Trusts are not only for the rich and famous – they can offer valuable protection for your family wealth. As vehicles of wealth preservation, trusts have had some important regulatory changes over the past few years as authorities have attempted to shift them away from tax evasion and more towards a true, family-minded way to pass on assets.
Despite these changes, some only ever read a trust deed once in their life, and not even very thoroughly that one time. If it’s drawn up properly and professionally, and your trusted financial planner is involved in the process, you should have little to worry about. But, at Victus Group we always like to help our clients understand a little deeper so that they are better connected to their fiduciary decisions.
Here are a few ways to avoid trust issues without being an expert!
Are all beneficiaries protected?
It might sound like something from a bad family movie, but ensure that the title deed explicitly states that trustees may not vote out important beneficiaries to disinherit them, for example, your children or spouse. While you’re at it, make sure beneficiaries aren’t vaguely referred to as ‘Susan’ or something similar. Instead, give their full names and ID numbers.
What happens if widespread misfortune strikes?
Most people will write a trust deed, name their significant other and any children, and then leave it at that. But what they don’t understand is that if there are no beneficiaries left of that trust deed, the funds automatically go to the state. It might be a horrible thought to ponder but in the unlikely event of your and your direct beneficiaries all passing away at the same time, for example, in an accident, you should name other next-in-line beneficiaries like, say, your parents, siblings or nieces and nephews.
Does it line up with your Will?
You don’t want your nearest and dearest facing legal battles in some hard times, so ensure that your Will explicitly supports your trust deed’s contents. In terms of if misfortune strikes and there may be some confusion in your Will as to beneficiaries, ensure that your Will states that other assets and amounts are to be placed in the trust.
Are properties of the Trust clearly nominated?
‘The yellow house’ or ‘our parents’ place’ is not good wording for property in a trust deed. South Africa’s Trust Property Control Act requires a maintained asset register for the trust, which includes location, value and the description of each asset. As people’s most valuable asset is likely to be property, make sure this is very clearly stated with documents proving ownership.
Be clear, giving the exact address and as much info as you can. Also, if you have more than one property or more than one trustee (which you should) be clear about which properties are held by which trustees. Again, if you need help, please feel free to include us in working with your trust administration.