We often get clients asking us if they should register their property in a Trust or in their own names. The standard answer is that if you ask 10 different Attorneys, you will most likely get 10 different answers. Here are a few advantages and disadvantages in order to make an informed decision:
The Benefits of a trust:
- The value of your estate can be pegged for estate duty purposes, by means of a trust.
- Growth on trust assets takes place in the trust, not in your personal estate.
- A trust can be used where an asset such as a farm, which is not divisible, needs to be held for the advantage of more than one beneficiary.
- It can be used to preserve assets after death to pass on to next generations, for any purpose, such as education or to meet contractual arrangements.
- Assets of beneficiaries incapable of managing their own financial affairs, being minors, inexperienced or handicapped, can be protected.
- During a divorce, a trust can be used to provide for continued maintenance of the children.
- If assets are already in a trust, it allows for a smooth and quick transition thereof, to next generations.
- If in a deceased estate, it may take months to transfer or to get access to assets or funds.
- In case of an estate, relevant documents are open to the public while in trust it is a private matter.
- Protect surviving spouses who are not in a position to manage their own financial affairs.
- Protect surviving spouses and/or beneficiary (ies) against bad influences/investments.
- Can be used to benefit special interests such as charities or educational bursaries, even after death, for an indefinite amount of time.
- A professional trustee can be expected to be impartial towards beneficiaries, especially after your death.
- Having assets in a trust prevents possible future intestate transfer to generations, with resulting inconveniences such as forced sales of assets.
- Cost savings on executor’s fees and transfer costs.
- A trust might present saving in income and capital gains tax, depending on circumstances.
- Trusts offer flexibility.
- Some involvement might still be possible by a living donor.
Possible disadvantages to be aware off:
- Loss of direct control of assets.
- When a trustee dies or becomes insolvent, it can have catastrophic consequences as there is no-one to act on behalf of the trust.
- The choice of follow-up trustees becomes very important.
- The choice of a trust company ensures continuity.
- Increased tax accountability through changes in tax laws or if not structured properly.
- A trust has to be registered as an entity, which can be accessed by such relevant authorities.
- There are administration costs involved in the form of trustee fees.
- There might be costs involved when transferring assets into trust.
For more information, contact Intro Real Estate. It’s the right choice.
Article courtesy of Jan Jordaan Attorneys.