Trusts
What are Trusts?
A trust is a legal arrangement where one or more trustees manage assets on behalf of beneficiaries. Trusts can help protect wealth, manage estates, or ensure that assets are distributed according to your wishes.
Why You Might Need a Trust
You may need a trust to protect family assets, minimise estate taxes, or ensure financial security for dependents. Trusts are often used in estate planning and asset protection strategies for individuals with significant wealth or complex family structures.
Types of Trusts
Living Trusts (Inter Vivos):
Created during the trust founder’s lifetime for the benefit of designated beneficiaries.
Testamentary Trusts:
Created in terms of a will and only come into effect after death.
Special Trusts:
Established for specific purposes, such as catering for minor children or disabled persons.
How Trusts are Taxed
Trusts in South Africa are taxed either at a flat rate of 45% on income retained in the trust or at the beneficiaries’ marginal tax rate if income is distributed. Capital gains are taxed at 36% for trusts.
Registration of Trusts
Registering a trust involves preparing the trust deed, lodging it with the Master of the High Court, and paying the registration fees. At Goldman Schultz, we assist with the entire process, ensuring that all legal requirements are met. Those wishing to DIY will need to ensure compliance with the Trust Property Control Act.
Documents Needed to Register a Trust
♦ Certified copies of trustees’ ID documents
♦ Proof of residence for trustees and beneficiaries
♦ A trust deed drafted according to South African law
♦ Completed forms from the Master’s Office
Reporting Obligations of Trustees
Trustees are responsible for managing the trust’s assets prudently and in the best interests of the beneficiaries. They must submit annual financial statements, ensure compliance with tax laws, and provide transparency in their actions through regular reports to beneficiaries. Trustees are also accountable to the Master of the High Court for the proper administration of the trust.
Contact us
Why You Should Choose Goldman Schultz for Your Trusts
At Goldman Schultz, we offer personalised service and expert legal guidance for setting up and managing trusts. With our boutique approach, you work directly with our experienced partners, ensuring dedicated attention to your needs. We understand the complexities of South African trust law and provide tailored advice to protect your assets, manage your estate, and meet your family’s future needs. Our goal is to simplify the process and offer long-term solutions for wealth preservation and security.
We prioritise your peace of mind, making us a trusted partner in your financial planning journey.
FAQ for Trusts in South Africa
How do trusts work in South Africa?
A trust is a legal entity where assets are transferred by a founder to be managed by trustees for the benefit of beneficiaries. Trustees manage these assets in line with the trust deed, ensuring compliance with South African laws. Trusts can serve to protect assets, reduce estate taxes, and manage wealth distribution.
What is a trust and its purpose?
A trust is a legal arrangement where one party (the founder) transfers assets to trustees, who manage them for the benefit of beneficiaries. Trusts are commonly used for asset protection, estate planning, and ensuring that assets are distributed according to the founder’s wishes.
What type of trust is best?
The best type of trust depends on your needs. Living (inter vivos) trusts are ideal for managing assets during your lifetime, while testamentary trusts come into effect after death and are useful for estate planning. A family trust can provide long-term protection for family assets. Consulting with a legal expert helps determine the best option for your specific situation.
What are the disadvantages of a trust in South Africa?
Trusts can be costly to set up and manage, and their tax rate (45%) is higher than individual tax rates. Compliance with legal and reporting obligations can also be time-consuming. If not structured correctly, the trust may not achieve the desired asset protection benefits.
How much money do you need to have a trust?
There is no set minimum to establish a trust in South Africa, but it should be financially viable. Trusts are typically recommended for individuals with substantial assets or complex estate planning needs. The costs involved in setting up and maintaining a trust should also be considered.
Can a beneficiary withdraw money from a trust?
Beneficiaries can only withdraw funds from a trust if the trustees approve and if the trust deed permits it. The trustees have the responsibility of ensuring that any withdrawals are in line with the terms and purpose of the trust.
Who has the most power in a trust?
Trustees hold the most power in a trust as they are responsible for managing the trust’s assets according to the trust deed and in the best interests of the beneficiaries. However, their actions are guided by the stipulations of the trust deed, and they must act in accordance with South African law.
Which trust fund is the best?
The best trust fund depends on individual needs. Family trusts are common for long-term wealth protection, while special trusts may be ideal for caring for disabled beneficiaries. The choice of trust should be aligned with your financial goals and estate planning needs.
What is the major disadvantage of a trust?
The primary disadvantage of a trust is the cost involved in setting it up and maintaining it. Trusts also face a higher tax rate compared to individual taxpayers, and ongoing administration can be complex, requiring regular reporting and compliance with legal requirements.
Why put money in a trust?
Placing money in a trust can protect assets from creditors, reduce estate duty, and ensure the assets are managed according to your wishes. Trusts can also provide financial security for minors, disabled individuals, or other vulnerable family members.
What type of bank account is best for a trust?
A separate trust account must be opened in the name of the trust to keep trust funds separate from personal assets. This ensures proper financial management and compliance with South African legal requirements.
Who is the best person to set up a trust?
An experienced attorney specialising in trust law is the best person to help you set up a trust. They ensure the trust deed is drafted according to legal standards and that the trust complies with all regulations.
Is a trust better than inheritance?
A trust can offer more control over how assets are distributed compared to inheritance, particularly for minor beneficiaries or complex estates. It can also protect assets from creditors and reduce estate taxes. However, it is more costly to establish and manage than a direct inheritance.
What are reasons to not have a trust?
If you have few assets or a simple estate, the costs of setting up and maintaining a trust may outweigh the benefits. High tax rates for trusts and the administrative burden may also make a trust less suitable.
How much tax does a trust pay in South Africa?
Trusts are taxed at a flat rate of 45% on income retained within the trust. However, if income is distributed to beneficiaries, they are taxed at their personal income tax rate. Capital gains within a trust are taxed at 36%.
How much money do you need for a trust fund in South Africa?
There is no specific minimum amount required to establish a trust fund, but the value of assets in the trust should justify the costs of setting it up and maintaining it. Typically, larger estates benefit the most from trusts.
What is the disadvantage of a family trust?
A key disadvantage of a family trust is the cost of setting up and maintaining it. Additionally, the trustees must comply with stringent legal requirements, including annual reporting. Trusts are also taxed at a higher rate than individuals.
Do you make money in a trust?
While a trust itself does not generate income, the assets within the trust (such as investments or property) can generate income. This income is either retained within the trust or distributed to beneficiaries. Trustees ensure the income is managed and distributed according to the trust deed.