SPECIAL TRUSTS IN SOUTH AFRICA

WHAT IS A SPECIAL TRUST?

Special Trusts in South Africa provide individuals with a secure and legally recognized way to protect and manage assets for specific purposes. Unlike standard trusts, Special Trusts, (also known as special needs trusts), offer unique benefits and legal structures tailored to cater to vulnerable individuals, especially those with mental or physical disabilities.

A Special Trust is a trust established specifically to benefit a defined beneficiary group or purpose, often with enhanced protections under South African law. Special Trusts fall into two main categories:

1. Type A Special Trust: This trust type is established for the benefit of one or more individuals who suffer from a mental or physical disability, where the disability prevents them from being able to care for themselves. The purpose is to ensure these individuals are financially protected and supported.
2. Type B Special Trust: This type of trust is created for the benefit of minor children (under 18) and aims to manage and protect assets until the children reach adulthood. Type B trusts are often created by a parent or guardian to secure the financial future of minor beneficiaries.

Special Trusts have unique tax implications and can benefit from tax relief compared to standard trusts, which can be advantageous for the beneficiaries in terms of financial security.

• The Trust Property Control Act 57 of 1988: This Act governs the creation and operation of all trusts in South Africa, including Special Trusts. It sets out requirements for trustees, their duties, and the management of trust assets to ensure accountability.
• The Mental Health Care Act 17 of 2002: This Act is relevant for Type A Special Trusts as it provides guidelines on the care and rights of mentally disabled persons who may benefit from Special Trusts.

What are the Requirements of a Valid Special Trust?

To establish a valid Special Trust, certain criteria must be met:

• Defined Beneficiaries: For Type A Special Trusts, the trust must benefit one or more individuals with a physical or mental disability, with a primary goal of supporting and caring for them financially. For Type B Special Trusts, the beneficiaries must be minors (under 18 years old).
• Trust Purpose: The trust deed must clearly specify the purpose of the trust, whether it is for providing ongoing care, supporting the beneficiary’s specific needs, or managing assets until a minor beneficiary reaches legal age.
• Qualified Trustees: Trustees must be appointed to manage the trust responsibly. Trustees have a fiduciary duty to act in the best interests of the beneficiaries, ensuring the trust’s purpose is fulfilled.
• Tax Compliance: The trust must comply with the Income Tax Act’s requirements to qualify as a Special Trust and benefit from relevant tax concessions.

What Documents are Required in the Registration of a Special Trust?

Registering a Special Trust involves several key documents:

• Trust Deed: The founding document of the trust, which sets out its purpose, beneficiaries, and the powers of the trustees. The trust deed must comply with South African laws, defining the trust’s structure and purpose in detail.
• Letters of Authority: Issued by the Master of the High Court, the Letters of Authority grant the trustees the legal power to act on behalf of the trust.
• Beneficiary Documentation: Proof of the beneficiary’s condition (for Type A trusts) or age (for Type B trusts) is required. For Type A trusts, medical records or assessments from registered professionals may be needed to confirm the disability.
• Trustees’ Details: Information on the trustees, including identification and contact details, must be submitted to the Master of the High Court.
• Registration Documents with SARS: The Special Trust must be registered with the South African Revenue Service (SARS) for tax purposes. Trustees may need to provide additional documentation, such as proof of residency or other personal identification.

Speak With Experts in Special Trust Setup and Registration

Establishing a Special Trust is a powerful way to protect the financial well-being of vulnerable individuals or minor children, with specific tax benefits under South African law. At Burger Huyser Attorneys, our expert legal team is ready to guide you through every step, from drafting a compliant trust deed to ensuring all regulatory requirements are met. Contact us today to learn more about how a Special Trust could benefit you and your loved ones.