A living or inter vivos trust can provide continuity, structured management of assets and flexibility in providing for beneficiaries. Trust property does not fall into the founder’s deceased estate simply because the founder dies, so the trustees can continue administering those assets in accordance with the trust deed, subject to there being a valid trustee composition and the necessary authority to act.
Where assets have been genuinely transferred to the trust, future growth in those assets can occur outside the founder’s personal estate. Trust ownership can also provide a degree of separation from personal creditor risk if the structure is properly established, funded and administered. These outcomes are not automatic: loan accounts, retained rights, defective administration and transactions vulnerable under other law can materially change the result.
A discretionary trust can also give trustees flexibility to decide which beneficiaries should receive income or capital and when. For tax purposes, qualifying amounts vested in resident beneficiaries may in some circumstances be taxed in those beneficiaries rather than in the trust, subject to sections 7 and 25B of the Income Tax Act and, for capital gains, the Eighth Schedule. This flexibility can be useful, but a trust should not be regarded as inherently tax-efficient.
See also: What are the benefits of an inter vivos trust in South Africa? | What are the disadvantages of a trust in South Africa? | What is the tax rate for an inter vivos trust?
Disclaimer: The information provided here is intended as general guidance only and does not constitute legal, tax, or financial advice. Every situation is unique, and legislation is subject to change. We invite you to reach out to our team at Wealth and Legacy Group for guidance tailored to your specific circumstances.