Page 41 - Nexia SAB&T Trust Guide 2025

TRUSTS AS A FINANCIAL AND ESTATE PLANNING TOOL

Trusts can serve a dual function of protecting assets as well as creating certain
taxation benefits.

To protect minor beneficiaries and incapacitated persons
■ Setting up a special trust for a mentally disabled or incapacitated person
allows for the safe custody of assets while at the same time benefitting from
lenient tax treatment from an income tax and capital gains tax perspective.
■ Setting up a testamentary trust for the benefit of minor children provides
some income tax benefits as well as preventing any funds being held by the
Guardian’s fund on behalf of the minor.
Protection against creditors
■ A discretionary trust may enjoy creditor protection in the case insolvency
(subject to insolvency rules).
■ Where the asset was transferred to the trust while the founder was solvent it
would be difficult for creditors to set aside the trust transaction.
■ Where there are vested rights – the protection is only afforded to those assets
in which the insolvent has no vested rights (a bewind trust provides no
protection in these circumstances).

Capital gains tax and trusts
With the introduction of capital gains tax, the effectiveness of the use of inter
vivos ordinary trusts in estate planning has been slightly negated.
Capital gains tax is payable by any trust in South Africa on any gains made as a
result of a disposal of assets after 1 October 2001.
Estate duties
■ If properly planned, managed and controlled, a trust can act as a significant
shelter against future estate duties.

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