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• Minors
  
  If a minor is an heir to an estate where there is no will, or if there is a will but no trust clause, the inheritance must be paid into the Guardians' Fund of the Master of the High Court. The same happens in the event of a minor being the beneficiary to the death benefits of a policy.
  
  
• Persons who cannot take care of their own affairs
  
  If persons are not able to take care of their own affairs due to physical or mental conditions, their assets must be placed under the protection of a curator. The Master of the High Court will give permission for all expenses as well as the types of investments made.

Other instances where a trust can be used to good effect:

• In case of indivisible assets
  
  Certain assets may, owing to their nature or because of circumstances, not be transferred to more than one person. For example: the Sub-division of Agricultural Land Act, Act 70/1970, currently stipulates that agricultural land may not be sub-divided without the authorisation of the Minister of Agriculture.
  
  
• To effect tax savings in the case of:

  • Estate Duty
    Assets transferred to a trust no longer form part of your estate. This means that all the growth in the value of the assets occurs in the trust, and not in your own estate, resulting in a tax saving.
    
    
  • Capital Gains Tax
    Trusts attract a higher Capital Gains Tax rate than that paid by individuals. However, a trust remains an excellent estate planning instrument because tax on capital gains is currently lower than that of estate duty. Capital gains can be vested (not distributed) in a beneficiary.  The gain is then taxable at the individual's tax rate.  (The individual will qualify for the R12 500 annual exclusion).
    
    
  • Income Tax
    Subject to certain restrictions, the trust will pay tax on retained income at the present rate of 40%.
    
    
  • Income paid out to income beneficiaries will be taxable in their hands at their normal tax rate.
    
    
• Pegging the value of your estate
  
  Growth assets, such as shares, unit trusts and market-related policies, could result in estate duty. Such assets can be transferred to a trust in order to keep the growth out of your estate.
  
  
• If your family composition is complex
  
  If you are divorced, or if you want to keep certain assets in your family, it could complicate inheritances and make your will very complex. This could result in unnecessary delays in settling your estate.
  
  
• To protect assets
  
  A trust could be structured in such a way that it does not vest in your hands and will therefore not form part of your estate. In the event of your insolvency, creditors will not be able to lay claim to these assets.

Contact an intermediary now for expert advice.

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