7 advantages of holding assets in a trust

Trusts are a way of protecting assets

What is a trust? A trust is a legal arrangement to protect assets and ensure they are managed or distributed as the donor (the person who owns the assets) wishes. The donor gives the trustee the right to hold title to the assets for the benefit of a third party. In a trust, assets are held by the trustee/s for the beneficiary or beneficiaries, on the instructions of the owner of the assets. Why would you choose to place your assets in a trust? What are the advantages of holding assets in a trust?

Principal advantages of holding assets in a trust

Some of the tax advantages enjoyed by trusts in the past no longer apply, but it can still be beneficial to hold assets in a trust. There are seven key advantages:

1. Asset protection – a trust is the only entity that benefits from total asset protection, thus ensuring it stays out of the clutches of creditors.
2. Estate planning and continuity – a trust survives the life of an individual (donor/trustee/beneficiary) and can span multiple generations. Because assets in a trust no longer fall into one’s personal estate, they are not subject to estate duty. 
3. Saving of executor’s fees – trusts can largely save high estate executor fees (3.5% of the gross value of the estate excluding VAT plus 6% of the interest collected after the deceased’s death).
4. Confidentiality – a trust deed is a confidential document, as opposed to documents like wills and records of deceased estates, which are public documents and therefore open for inspection.   
5. Control over assets – a donor can ensure a measure of control over their assets by appointing competent professionals (the trustees) to manage and maintain the assets in accordance with the donor’s directives.
6. Flexibility – some testators do not want their assets to pass outright to their beneficiaries, if there is a risk of disputes among heirs. Instead they may prefer to make more personalised arrangements. These may include provision of a source of income for a spouse for life or the education of minor children, without allowing access to capital until later in life. A trust is also a useful means to deal with heirs who have special needs.
7. Continuous source of income – unlike an estate, where the assets of the deceased are frozen pending the appointment of an executor, a trust can continue to provide a source of income for the deceased’s dependants.   

Benefits outweigh disadvantages

The main reason for holding assets in a trust has always been asset protection and wealth preservation. Despite changes to the law that have removed certain tax benefits, the advantages of holding assets in trust still outweigh the negatives.

Legal advice is essential

Trusts are complex legal entities. An attorney with experience of trusts and estate planning can help you set up your trust and complete all the documentation and steps necessary to register and manage the trust. Cape Town law firm Simon Dippenaar and Associates can help you with all aspects of trust administration. Give attorney Simon Dippenaar a call on 086 099 146 or email sdippenaar@sdlaw.co.za.

Further reading:

• How to register a trust – the procedures and costs involved
• The benefits of setting up a trust
• Trust-to-Trust: when trust assets are at risk during divorce
• Trusts – frequently asked questions

Simon Dippenaar

https://www.sdlaw.co.za

Cape Town attorney Simon Dippenaar has a BBusSc LLB degree and Professional Diploma in Legal Practice from the University of Cape Town, and is an admitted attorney of the High Court of South Africa. He is the founder and director of private legal practice, Simon Dippenaar & Associates, with offices in Cape Town and Gauteng representing South African and international clients.

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