A Trust is a separate legal entity which exists apart from the individuals who control it and benefit from it. It has its own bank account and submits its own tax returns and may draw up its own annual financial statements.

Advantages of a trust

1. As it is a separate legal entity it cannot be attacked by your creditors unless it has signed surety.
2. It gives you great savings on estate duty on your assets when you die. Currently estate duty of 20% is payable on every rand above R3.5 million of assets an individual owns.
3. It allows the assets to continue operating when you die as most trusts have a clause nominating a beneficiary or other person to become a trustee on your death. As an individual your estate would be frozen on death.
4. It is an attractive and neat vehicle for you to house and build up all your assets in.
5. If it is a discretionary trust, the income received and distributions made may go to any beneficiary at the discretion of the trustee.

Persons involved in a trust

> Donor – this is the person who donates a nominal sum of as little as a R100-00 so as to get the trust formed. The Donor should be a close relation such as a parent or sibling.
> Trustees – these are the persons who control the assets of the trust and make decisions as to which assets to purchase or to dispose of. The trustees need to be independent and 3 trustees are normally considered a good number. The trustees are normally yourself, your spouse or a close friend and a third independent person being your attorney, accountant, business advisor or wise mentor.
> Beneficiaries – these are the persons who benefit from the trust and are normally your children and could also be yourself and your spouse or any other person you may wish to nominate.

Administering your trust

If a new asset is purchased, it should be paid out of the trust bank account, it is then entered into the trust’s books of account.

You can sell assets you currently own to the trust whereby you create a loan account and the trust owes you money. This does require a detailed explanation.