The main objectives in establishing a trust are as follows:
1. Asset Protection
A Trust is the only legal entity in our country which can offer an individual total asset protection, this is achieved by virtue of the fact that a trust is not owned by any one individual. One of the most important aspects of this document is to highlight the exposure an individual assumes once they enter the busi
ness arena or the residential or commercial property market. The vagaries of carrying on a business are many and varied and include but are not limited to:
•potential claims for damages
•claims by employees, financiers, landlords, sureties;
•Rights of a consumer
•Business creditors
•Divorce, your Spouse could be your biggest creditor in the event of the relationship ending
In order to mitigate and guard against these risks, one needs to place their assets in a Trust. This protects the assets against risk from all potential claims and creditors. Whilst a Trust offers asset protection against creditors, it is important to note that whilst there are any loans or claims against a Trust by any person, the Trust could be exposed to creditors of that person. The reduction of the loan account is therefore of paramount importance.
2. Succession Planning
In planning an individual’s estate the objective, as stated above, is to get the individual to own NOTHING. This position is attained by establishing the correct Corporate and Trust structures that will own all the assets, investments, properties, commercial properties and businesses that an individual would have owned in his personal capacity. Once this status is obtained an individual will eliminate all taxes, costs and duties which would ordinarily be triggered on the death of the individual. These taxes and costs are; Capital Gains Taxes, at an effective rate of 13.3%, Estate Duties at 26.6% of the net value of the estate and Executors Fees of 3.5% of the GROSS value of the estate together with administration costs of 6% of any income administered by the Executor. In following our advices the taxes, duties and costs are eliminated and approximately 30% of the value of the estate will be saved on the event of the death of an individual. In order to complete an estate planning exercise for an individual their Last Will and Testament must also be finalised. The Will must dovetail with the Trust. Benefits on death
•No Capital Gains on death
•No estate duty
•No executor’s fees
•No costs on death
•Protection of minors
•No Estate Freezing
Continuity
In the event that the individual does not or has not structured their affairs, the assets, cash, business interests and property portfolio may not continue after his death. Should there be immovable property or a property portfolio, these may need to be liquidated, as all bonds need to be settled. Further, should there be a business which is not properly structured it will come to a grinding halt. A Trust does not die and can therefore continue in perpetuity, allowing for future generations to benefit from the wealth that you create during your lifetime.
3. Succession Planning
Many owners trade as sole proprietors, in a partnership or directly own the shares in a Company or members interest in a Close Corporation. Structuring your business this way will not guarantee that the benefits accruing from their business interests will flow to the persons they intended. The correct Corporate Structures owned by Trusts coupled with the necessary agreements must be implemented and executed to ensure continuity of the flow of benefits and the elimination of any costs, taxes and duties on the event of the death of an individual. The above applies equally to an individuals investments, properties and commercial property interests. It is critical that income producing assets or appreciating assets are correctly structured to ensure that a legacy is created and that the assets are not sold, very often way below market value to meet creditors claims, or to cover taxes, costs and duties which arise on the death of an individual. Structuring will ensure that the legacy survives an individual’s death. Trusts allow for the best mode of succession planning as the South African Trust Law allows for a Trust to continue in perpetuity. A word of advice, we suggest that a properly drafted Will be executed in order to ensure that the individual does not die intestate. It is also very important who you nominate as Executor of your estate and ensure that the Trust structure is addressed in your Will. The Will also allows the individual to capitalise on various estate duty exemptions, and certain tax relief. Additional Complimentary Services which can be offered (Through a partnered service provider)
1. Registration of companies and amendments thereto
2. Accounting and auditing services for the trusts
3. Submission of tax returns for trusts
4. Financial services
- Investments (Endowments, retirement annuities, preservation funds)
- Retirement planning
- Financial planning
- Life, dreaded disease and disability covers
- Business risk and financial planning
- Employment benefits (setting up company provident funds)
