there is sufficient capital in the Trust to finance these costs.

The Trust Property Control Act No 57 of 1988 gives a list of requirements that the Trustees need to follow in conjunction with the Trust Deed. All decisions must be made jointly. In court cases like Thorpe & Others v Trittenheim & Another and Steyn and Others NNO v Blockpave (Pty) Ltd it is clear that transactions are not valid if all the Trustees have not agreed to them.

The appointment of Trustees is initially up to the Founder. However, it needs to adhere to the requirements of the Trust Property Control Act No 57 of 1988. The Trustee, the Founder and the Beneficiary may be the same person. However, the Master of the High Court prefers that he/she is not the only Trustee and only beneficiary. It is important that there is a clear separation of beneficial interest and control of assets held by the Trust. In the court case, Land and Agriculture Bank of South Africa v Parker & Others it is highlighted that Trustees including the Founder cannot use the Trust as their alter ego. The Master can appoint an Independent Trustee if he feels the current Trustees are not appropriate.

Transferring assets to the Trust needs to be considered carefully. Seek advice regarding this in order to do this in the best and most cost effective way.

Managing a Trust can be onerous and technical.

If you wish to consult with Ternary Financial Services CC regarding your Trust please feel free to contact us.