Reghardt Draper
Boshoff Visser
A
large majority of South
African citizens strongly
believe that a trust is the
seventh wonder of the
world when it comes to the protection of assets. Be that as it may,
many people choose to set up a
trust without truly realising the potential dangers of such a decision.
A trust, simply put, is a legal relationship created by a founder who
transfers assets under the control of
trustees. The Trustees in return have
a legal responsibility to act with
care, due diligence and skill when
the assets are placed in their care.
The main idea of setting up a trust
must be to relinquish control over
the particular assets so that the
trustees can manage and protect
the assets on behalf of the founder
for the benefit of the beneficiaries
of such a trust. Unfortunately, most
founders – who may also legally be
a trustee of a trust – are almost always tempted to regard the assets
that have been transferred to the
trust as really still being their own.
A founder of a trust must separate
himself from the assets in the trust
to prevent the courts from piercing
the veil of the trust. The courts may
in such a case look through the underlying purpose of the trust and
regard the assets as being part of
the founder’s personal estate. These
assets will then be attackable by his
creditors and in the event of his
death, form part of his personal
estate which will subsequently trigger estate duty.
To avoid these potential pitfalls,
one can consider the following
when setting up a trust:
The founder, also being one of
the trustees, should avoid having only himself and his spouse
as the trustees of the trust. If the
founder and his spouse are both
trustees, then there should rather be a third independent trustee who will not benefit from
the trust;
It is of utmost importance that
the founder and the trustees
familiarise themselves with their
fiduciary duties in the administration of the trust;
Furthermore, the trust must
avoid any provisions that give
the founder, or a specific trustee, any veto powers to appoint
or dismiss any other trustees
without the permission of the
aforesaid trustees.
Regardless of the potential dangers
of a trust, it still remains one of the
most useful estate planning tools to
ensure asset protection and perpetual succession.
Our Estate Planning Team at
Boshoff Visser Financial Services
(Pty) Ltd has decades of experience
and is professionally equipped to
draft a trust fit for your financial
needs to ensure that your loved
ones are well looked after.
Reghardt Draper
Boshoff Visser Finansiële Dienste (Edms.) Bpk.
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