At STBB, we understand that smart estate planning today can secure your legacy tomorrow. Undoubtedly, establishing a trust is one of the most effective tools in estate planning. Whether used to preserve generational wealth, safeguard assets, or manage property for the benefit of others, a trust offers continuity and peace of mind. To that end, this article provides a brief rundown of the key benefits of establishing a trust.
Strategically protect assets from creditors
Generally, assets held in a trust are protected from creditors. Once assets are transferred to a properly established trust, they are no longer legally owned by the trust’s founder and will not form part of their deceased estate. Accordingly, if you are sued or declared insolvent, your creditors cannot typically institute a claim against the trust and attach its assets in execution of debt. Crucially, if beneficiaries experience financial challenges, their inheritance will be secure.
Preserve important family assets for future generations
In a similar vein, trusts also support the long-term preservation of family wealth by shielding assets from pecuniary risks such as divorce, failed business ventures, or personal financial difficulties across generations.
Safeguard the inheritance of minor children
Under the Administration of Estates Act, cash bequests to a minor – in terms of a valid will or the rules of intestate succession – cannot be paid directly to the minor’s appointed guardian. Instead, the funds are held by the Guardian’s Fund until the beneficiary turns 18. In the interim, the guardian is required to apply to the Guardian’s Fund to claim a portion of the funds for necessities, medical costs, education, and other items. To avoid this impractical scenario, establishing a testamentary trust in a will enables you to ring-fence assets intended for minors and appoint a trustee to administer the funds on their behalf.
Minimise estate duty payable to SARS
Estate duty, which is levied on the net value of a deceased estate that exceeds R3.5 million, can considerably reduce the funds available for distribution to beneficiaries. Accordingly, transferring key assets to a trust will minimise estate duty liability, particularly if assets with growth potential are transferred early on.
Effectively administer assets for charity
For those passionate about helping others, a trust provides a mechanism to ensure your resources are channelled towards charitable causes when you’re gone. Notably, a trust established for charitable purposes may be exempt from the payment of income tax and capital gains tax, which ultimately maximises capital.
With these benefits in mind, it is little wonder that trusts are a popular mechanism in effective estate planning.
Safeguard your assets and secure your legacy. Contact our trust law attorneys at trusts@stbb.co.za today about creating and structuring a trust that works for you.
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