Using a Trust as an estate planning tool

 

Death eventually knocks on everyone’s door. This certainty necessitates proper estate planning to ensure that when the time comes you are not anxious as to whether sufficient provision has been made for your loved ones after you are gone. In this article, we briefly explore some of the main benefits as well as concerns in using a trust as a specific tool for your estate planning purposes.

Estate planning is aimed at protecting and preserving one’s assets not only during one’s lifetime, but also thereafter. In order to obtain some of the benefits that are associated with using a trust as an estate planning tool, it is important that the trust is correctly set-up and complies with the essential requirements of the Trust Property Control Act.

Some of the benefits associated with using a trust are:

Asset protection

The great advantage of a trust is that it allows you to enjoy the use and the fruits of the asset while not having ownership of that asset. Generally, if an asset has been transferred to a trust when the founder of the trust was solvent, the creditors cannot lay claim to such an asset.

Stabilizing of the value of the assets for estate duty purposes

Assets that have the potential to increase in value can be transferred to the trust. This can help ensure that the growth in those assets do not form part of the deceased estate and would not be subjected to estate duty taxes upon the death of the owner.

Remains private

Where the details of a deceased estate is filed at the office of the Master of the High Court as part of the liquidation and distribution accounts, the financials of a trust remain private and are protected from public inspection, providing privacy in respect of your affairs and family planning.

Control of assets

A trust is useful to plan for the care and protection of beneficiaries that are minors or incapacitated. The trust enables experienced trustees to effectively and efficiently control and administer the trust assets over time for the benefit of minors and persons with special care needs and avoid the squandering or misuse of such assets.

Efficient and continued succession

Once a trust has been validly set up, the trust can continue indefinitely provided sufficient provision is made for the continuation of trustees to administer and control the trust. Accordingly, the death of a beneficiary does not impact the existence of the trust or the ability of the trust to continue to provide for the care and use of the trust assets for the remaining beneficiaries.

Setting up and administering a trust can be a costly exercise and as such it is important that you weigh up the costs and administration involved against the purposes of the trust and the potential benefits that a trust provides, as setting up a trust merely for the sake thereof is never a good idea.

In considering the use of a trust as an estate planning tool, it is also important to remember the following:

1. A holistic decision should be taken when considering using a trust as a vehicle for estate planning by taking into account your individual needs and financial capabilities.
2. Using a trust as a vehicle for estate planning can be a complex exercise and therefore it is important that proper legal advice be obtained which considers your current and future needs and does not provide you with a one-size-fits-all solution.
3. Your estate plan should be revisited every time there are significant changes in your life, such as marriage, divorce or death of a beneficiary, and this may include revisiting the provisions of your trust and whether these are still appropriate in the light of your overall estate plan.

Discuss these items with your legal advisor and embark on the process of trust planning with a clear understanding of the nature and consequences of setting up a trust.