Page 31 - Nexia SAB&T Estate Planning Guide 2024

beneficiaries benefit during his lifetime, then Section 3(3)(d) of the Estate
Duty Act may come into play. Such asset(s) may be deemed to be property
of the estate planner and included in his estate for estate duty purposes.
n The way in which the trust deed is drafted is important, and also the way in
which the trust and the trust assets are administered. One trustee should not
be allowed to do as he or she pleases in regard to the trust assets.
n It is advisable to appoint at least three trustees, one of whom is completely
independent, to act as such so that the estate planner (who may be a trustee
and a beneficiary) will have a minority vote.

Divorce and assets in trust
n A 2006 Supreme Court case (Badenhorst vs. Badenhorst) highlights the fact
that if a trust is not correctly established and managed, it could be deemed
to be invalid, and in fact, not a trust at all.
n The case was between a husband and his ex-wife, and the Court held that
the trust assets were deemed to be owned by the husband in his personal
capacity, and he was consequently ordered to share same in an equitable
fashion with his ex-wife in their divorce proceedings.
n Some of the factors which contributed to the Judge’s ruling were that
the husband had listed the trust assets as his own personal assets in an
application for a credit facility and had insured in his own name a beach
cottage owned by the trust. In addition, he seldom consulted with the other
trustee (his brother) regarding the administration of the trust assets.
Important considerations re trusts:
n Most inter vivos trusts are set up for various purposes such as financial and
estate planning, reducing estate duty payable on death and /or protection of
assets against creditors.
n The estate planner needs to weigh these benefits against the practicalities
of losing ownership and control over assets transferred to a trust. The estate
planner, who in this case, would also be the founder of the inter vivos trust,
should consider that, by transferring an asset into a trust structure, he is no
longer the owner of that asset, and his trustees are responsible for taking full
control of the asset and administering it in accordance with the trust deed.

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