JHB 
Trusts have long been recognised as a valuable estate planning tool, but their role in protecting vulnerable beneficiaries is becoming increasingly significant. In the South African context, a vulnerable beneficiary may be a minor, someone with a disability, or an individual with limited financial literacy. Establishing a trust is a strategic way to ensure that assets are responsibly managed and that the needs of these beneficiaries are met, both now and in the future.
Why establish a trust for vulnerable beneficiaries?
Trusts provide a legal structure whereby a third party, or trustee, can manage assets on behalf of the trust beneficiaries. This arrangement ensures that funds are used in accordance with the settlor’s intentions and according to the needs of the beneficiary.
Key benefits include:
Financial protection
Trusts protect vulnerable beneficiaries the mismanagement of trust funds and from consequent exploitation.
Long-term security
Trusts allow for structured disbursements over time rather than lump sum transfers, supporting long-term financial stability.
Customisation
Trust deeds can include specific conditions tailored to the needs of each beneficiary, including milestones or oversight mechanisms.
Choosing the right type of trust
Selecting the appropriate trust structure is essential. In South Africa, discretionary trusts are often used for vulnerable beneficiaries, giving trustees the authority to decide how and when funds are distributed based on the circumstances and needs of the beneficiaries.
Other innovative trust options include:
- Special trusts type A: Created for individuals with disabilities, ensuring that their needs are carefully managed without jeopardising state support.
- Special trusts type B: Designed to hold assets for minors until they reach the age of majority or a specified age.
Compliance and trustee responsibilities
Establishing a trust is only the first step. Trustees have ongoing fiduciary duties and are responsible for compliance with tax regulations, proper record keeping, and timely reporting to SARS.
Key responsibilities include:
- Filing annual tax returns for the trust.
- Reporting of beneficiary declarations to SARS.
- Maintaining accurate financial records.
- Ensuring all distributions are compliant with the terms of the trust deed and relevant legislation.
Failure to comply with these obligations can result in penalties and reputational damage.
How MMS Group can assist
The MMS Group Trust Services Division specialises in providing comprehensive tax, accounting, and regulatory services for trusts, including:
- Trust tax return preparation and submission.
- Beneficiary declaration management.
- Advisory on trust structures and compliance.
- Financial record keeping and reporting.
Our team of experts ensures that trusts are administered in line with legal and regulatory requirements, providing peace of mind for trustees and safeguarding the interests of vulnerable beneficiaries.
For more information on our specialised tax and accounting services for trusts, visit our website: MMS Group Trust Services.