Discretionary Living Trusts A legacy for generations

Written by Trust Specialist, Mervin Messias, it is the culmination of knowledge and expertise that has been acquired over many years’ study and practice of Trust law.

The author recommends the use of Trusts as part of estate planning because they provide solutions to many potentially complicated problems related to asset protection, succession planning, and disability protection. Many little-known benefits of Trusts are revealed to help protect your hard-earned wealth for generations to come. A Trust circumvents the whole process of winding up an estate, together with its potential delays, hassles and frustration.

In fact, a Trust deserves pride of place in any estate plan. It means business as usual, even after death, with no executor, executor’s fees or estate duty.

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    Asset protection


    Asset protection

    Asset protection

    The public often finds it difficult to see beyond the costs of setting up and administering a Trust – and yes, it can be expensive.  My business experience and common sense tell me it’s better to pay the set up and administration costs as well as the taxes on deemed interest than risk losing a chunk or all of the capital you’ve worked hard to accrue, to an attack or claim.  Growth protection, especially, is of paramount importance.

    Vultures are opportunists that circle patiently for the meatiest carcasses, then pounce.  When it comes to money, you don’t even need to be dead (though you may wish you were!) to have them circling and gunning for the prize pickings you spent a lifetime slogging for and investing cleverly.  You may even have amassed an enviable fortune which is both empowering and risky, so much so, you feel compelled to keep your lawyer on speed dial.  Just in case.

    Consider these additional benefits to creating a Trust:

    • It remains active even after the originator has passed which mitigates any delays, frustration and legal costs associated with a Will. Take covid-19 as an example, when the Master’s office closed owing to infections, nothing could be processed.
    • It can circumvent these problems. Property can be dealt with immediately as it falls outside of the Deceased Estates Act and the process of inheriting can be expedited.

    Prioritise asset protection today because once there is an attack on your assets, you cannot scramble to create a Trust to protect your assets and avert the consequences of a claim.  It’s advisable that a Trust be created when the coast is clear.

    Why expose your assets to attack when there are ways to vulture-proof them?  John Fletcher gives it to us straight, “Of all the forms of wisdom, hindsight is by general consent the least merciful, most unforgiving”.

    Property (art, jewellery, cars etc), land, shares, insurances, investments, and accumulated wealth are all deemed to be assets.  There is much to be gained by having your Trust Deed structured by an acknowledged specialist so that all potential traps, complications, and loopholes are carefully considered and provided for within the constraints of the law.  Consider this:  if the Trust does not comply with prevailing legal requirements, all protection falls away.

    It is estimated that around 95% of Trust Deeds in South Africa are either faulty or invalid. Like medicine, all practitioners are qualified as doctors, but would you consult a Urologist for a hip replacement?   Legal matters are no different.

    Drafting the Trust Deed takes time.  How should you proceed?

    1. Get your assets into a Trust.

    Appoint a Trust Specialist to draft the Trust Deed.  All assets could be registered via a loan account and if the assets emanate from a Will, donations tax will not apply.  The input of a Tax Specialist is a crucial component to drafting a Trust Deed as tax law is highly complex.

    The important thing is to keep your assets beyond the reach of any potential disgruntled parties – creditors, spouses, business partners, beneficiaries, and the like.

    2. Administer the Trust properly.

    When the Trust is created, it’s required to be registered with SARS.

    YOU appoint the Trustees – the custodians you choose will be people you know and trust, people who will have YOUR best interests at heart, not some stranger at a financial institution.  The Trustees must be authorised by the Master of the High Court.  These checks and balances have a more personal and powerful significance.

    The Trustees CANNOT act outside the Trust Deed.  They are legally required to open a bank account for the Trust as all monies received for the Trust must be deposited into the account e.g. dividends from shares.  An accountant must be appointed by the Trustees as s/he is required to render tax returns on behalf of the Trust since it is liable for tax on income generated and Capital Gains Tax if the Trust has disposed of any assets.

    The Trustees are also legally required to meet on a regular basis, minute every meeting and record any resolutions they pass.  A majority vote is usually required but a unanimous vote may be required in other respects e.g. amendments.  However, they cannot act until they are authorised by the Master of the High Court.

    3. Allow for flexibility.

    The Trust Deed must be properly drafted to include some flexibility and accommodate unexpected contingencies.  Amendments need to be carefully drafted and lodged with the Master of the High Court.

    I’m committed to Estate Planning, Trusts and optimising Tax benefits for my clients.

    Is it not important to your peace of mind that your hard-earned wealth is optimally protected so that when you pass, your beneficiaries have immediate enjoyment of your material legacy with the minimum of fuss?  The thought of them struggling to access what you’ve left them because of complications, delays and red tape, is simply unconscionable and unnecessary.

    Please contact me if you’d like professional help setting up an Estate Plan, Trust or Will, or advice on Tax.  We can start from scratch or review what you already have in place.  Quotation available on request.

    DR MERVIN MESSIAS – JD (Juris Doctor) / BA, LLB University of the Witwatersrand
    TEP (Trust & Estate Practitioner) / MTP Master Tax Practitioner – S.A.

    To book an appointment, please contact my Executive Assistant, Jutleth Mkhonza.  Email or call +27 (0) 11 783 0108