Seven reasons to set up a trust

Trusts can offer many valuable benefits. Here are seven reasons to set up a trust.

  1. Protection of assets

    A trust is a vehicle for asset protection. Assets in a trust are not owned by the trustees or the beneficiaries, which means that the creditors of trustees or beneficiaries have no claim against the trust.

    Here is some related information:
    Can you register a car to a trust?
    Can you buy a house through a trust?

  2. Benefits for offspring

    In South Africa, minors are not allowed to inherit any assets. A trust is therefore valuable, as it protects your children if something should happen to you. The trustees will administer the assets in the trust until the beneficiaries are of legal age. It is also valuable to create a trust for your offspring because you can limit their access to their inheritance. If you have minor children, a trust allows you to ensure that their inheritance is overseen by a trustee until they are old enough to manage the monies themselves.

    Read more about family trusts.

  3. Continuity

    A trust survives the life of an individual (donor/trustee/beneficiary) and can span multiple generations. When any of the trustees pass away, the trust and any assets owned by it remain unaffected. When a specific beneficiary passes away, only the assets vested in him/her upon date of death would form part of his/her estate duty purposes.

  4. Charity

    A trust can be used for the administration of asset for charitable purposes. A grantor can transfer assets such as money, real estate, or art to a charitable trust, and designate that they eventually be given to a specific organisation.

  5. Reduce tax expenses

    Your assets may be excluded from certain taxes, such as estate duty, by transferring your growth assets into the name of a trust. Under a trust, the property no longer falls into your personal estate and is thus not subject to inheritance tax. The ownership and benefits can then be passed onto your family quickly and without complex tax issues.

    More about trust taxation.

  6. Dividing assets and property

    Having a living trust can help determine how difficult-to-divide assets should be split up. For instance, in real estate, a living trust can be extremely beneficial. With a house, a living trust offers more control than a will in spelling out how such property should be transferred after the grantor’s death.

  7. Avoiding probate

    If you fund your trust during your lifetime, you will avoid probate. Avoiding probate means that your family will not have to go to court to authenticate your will after your death in order to access your assets. Therefore, avoiding probate usually means substantial savings in time, legal fees, and paperwork.

    Read more about wills and a trust.