Family trusts can be testamentary or inter vivos trusts. Their main purpose is the protection and maintenance of trust property, for the benefit of minor children, or family relations of the founder.
In this type of trust, the trustees are all beneficiaries and the beneficiaries are all related to one another. As such, the Master registering the trust can insist on the appointment of an independent outsider as one of the trustees.
Family trusts are generally set up as inter vivos / living trusts and are to be registered as such.
Registering a living trust
The administration of trusts is governed by the provisions of the Trust Property Control Act no 57/1988.
Register the living trust at the office of the Master in whose area of jurisdiction the majority of the assets to vest in the trustees are situated. If more than one Master has jurisdiction over the trust assets, final jurisdiction will rest with the Master of the office where the trust was first registered.
Submit the following documents to the Master:
- A completed Acceptance of Trusteeship application form for each trustee.
- A completed form J344: Bond of Security if required by the Master for each trustee.
- All the requirements listened in FormJM21: Memorandum.
- The original trust deed or a copy thereof, certified by a notary.
- R100 – paid in cash to the Department of Justice banking account or at any Magistrate Court, stating the relevant reference number as set out in Chief Master’s Directive 2012-01. Proof of payment must be attached to the submitted documents.
- The Acceptance of Auditor form, if applicable – J405.
The above mentioned forms are all accessible on the official website for the Department of Justice and Constitutional Development: http://www.justice.gov.za/master/forms.html#trust
Property in a living trust
Living trusts are ideal for keeping “growth” assets such as shares and property separate from your estate.
Trusts are especially useful from a property perspective since a trust does not die. A trust is not liable for estate duty, transfer duty, executor’s or conveyancer’s fees that would be payable as part of an estate or in the hands of heirs. Furthermore, the trust does not pay capital gains tax provided an asset is not sold.
Trusts can also be used to lock in value and protect assets. For example, if you have a property registered in a trust, the property is no longer part of your personal estate and is thus protected from creditors even if you are declared insolvent.
Despite the benefits of having property under a living trust, this system is not ideal for everyone, as certain issues may occur. For example, problems can come up when trusts aren’t properly established or managed. The founder also has to give up control of his/her assets and the intended beneficiaries might not receive an income until after an estate is wound up, which can take a while.
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