Trusts are regulated by the provisions of the Trust Property Control Act, No 57 of 1988, which act defines a “trust” as follows:
““trust” means the arrangement through which ownership in property of one person is by virtue of a trust instrument made over or bequeathed –
- to another person, the trustee, in whole or in part, to be administered or disposed of according to the provisions of the trust instrument for the benefit of the person or class of persons designated in the trust instrument or for the achievement of the object stated in the trust instrument; or
- to the beneficiaries designated in the trust instrument, which property is placed under the control of another person, the trustee, to be administered or disposed of according to the provisions of the trust instrument for the benefit of the person or class of persons designated in the trust instrument or for the achievement of the object stated in the trust instrument,
but does not include the case where the property of another is to be administered by any person as executor, tutor or curator in terms of the provisions of the Administration of Estates Act, 1965 (Act 66 of 1965); “
The term “trust” therefore refers to the relationship of trust between the various parties involved in the trust in respect of the trust property. The parties to a trust are the founder(s), the trustee(s) and the beneficiaries.
The trust is a well established instrument which can assist with estate planning and it can also be a very helpful business tool. There are various types of trusts and one should select the type of trust which best accommodates your specific needs and which is best suited for the purpose of its establishment. The most common trusts in practice are Family Trusts, Testamentary Trusts and Business Trusts.
Each trust deed will vary depending on the circumstances. Before you establish a trust you should determine, inter alia, what the purpose of the trust would be, what the duration of the trust must be and what the rights and obligations of the trustee(s) and beneficiaries must entail. This will then be stated in the trust deed and all parties involved will be bound by it. It is also important to note that a trust may have certain tax implications and it is therefore essential to have knowledge of the relevant sections of the Income Tax Act, No 58 of 1962. The taxation of the trust income is influenced by a number of factors which factors determine who will ultimately be liable for tax - the trustee, the beneficiary or any other person.
Within the framework of a well constructed trust deed the advantages of a trust can be endless.
