“A trust is basically an arrangement whereby certain assets are handed over to a person or organisation, where they take care of the assets for the benefit of the beneficiaries. It’s not a separate legal entity such so a company, so they manage the assets for the beneficiaries,” Riaan Botha from will services from ABSA Trust, told CNBC Africa.
Trusts began in the Middle Ages, where trust was given to a specific person to handle the assets of another who went to war.
Today, it’s in the form of a contract an individual signs that is registered at the Master of the Supreme Court, and certain rights and powers are given to a person to manage the assets on behalf of the beneficiary.
The inter vivos trust is a trust that is set up during an individual’s lifetime, where one can put certain assets within the trust in question as a protective measure for the beneficiary.
Certain assets can be decided over others, and the preference method is an additional means of splitting one’s estate, or freezing the value of the estate for estate-duty purposes.
The testamentary trust is set up in terms of the individual’s will, whereby certain assets go into the trust for the benefit of specific people or organisations.
“A trust does not die. When you die, a trust is not affected at all. If you create wealth within the trust, then the funds in that trust can be utilised while the estate is being finalised. South Africans are under the impression that only the wealthy and the very complex can utilise a trust. Anybody that’s got the need for a trust can utilise it,” Botha explained.
A typical family trust will consist of husband and wife trustees, as well as an independent trustee as another trustee. Beneficiaries will be husband, wife and all the lawful descendants related to the trust. Assets are therefore protected for future generations.
“We’ve got trusts that were registered in early 1900s that are still now active, where four generations have benefitted out of that trust. The funds are managed in such a way to provide for for education [and others],” said Botha.