At the moment a level of uncertainty surrounds Trusts, this is due to SARS clamping down on the compliance, use, management and administration of Trusts.
The continued existence of a Trust as an entity which can be used for wealth preservation, legacy planning, risk management and estate planning purposes is not at risk. That’s a good start!
A Trust also provides continuity when you pass on. Where the winding-up of your Estate may take years, the Trust continues, and the Trust’s funds or assets can be utilised to provide for your dependants.
When managed properly, a Trust remains a handy tool to preserve wealth through generations, ring-fence assets with growth potential, and manage potential risks associated with certain assets.
The following may assist you in assessing your Trust’s level of compliance:
- A bank account must be opened in the name of the Trust to receive the founder/settlor of the Trust’s initial donation (as stated in the Deed of Trust).
- The Trust must be registered as a taxpayer with SARS.
- Provisional and income tax returns must be filed.
- Annual financial statements must be compiled where assets (even if it is only a bank account or shares in a company) are held in the name of the Trust.
- An independent trustee must be appointed – someone who is not related to the other trustees or the beneficiaries and who has the required knowledge to guide the other trustees in the performance of their fiduciary duties (there are varying views on this, but we take a conservative approach and advise our clients to appoint an independent trustee).
- All decisions by the trustees must be recorded by way of resolutions, which are signed by the trustees.
- The trustees must consult on all decisions, albeit via e-mail or virtually or over the phone before a resolution is passed. Formal trustee meetings are not required unless the Deed of Trust prescribes that formal trustee meetings must be held.
- The Deed of Trust must be reviewed regularly to ensure that the Deed complies with changing Trust practices and laws.
Your Trust must (and can!) work for you – it must (and can!) serve the purpose for which it was created. It does, for many of our clients.