Why a trust is the most comprehensive estate planning vehicle in the world

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1. A trust provides total continuity

If individuals have not structured and properly planned their assets, cash, property portfolio, insurance portfolio, business interests correctly, all their assets may have to be liquidated to compensate for all taxes and outstanding debt upon death. This could be potentially detrimental to your family and their financial well being. This could be avoided through proper planning and structuring.

2. Taxes and costs of more than 30% can be saved upon your death

If you do not have a trust, more than a 1/3 of your life assets will go to SARS when you die, and that is based on assets that you have acquired with money you paid tax on while you were alive.

A trust ensures the following:

  • No Estate Duty (20% of the Estate below R 30 million, and 25% of the Estate above R 30 million) as the trust will continue to persist after death.
  • No Capital Gains Tax on growth assets. Death is deemed as a disposal and will trigger if you hold these assets in your own name upon death.
  • No Executor’s fees (at 4.025% of the Gross Estate). This is an unnecessary and avoidable tax. Executor fees are calculated on the gross value of an estate and deducted before any other expenses, therefore the executor can receive up to 10% of a net estate.

3. No cost on death

No transfer costs and bond cancellation costs on immovable property and costs related to other assets, which are already registered in or held by the trust (as ownership does not transfer to anyone after death).

4.Your minors are protected

In South African Law, a minor in general cannot inherit money (and it is not wise to leave immovable property to a minor). Therefore upon death of the parent (or other person who the child inherits from) normally the assets held in their personal name upon death are liquidated and the proceeds invested in the Guardian Fund, with limited access thereto until the minor turns eighteen. It therefore makes sense to pro-actively structure assets in a trust as part of your estate planning where minors may inherit.

Assets are also protected against spendthrift children, who will not be able to reduce the assets to zero.

5. No estate freezing

Bank accounts and cash reserves of a trust will not be frozen during the winding up of the estate, which can take up to two years or longer in the case of a deceased estate. A trust will ensure rapid access to capital and income after death.

6.Multi-ownership of assets

Some assets cannot be divided (e.g. businesses, farms or other property). By placing these types of assets in trust, the heirs can be the beneficiaries of the income generated by the assets. The heirs are also protected from one anothers creditors and potential claims by spouses upon divorce or potential claims of creditors upon sequestration of an heir.

7.Confidentiality

A will and the Liquidation and Distribution Account in a deceased estate become a public document on death. A trust does not form part of an estate, and therefore the list of assets held in a trust remain confidential.