More individuals are recognising the importance of estate planning and are looking for effective ways to protect their assets in order to transfer their wealth to their beneficiaries. One of the mechanisms utilised in estate planning is the establishment of a trust.
A trust is a legal entity, set up by a founder, donor or Settlor (owner of assets) by way of a trust instrument, granting a Trustee(s) control over these assets on behalf of the beneficiaries of the trust. Trustees are responsible for ensuring that the assets under their control are well maintained for the benefit of the beneficiaries of the trust.
Trusts are formed in two ways:
The administration of the trust assets is determined by the Settlor and Trustees in a formal document, known as the trust instrument, which is legally binding and provides the framework for the operation of the trust. Trustees should manage the trust in accordance with the terms of the trust instrument, as well as legislation (primarily the Trust Property Control Act).
The trust instrument for Inter Vivos trusts is the Trust Deed, whilst the trust instrument for testamentary trusts is the Will. This framework is integral in ensuring that the Settlor’s formal wishes are adhered to by the Trustees.
Types of Testamentary Trusts
The main types of testamentary trusts are:
Types of Inter Vivos Trusts
The main types of Inter Vivos trusts that we specialise in are:
Inter Vivos trusts can be discretionary or vested in nature.
Tax Implications of a Trust
All trusts must be registered as a taxpayer, even if the trust has no income and income tax returns for the trust must be filed annually. The income tax rate for a trust is 45% and capital gains tax also applies. The 2019 tax season officially started on Monday, 1 July and runs until 4 December 2019.
MMS Trust Services can assist:
Establishing a trust can be an intricate process and it is important to set up a trust that is in line with your goals and needs, as well as legislation. There are also potential disadvantages if a trust is not established and maintained efficiently. Therefore, enlisting the services of informed professionals, who empower you to effectively plan for the future of your estate, is vital.
MMS Trust Services was founded in 2008 and specialises in providing all accounting and tax related services for trusts. For more information about our division, please visit our website (www.mmsgroup.co.za), or contact us on firstname.lastname@example.org or 011 672 0020 / 021 300 4089 for more information.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)