Information about Trusts
What are trusts? | How can I start a trust fund? | What are the advantages of offshore trusts | What is the role of estate planning when forming trusts? | Who creates the trusts and what services are available? | Where can I find more information about trusts?
What are trusts?
Trusts are legal agreements which can be used as a formal tool for planning your investments. Trusts arrange for the holding and management of assets by a person, a corporation or an association with the intention of providing for the beneficiaries. Trusts lay down the rights and duties among the parties of a trust - trustor, trustee, and beneficiary. A trustor is one who transfers funds or assets to a trust. The person who holds the legal title to the trust is the trustee. It is the trustee who manages the trust's assets to behalf of the beneficiary. A person for whom the assets of the trust are held is the beneficiary. Trust fund is the term used to refer to the assets held in trusts.
Although many wealthy people use trusts for a variety of reasons, trusts are tools that can be used by anyone to accomplish certain financial objectives. A family trust can be used to split income between family members, reduce probate and estate duties, and protect the trust fund assets from creditors. Family trusts assist with safeguarding assets for future generations and ensure that your wishes are carried out while meeting the needs of your beneficiaries.
There are two types of trusts used for tax purposes. Namely, inter vivos trusts and testament trusts. Inter vivos is usually an investment trust setup while the trustor is still alive to manage the trust fund for the beneficiaries. This is often seen as a better alternative than simply handing over the asset to the beneficiary and ensures that the trust fund is used for the purposes intended by the trustor. Testament trusts are usually family trusts created in the will of the trustor and takes effect upon that person's death. Testament trusts name your heirs as beneficiaries of the trust fund, instead of leaving your assets to your family directly.
Before creating a trust fund you must decide what it is you wish to accomplish. You will also need to understand the income tax and legal implications associated with trusts. You will need to decide on several important issues including; who will act as trustee? What assets will be transfer into the trust fund? Who are the beneficiaries, and how will their needs of the trust beneficiaries be met? Will the trust come into effect before or after your death? Will the trust be revocable or irrevocable? And how long will the trust operate?
How can I start a trust fund?
Speak to a PSG Financial Advisor. We have more than 200 offices throughout the country that can ensure you peace of mind. You can search for offices by region, by advisor name or by advisor speciality. You can also request to speak to an advisor and we will ensure that one of our highly skilled advisors contact you.
What are the advantages of offshore trusts
PSG Konsult Trustees Limited is a Corporate Trustee regulated and licensed by the Financial Services Commission of Mauritius to provide Corporate Trustee Services.
There has been a lot of discussion about offshore trusts over the years. Some for, some against.
These are some of the benefits of offshore trusts:
- Political Risk - By lending one's offshore allowance to an offshore trust one can ensure that the assets are held and controlled outside of South Africa.
- Currency Hedge - An investment into a hard currency, GBP, Euro or USD ensures that the assets would be protected in international currency terms should the Rand devalue.
- Estate Duty - The trust assets would be pegged in Rand terms for estate duty purposes so whatever assets you own offshore they will always have a Rand value attached to them. Estate Duty in South Africa is currently 20% of an estate over R3.5m. (By clever use of the donation tax allowance the assets can accumulate offshore over a number of years.) This will protect your heirs from paying more tax on your hard earned assets than they need to.
- Probate - Probate and the winding up of an estate are long, tedious and painful procedures. By having a trust hold the assets at least the trust assets would fall outside of the estate making every-one's life much easier.
- Freedom and Flexibility - There is no exchange control in Mauritius and the trust assets can be transferred or invested once held by the trust.
- Tax Savings - The offshore trust would not suffer income tax, capital gains tax, donations tax etc. The client is only taxed when the client receives interest on the sum loaned to the trust or when there is a distribution of the trust's assets back to the client as a beneficiary.
- Relationship - The trust is administered by a PSG group company. However, direct contact would be maintained with the trustees through PSG Konsult Trust's fiduciary consultants, based in South Africa.
- International Investments - Access to a wide range of international investments otherwise inaccessible from South Africa.
- Easy Access - You will have complete and easy access to your estate and trust portfolio though the PSG Online platform.
We can provide you with a step by step guide to setting up your offshore family trust fund.
What is the role of estate planning when forming trusts?
Estate planning involves managing a person's assets, which can be done through an investment trust, while they are alive and the distribution of those assets when that person passes away. Estate planning allows for the orderly administration and disposal of a person's estate, which is clearly defined in a family trust. Estate planning involves the process whereby a client's financial affairs in respect of his will, property, trusts, insurance, income tax and estate duty are restructured to achieve certain objectives.
The following aspects must be covered when estate planning:
- Wills - Drafting of a legally binding Will to ensure a practical and equitable distribution of assets to heirs and minimising death duties; You can find out more about Wills and why they are important on the estate and trust advisory FAQ page.
- Trust formation - To serve as a vehicle to own assets with the view of pegging the growth potential thereof and to protect the assets against the claims of creditors;
- Asset restructuring - To separate business interests from personal investments;
- Buy and sell agreements - Protecting partners in the event of the disability or death of one partner;
- Succession planning - What will happen to the business interests of a sole proprietor?
- Taxation - Donations tax, Estate Duty, Capital Gains Tax;
- Offshore structures - The use of offshore structures for SA residents.
Who creates the trusts and what services are available?
PSG Konsult Trust (Pty) Ltd is an independent trust and fiduciary services company which offers services to structure a client's estate in respect of his will, property, trusts, insurance, income and estate duty.
Our service offering is as follows:
- Estate planning to structure a client's financial matters in respect of his will, property, trusts, insurance, income tax and estate duty.
- Evaluation of existing estate planning structures.
- Drafting of wills.
- Drafting and registration of inter vivos trusts.
- Deceased estate administration.
- Advice regarding the drafting of financial statements for inter vivos trusts.
- International estate planning.
- Registration of offshore trusts and companies.
- Drafting of agreements related to estate planning.
- Exchange control.
- Applications for tax clearance certificates.
- Registration of companies and close corporations.
- Corporate trusteeship.
Where can i find more information about trusts?
You can find more information about our different types of trusts on our FAQ page.