A family trust is commonly used to hold and manage family assets over the long term, provide for beneficiaries in a structured way, create continuity in the management of wealth and, where appropriate, form part of an estate and asset protection plan.

Where assets are validly transferred to a trust, they no longer form part of the founder’s personal estate merely because the founder created the trust. This can keep future growth in those assets outside the founder’s deceased estate. However, the way the trust is funded matters. For example, if the trust owes the founder money on a loan account, that loan remains an asset in the founder’s estate. Transfers to a trust can also have capital gains tax, donations tax, transfer duty, securities transfer tax or other tax consequences.

A properly constituted and administered trust may also provide a degree of protection from personal creditor risk because trust property is kept separate from the personal estates of the founder, trustees and discretionary beneficiaries. That protection is not absolute and can be undermined by improper control, defective administration or transactions that are open to challenge under insolvency or other law. Family trusts are also frequently used to provide for minor children, dependants or family members who should not receive assets outright.

See also: Why do you need a family trust? | What are the benefits of an inter vivos trust in South Africa?

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.