OWNERSHIP TRUSTS IN SOUTH AFRICA

WHAT IS A OWNERSHIP TRUST?

An ownership trust, also known as a vesting trust, is a legal arrangement where assets are transferred to the trust to be held and managed by trustees on behalf of the beneficiaries. In this setup, the trustees have a fiduciary duty to act in the best interests of the beneficiaries. Unlike discretionary trusts, where trustees have control over how assets are distributed, an ownership trust typically vests the benefits directly to the beneficiaries, giving them fixed rights to the assets held within the trust. Ownership trusts primary form of trust structure is to allow for the protection and management of assets for the benefit of designated beneficiaries. These trusts are a popular estate planning tool in South Africa, providing a means for individuals and families to safeguard assets, control how they are managed, and potentially reduce estate duty and other taxes.

• The Administration of Estates Act 66 of 1965: Relevant when dealing with trust assets after the death of the trust founder, this Act governs the distribution of estates and the role of trustees in handling trust assets post-mortem.

Together, these laws provide the legal foundation for setting up, managing, and dissolving ownership trusts in South Africa, helping protect both trustees and beneficiaries.

What are the Requirements for a Valid Ownership Trust?

Creating a valid ownership trust in South Africa requires meeting specific legal requirements, including:

• Trust Deed: The trust deed must clearly state the purpose of the trust, the assets to be held within the trust, and the rights of the beneficiaries. This document acts as the “constitution” of the trust, guiding all decisions made by the trustees.
• Capacity of the Founder: The person creating the trust (the founder) must have the legal capacity to do so, meaning they must be of sound mind and meet the legal age requirement.
• Appointment of Trustees: A minimum of one trustee must be appointed, although two are recommended for oversight. Trustees must act independently, without personal interest in the trust assets, to avoid conflicts of interest.
• Defined Beneficiaries: Beneficiaries must be specified within the trust deed and have enforceable rights to the assets or income in the trust.
• Compliance with the Trust Property Control Act: The trust must adhere to the Act, ensuring transparency, proper record-keeping, and adherence to fiduciary duties by trustees.

What Documents are Required for Registering an Ownership Trust?

To register an ownership trust in South Africa, the following documents are typically required:

1. Trust Deed: As the founding document, the trust deed is required to outline the purpose, beneficiaries, and terms of the trust.
2. Trustee Declaration Forms: Each trustee must complete and sign a trustee declaration form, acknowledging their role and responsibilities under the Trust Property Control Act.
3. Proof of Identity: Copies of identification documents for the founder, trustees, and beneficiaries must be provided for verification.
4. Trust Registration Form: The Trust Property Control Act requires a registration form to be filed with the Master of the High Court, providing an official record of the trust.
5. Fee Payment: A nominal fee is usually required for the registration process.

Upon submission of these documents, the Master of the High Court will issue a Letter of Authority, officially recognizing the trust and allowing the trustees to act on behalf of the trust.

Speak to Specialist Testamentary Trust Lawyers

An ownership trust offers a flexible and legally structured approach to asset management in South Africa, protecting wealth while ensuring beneficiaries receive the intended benefits. At Burger Huyser Attorneys, our experienced team is available to guide you through the process, from establishing the trust deed to managing compliance with South African laws. Contact us today to discuss how an ownership trust can fit into your estate planning strategy.