With regards to estate planning, a trust is essentially a legal relationship created by the trust founder by placing their assets under the control of another person/s during the founders’ life or on death for the benefit of their beneficiaries.
Setting up a trust may seem an imposing task, but it is not. An accredited financial advisor can assist you in setting up a trust to assist you in saving your heirs as much money as possible upon your death. You will need to plan this very carefully though, as in recent years the South African courts have ruled against people who failed to administer their trusts properly. This had been especially true in cases where the founder of a trust has been a trustee and beneficiary of said trust. This was mainly due to the fact that these trusts appeared to be set up to gain tax advantages or hide assets from creditors. Even if you are not guilty of such wrongdoings, a poorly administered trust can still see your trusts without protection after your death.
There are a number of parties that can challenge the protective status of your trust. These include:
* The South African Revenue Service
* Disappointed beneficiaries of trusts
* Your creditors
* Former spouse who may believe that they are not receiving their fair share of assets from the trust
There are a few minimum provisions that trustees are advised to adhere to, to prevent the “trust veil” being lifted and the trustees being held liable for claims from creditors and other parties. These are:
* Observer provisions of the Trust Property Control Act and all applicable legislation.
* Appoint an independent trustee, someone who isn’t connected to the family or a beneficiary.
* Prepare all annual financial statements whether the trust receives a taxable income or not.
* Hold regular meeting and minute all decisions and discussions.
If you want to ensure that the assets in your family trust are properly protected, you must seek the counsel of an accredited financial advisor who will be able to assist you in avoiding mistakes that may lead to the decimation of your trust upon your death. An expert independent trustee will also assist in ensuring the safety of your assets.