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Increasingly, individuals are appreciating the value of trusts in estate planning. Thanks to the continued growth in these vehicles, we offer dedicated trust accounting services to our clients.

In this article, we explain the 10 basic principles of trusts in South Africa.

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  1. Trusts are governed within the legislative framework of the Trust Property Control Act 1988. The constitutional document of a trust is the Trust Deed. The Deed sets out the trust objectives, powers and limitations.  Trusts must be registered with the Master of the High Court in the relevant jurisdiction and are managed by trustees, duly authorized by the Deed and by the letters of authority issued by the Master.
  1. A trust is an arrangement that facilitates transfer of assets from the donor to the trust. Once transferred, these assets are then controlled by one or more trustees, for the benefit of the trust beneficiaries.  Ownership of the trust assets vests in the trust, not in the trustees. 
  1. Assets of a trust are held for the benefit of the trust beneficiaries. Every trust must have identifiable beneficiaries. Beneficiaries could be natural or juristic persons.
  1. Although a trust does not have legal personality as it is in essence a collection of assets, it is regarded in some instances (taxation, for example) as having separate legal identity. Notwithstanding lack of legal personality, it can have legal capacity with trustees permitted to perform juristic acts within the ambit of the Trust Deed.
  1. Trusts are helpful in the protection of assets and ringfences assets in the event of subsequent insolvency, liquidation or divorce.
  1. There are two main types of trusts:


    1. Inter vivos trusts – these are trusts established by living persons
    2. Testamentary trusts – created under the terms of a will
  1. As in the case of directors of companies, the trustees owe a fiduciary duty to the trust beneficiaries. This duty requires trustees to administer the trust and its assets solely for the benefit of the trust beneficiaries.
  1. Trusts are especially useful for employee share incentive schemes. Shares are held for the benefit of employees, dividends are distributed to beneficiary employees and there is no requirement for ownership of the shares to change notwithstanding employees joining or leaving the company.
  1. Trusts are taxed at 45% of their net income and are subject to capital gains tax.
  1. A trust terminates by agreement, as set out by the trust founder or upon attainment of the trust objective or realization of impossibility of achievement thereof. Once dissolved, the trust assets devolve according to the provisions of the trust deed.

Due to the tax status of a trust, whether established by inter vivos or testamentary principles, it is important that trustees ensure financial accounting records are maintained and are up to date at all times. Should you require trust accounting services for your trust, reach out to our team

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