You might be familiar with some common misconceptions about trusts. Questions like, “What is a trust?” or “Are trusts only for wealthy people?” come up frequently. In this article, we’ll clarify these misconceptions and explore why trusts are valuable for everyone, not just the affluent.
What is a Trust?
A trust is a legal arrangement where one person, known as the “founder” transfers property, assets, or rights to another party called the “trustee.” The trustee manages these assets for the benefit of a third party, “the “beneficiary.” The founder relinquishes control and ownership of the assets, with the trust’s purpose being to benefit the beneficiary.
Trusts can be established through a will, a trust deed, or a court order. It’s important to note that, following the Trust Property Control Act, verbal trusts are not legally recognized unless they are documented in writing.
Why Form a Trust?
Despite common perceptions, trusts are not just for the wealthy or for avoiding taxes. Recent updates to reporting requirements under the Trust Property Control Act have introduced more stringent compliance measures, leading some to view trusts as burdensome. However, the true value of a trust goes far beyond these regulatory challenges. Here are five key benefits of maintaining a trust:
- Asset Protection
Trusts can shield assets from creditors, matrimonial disputes, and legal claims, offering a layer of protection that can safeguard your wealth from unforeseen challenges. - Continuity
Trusts provide a mechanism for passing down assets across generations. This continuity ensures that family wealth and property can be preserved and managed according to your wishes long after you’re gone. - Control and Distribution Flexibility
With a trust, you can set specific conditions and timelines for how your assets are distributed. Trustees have the flexibility to manage and allocate resources in a way that aligns with the needs of beneficiaries, allowing for customised and controlled distribution. Whilst ensuring the legacy of the founder is maintained. - Privacy
Trusts offer a degree of privacy as they do not require public disclosure of your financial affairs. This confidentiality means the daily activities of the trust remain private and protected from public scrutiny. - Estate Planning
Trusts are a tool to effective estate planning which ensures that your assets are managed and distributed according to your wishes after your death. This planning is crucial regardless of the size of your estate, as it helps ensure your loved ones are cared for and your desires are honoured.
Conclusion
Trusts are powerful tools that offer more than just financial benefits. They provide asset protection, continuity, flexibility, privacy, and effective estate planning. By understanding and leveraging the advantages of trusts, you can better manage your assets and ensure that your wishes are fulfilled, regardless of your wealth or status.
Speak to a Professional
Our team has the required expertise in trust administration and estate planning, tailored specifically to your wishes. We prioritize and understand the importance of proper planning. For further information or assistance, please contact Ralf Schulz at rs@rslv.co.za or Zinhle Ramasike at zr@rslv.co.za.