Trusts and Estate Planning

Silke Financial Services is often approached regarding the advisability of usage of Trusts in the areas of estate planning.

Briefly, there are two main applications of Trusts. These are:

• An Inter Vivos Trust – this trust is formed during the lifetime of the 'Settlor' of the Trust.
• A Mortis Causa Trust – this type of trust is provided for in a Will, where there is a possibility of minors inheriting.

This Communiqué provides a broad overview of the essential elements to watch out for when considering the formation of an Inter Vivos Trust.

Trusts are a long standing part of the South African landscape and are regulated by the Trust Property Control Act. They serve multiple purposes, from the formation of so-called business trusts to those formed to protect the assets of families and for various philanthropic purposes.

As far as using trusts for personal family assets is concerned there are a number of advantages in the areas of investment planning. One of the major motivations for forming an inter vivos trust is to peg the value of one's estate for estate duty purposes. Once the asset is transferred to the trust, further growth occurs in the Trust and not in the donor's hands.

Trusts are administered by Trustees who have a fiduciary duty to administer the trust with integrity. Trust administration is vital and one should be prepared to pay professional fees for such expertise.

Factors to consider:

• It is important that the original owner of the trust assets does not retain control
• Look out for the deeming provisions of the Income Tax Act
• Ensure that an attorney or trust office has worked through an old trust deed, updating where necessary
• Ensure that there is proper accounting and record keeping
• Ensure all major decisions have been recorded and authorised by the trustees in the form of signed resolutions
• Avoid blanket authorisations
• Record minutes of meetings of trustees

As far as the trustees of a Trust are concerned it is important that:

• Trustees have an authority to act only when authorised in writing by the Master of the High Court
• Changes to address must be notified to the Master within 14 days of the change
• Because trustees have a fiduciary duty to the trust and beneficiaries they must avoid any conflict of interest
• Trustees ensure that all personal interests in agreements entered into with the trust have been declared to the other trustees
• Trustees act with care, diligence and skill, which can reasonably be expected of a person who manages the affairs of another.

A trust and founder's last will and testament need to work in concert. Unfortunately, these are often aspects that many leave for another day. It is well worth taking the time to ensure that these are up to date.

Silke Financial Services has the skill and expertise to advise on local and offshore trusts and works with professional experts in this field in order to assist you to tie up all loose ends regarding your estate planning and trust requirements.