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Trusts are powerful and versatile ways to safeguard your assets and ensure the seamless distribution of wealth according to your wishes. There are different types of trust options available, each with its own benefits. From living trusts that offer the opportunity for asset management during your lifetime, to testamentary trusts that come into effect upon your passing, understanding the different types is essential to optimise your estate planning and providing for your loved ones.

Asset protection and management

Protecting and managing your assets through trusts offers significant benefits if you want to secure your wealth and minimise estate tax liabilities. One major benefit is that you can keep the value of your assets in your personal estate steady while still letting them grow.

Tax planning and reduction

Trusts provide opportunities for estate duty reduction. In South Africa, assets held in a trust are not considered part of the deceased individual’s estate, potentially reducing the estate duty liability. Through careful estate planning, individuals can ensure that their assets are transferred to beneficiaries while minimising tax implications. Certain types of trusts qualify for specific tax benefits, deductions, or exemptions.

For example, one of the advantages of a testamentary trusts is that it can be structured to optimise tax planning. These trusts have their own tax rates, which can be advantageous for income distribution among beneficiaries.

Protecting beneficiaries with special needs

Trusts play a crucial role in protecting beneficiaries with special needs. If you have a child or dependent who is unable to manage their financial affairs due to a disability, you can establish a Special Trust Type A. This is designed for parents who want to ensure the care and financial well-being of their special needs child upon the parent’s passing. NB. Special Trust Type A should be registered exclusively for the welfare of a beneficiary who has a permanent mental or physical disability.

One way to protect the inheritance of a dependent with special needs is with a provider’s trust. This holds all the assets in your estate and allocates them to care for your special needs dependent. Appointing professional trustees or trusted individuals ensures proper management and adherence to your wishes.

When establishing a special trust, it is essential to consider the fees associated with trusteeship. Some institutions charge upfront fees, but Capital Legacy, for example, offers a more affordable option with an annual fee of 0.75% on the capital.

Control over inheritance distribution

By having a valid will in place, individuals can designate specific beneficiaries, determine the assets they will receive, and impose conditions or requirements for inheritance. However, trusts offer even greater control and flexibility, where individuals can dictate when and how assets should be distributed to beneficiaries. Trustees can be appointed to manage and distribute assets according to the testator’s instructions, ensuring that the distribution aligns with their intentions.

Contact us to receive expert advice on the all the advantages a trust, and which type would best suit your needs.