In Trusts, Uncategorized


An Inter Vivos Trust – i.e. “a trust amongst the living” – is created by agreement between the Founder (or Donor) on the one hand, and Trustees on the other hand, for the benefit of a third party or parties known as the Beneficiaries.

A trust is a separate entity that does not “belong” to anybody in particular. The typical discretionary Family Trust does not form part of the estate of it’s Founder or Trustees, nor of the Beneficiaries for whose benefit it was created.

The trust is controlled and administered by it’s trustees for the benefit of the beneficiaries. In the typical discretionary trust, beneficiaries do not have any rights to the assets of the trust. The trust is intended to acquire and hold assets for the benefit of it’s beneficiaries only. Beneficiaries therefore enjoy what is called “practical ownership”, but do not acquire vested rights or actual ownership before sometime in the future when rights might be allocated in terms of the provisions of the trust deed. The implications and consequences of ownership can therefore be postponed for as long as may be necessary or required.

The trust document contains the rules pertaining to the administration of the trust. These rules will amongst other determine the powers of the trustees, the rights of beneficiaries, administrative procedures, the termination date of the trust and other important provisions for the smooth and fair management of the trust.



As the trust is a separate entity, the assets of the trust do not form part of the estates of any of it’s trustees or beneficiaries. This separation of ownership holds various benefits for the beneficiaries of a trust.

  • Assets held by a trust do not form part of the deceased estate of any of it’s trustees or beneficiaries. No estate duty, Capital Gains Tax or administration costs are therefore applicable to a deceased estate of a the Founder, Trustee or any Beneficiary.
  • Your unforeseen demise will not result in the freezing of the trusts bank account or business.
  • The trust continues to “live” despite your demise. The beneficiaries can still benefit as usual from the trust and do not have to wait for the winding up of your estate.
  • Your demise does not require transfer of immovable properties registered in the name of the trust . Transfer duties and transfer costs are therefore not applicable.
  • As the trust assets do not form part of your estate, assets registered in the name of a trust or otherwise belong to a trust, are protected against claims that might be instituted against you personally. Creditors cannot attach trust property to satisfy your personal liabilities.
  • A trust effectively protects you against the risks linked to your business enterprise. Once again business creditors cannot attach trust property for the debts or liabilities of the business.
  • By transferring assets with a growth potential to a trust, you can peg the growth in your estate and effectively transfer growth to the trust. Your estate is thus not penalized for any increase in the value of assets and effectively avoids estate duty .
  • A trust is a safe haven for assets that must be protected for the maintenance of your family and your dependants after your death.
  • A trust is a legitimate way of broadening your tax base whereby tax liability can be reduced.
  • A trust is the ideal vehicle to provide tax free funds for the education of children.
  • Different to public entities, trusts offer privacy to it’s beneficiaries and trustees. Access to the provisions and the business of the trust can only be obtained with the permission of the trustees.

In future articles attention will be given to the statutory requirements of a trust, the question of “for who are trusts meant”, the transfer of assets to a trust, taxation of trusts, termination of a trust and maintenance of a trust.



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