How many parties are involved in a trust?
There are three parties that are involved in a trust:
- Founder – The person who has created the trust.
- Trustees – The persons responsible in the administration and management of the trust in a fiduciary capacity, in the interest of the beneficiaries.
- Beneficiaries – The persons who are entitled to enjoy the benefits of the trust.
Benefits of setting up a trust
- Asset protection – A trust entitles a beneficiary to the use and enjoyment of its assets without personally owning the assets. As the assets are separate from your personal estate, the trust may protect the trust assets from claims brought against you personally subject to the condition that the trust has not signed surety on your behalf.
- Establishes continuity and protection for minors – South African law prohibits minors under the age of 18 from inheriting directly. This means that your assets may not be distributed according to your wishes because they will be sold and the proceeds will be held by the Guardians Fund until your minor children reach the age of majority. Placing all of your assets in a trust that will be managed in the best interests of the minors by your appointed trustees will be a better solution.
- Reduces tax – Your assets may be excluded from certain taxes, such as estate duty, by transferring your growth assets into the name of a trust.
