A trust is usually at the centre of a client’s estate plan, because it allows a client to divest himself of his assets for the benefit of loved ones, yet retain involvement in the administration of the trust and also include himself as a beneficiary who may benefit, usually at the discretion of the trustees.
No other single vehicle allows for this unique set of circumstances, thus providing an effective tax “avoidance” and asset protection structure as long as the trust deed is properly drafted and the trust is administered meticulously.
As Lighthouse Trustees, we have put together a trust administration platform that utilises new digital solutions to allow trustees to conduct the administration of their trusts cost-efficiently, conveniently and effectively.
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Drafting the trust deed so as not to fall foul of the various anti-avoidance provisions in the Estate Duty Act and Income Tax Act is easily achievable where the client engages a suitably experienced fiduciary specialist; however, where most clients sail their trusts directly into the wind is in the administration of the trust after its creation.
So where does it all go wrong? It is a well-established principle that no matter how well your trust deed is drafted, if it is not administered as a trust, independent from the client (usually the founder), it will count for zero. Our courts have had a field day in applying the “substance over form” doctrine, rendering trusts void from inception because the trust is controlled by the client and effectively a sham.
So how should one avoid the application of the substance over form doctrine? Ensure that the following principles are adhered to:
Failure to apply any one of these principles could undermine the purpose of the trust and open it to attack.
Signing resolutions and any other documents not requiring a physical signature has never been easier with our electronic signing platform, which provides a detailed audit of each trustee’s signing process.
All our trust deeds are prepared to incorporate the provisions of the Electronic Communications and Transactions Act and thus take advantage of new technologies.