Trusts are often associated with the ultra-wealthy; this is a common misconception. Anyone with valuable assets can open a trust, these assets may include real estate, stocks, bank accounts and vehicles. These are assets that most families in the middle class have. This is a guide on how to set up a trust in South Africa.
The primary reason why people open a trust is to avoid probate. This is a process where a will is “proved” in the court of law and accepted as a valid public document that is the true will and last testament of the deceased.
The problem with probate is that your beneficiaries will have to hire expensive lawyers and it can be challenged. Creditors will make their case for why they deserve to be paid first, this is a process that can span months or years. A trust avoids all this and is effective immediately after the grantor passes on.
Here is how to set up a trust in South Africa.
1. Find an attorney
The first thing you need to do is find a reputable attorney, the attorney should have experience with handling trusts. Trusts can be extremely complicated; you need an attorney to make sure that everything is in order. There are a lot of reputable firms in South Africa that deal with trusts.
Make sure that you attorney understands that you want to set up a trust and not a will. Attorneys are usually inclined to making you draft a will because they benefit. You beneficiaries will likely use the services of your lawyer should there be a probate. Your attorney will help you with drafting a trust, make sure that it’s an experience estate planning attorney.
2. Choose your preferred trust fund
There are a lot of options that you can choose from when you set up a trust in South Africa. A lot of people usually prefer to set up family trusts. A trust can either be a living trust or a testamentary trust. Go with the first option, a testamentary trust will end up with your beneficiaries going to court.
This is because a testamentary trust is not in effect until you pass on, this ends up in a long drawn out legal procedure. A living trust can be set up while you are still alive, this is a trust that you fund or contribute your assets to while you are still alive. Also known as Inter-Vivos, living trusts can be revocable or irrevocable.
A revocable trust is trust that you can amend or completely cancel, you can even remove some assets that are part of the trust. You can’t amend an irrevocable trust, all assets in the trust belong to the trust and you will never have access to them. It might happen that you were wealthy when you made an irrevocable trust and have now suffered misfortunes. You can’t access the assets that are in the trust, you might live in poverty while having a trust that is worth millions. It’s generally better to choose a revocable trust.
3. Establish your trust
You will need to state your beneficiaries, trustees and fund the trust. A beneficiary is someone that will receive the estate from the trust, you can set yourself as a beneficiary if you are doing a living revocable trust.
A trustee is someone that manages the trust and acts in the best interests of the beneficiaries. You will likely be the sole trustee of your trust; however, you will need to name alternate trustee. If your trust is limited to a few assets like your personal residence and few assets then you can appoint a spouse or relative as a trustee.
Funding the trust basically means putting assets into the trust, setting up a trust costs some money, usually a few thousands. You will have to put assets into the trust in order to benefit from it. You will have to rename these assets or change the title deed holder to be trust if it’s your residence.
Conclusion
Setting up a trust is not a complicated process, especially if it’s a revocable living trust. An attorney will be able to guide you through the whole process. Do you have any thoughts or questions? Comment below.
