Why Set Up an Inter Vivos Trust?
An inter vivos trust, commonly known as a living trust, is an effective estate planning tool that allows you to manage and protect assets for the benefit of your chosen beneficiaries. In South Africa, setting up and registering an inter vivos trust involves several legal and administrative steps.Â
An inter vivos trust is often used to:
- Protect assets from creditors.
- Minimize estate duty liabilities.
- Ensure continuity in asset management.
- Provide for dependents or heirs in a structured manner.
- Preserve generational wealth.
How to Set Up and Register an Inter Vivos Trust in South Africa
An inter vivos trust is a legal entity created during the lifetime of the founder (the person setting up the trust). Assets are transferred into the trust to be managed by appointed trustees for the benefit of beneficiaries. The terms and conditions of the trust are outlined in a legal document known as the trust deed.
Step 1: Draft the Trust Deed
The trust deed is the foundation of your trust and outlines its purpose, the roles and responsibilities of trustees, and the rights of beneficiaries. It must include:
- The name of the trust.
- Details of the founder, trustees, and beneficiaries.
- The objectives of the trust.
- Rules for managing and distributing assets.
Ensure the trust deed complies with South African trust law and aligns with your specific goals. Engaging an experienced attorney is crucial at this stage to ensure the document is legally sound and comprehensive.
Step 2: Appoint Trustees
Trustees are responsible for managing the trust’s assets and ensuring its terms are followed. Choose individuals or entities (such as a trust company) who are trustworthy, competent, and capable of acting in the best interests of the beneficiaries.
Step 3: Transfer Assets into the Trust
To operationalize the trust, the founder must transfer specified assets into the trust’s name. This may include:
- Property
- Investments
- Bank accounts
- Other valuables
The transfer must be executed according to the terms outlined in the trust deed.
Step 4: Register the Trust with the Master of the High Court
In South Africa, all trusts must be registered with the Master of the High Court. To do so, submit the following documents:
- The original signed trust deed.
- A completed Trust Registration and Amendment Form (J401).
- Copies of the ID documents of the founder and trustees.
- Proof of payment for the registration fee.
- The trustees’ acceptance of their appointment (in writing).
- A schedule of assets (if applicable).
The Master of the High Court will issue a Letter of Authority, officially recognizing the trust and authorizing the trustees to act.
Step 5: Open a Trust Bank Account
Once the trust is registered, open a dedicated bank account in the trust’s name. This account will be used to manage the trust’s financial transactions. Trustees are required to ensure proper record-keeping and compliance with financial regulations.
Key Considerations When Setting Up an Inter Vivos Trust
- Professional Guidance: Legal and financial expertise is essential to ensure that the trust complies with all legal requirements and serves its intended purpose.
- Costs: Establishing and maintaining a trust involves costs, including legal fees, administration fees, and annual auditing.
- Trustees’ Duties: Trustees are legally bound to act in the best interests of the beneficiaries and must manage the trust responsibly. Select trustees carefully to avoid mismanagement.
- Tax Implications: Trusts are taxed at a flat rate of 45% on retained income. However, income distributed to beneficiaries is taxed at their individual rates. Proper tax planning is crucial.
Setting up and registering an inter vivos trust in South Africa is a structured process that requires careful planning and adherence to legal requirements. While the process may seem complex, the benefits of asset protection, estate duty savings, and wealth management often outweigh the challenges.
At Burger Huyser Attorneys, we specialise in estate planning and trust law. Our experienced team can assist you in drafting the trust deed, registering the trust, and ensuring it is managed effectively. Contact us today to secure your financial future and that of your beneficiaries.
Contact Burger Huyser Attorneys, and book a consultation.
To speak to one of our experienced attorneys in South Africa for immediate assistance, contact us on the numbers below:
Randburg call 061 516 6878; Roodepoort call 061 516 0091; Sandton call 064 555 3358;  Pretoria call 064 548 4838;
Centurion call 061 516 7117; Alberton call 061 515 4699; Bedfordview call 061 536 3223
DISCLAIMER: Information provided in this article does not, and is not intended to constitute legal advice. READ MORE