Trust Fund - Setup and Costs - Help

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superskully

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Hi All
So any help with trust funds here.
1. What do they cost?
2. Where do you setup them up? (banks??).

I would like to setup a Family trust fund.
The goal is this: if anything happens to my wife and me, everything must go into trust fund (life insurance, cash, assets) from which the guardians of my DAUGHTER can use for maintenance....
 
You can set this up in your will and will not cost you anything except the cost of the drafting of the will. It is called a testamentary trust.

Contact a lawyer to draft the will with all the necessary trust stipulations for you.
 
2 things you need to know:

1) Trusts suck from a tax perspective in most cases.

2) This is not something you want to DIY.
 
rather set up an (Inter vivos) trust now & donate/sell all your assets to the trust. This way u will avoid estate duty & capital gains tax when u or wifey dies!

I paid R4900 for one trust. I have 2...one for all my paid up assets & one for my assets that I still owe/paying off.

A trust is registered at the Magistrates court

eidt: High Court, not Magistrates..thanx for the correction Boka1
 
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And no, contrary to popular belief, trusts are actually tax effective...just get an accountant who knows their story & you will never have problems.

You can either use the services of a lawyer to set up your trust or use trust specialists (recommended, although they do cost more)
 
There are a few issues relating to testamentary trusts that you need to be aware of though, and that is that they're open to abuse by unscrupulous trustees so you'd better appoint someone who you'd trust with your life. They also have no legal obligation to assume the duties of a trustee at the time of your death, so just be aware of this beforehand. The one thing I am not 100% sure about regarding testamentary trusts is whether or not the trust deed is in place before death and it merely kicks in after death, or whether the trust deed is drafted after death to reduce costs...
 
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ice_cubes said:
rather set up an (Inter vivos) trust now & donate/sell all your assets to the trust. This way u will avoid estate duty & capital gains tax when u or wifey dies!

I paid R4900 for one trust. I have 2...one for all my paid up assets & one for my assets that I still owe/paying off.

A trust is registered at the Magistrates court
Click to expand...

Celine can go into a little more detail than I can on this subject but the law has tightened around trust funds, estate duty and capital gains tax. I switched out my property from a trust fund for this very reason because it became far more tax efficient to do so. Trust funds are no longer the tax-havens they used to be. Nowadays it makes more sense to declare it in a spouse's name because the tax efficiencies in that department have increased while the noose around trusts has been tightened...
 
DJ... said:
There are a few issues relating to testamentary trusts that you need to be aware of though, and that is that they're open to abuse by unscrupulous trustees so you'd better appoint someone who you'd trust with your life. They also have no legal obligation to assume the duties of a trustee at the time of your death, so just be aware of this beforehand. The one thing I am not 100% sure about regarding testamentary trusts is whether or not the trust deed is in place before death and it merely kicks in after death, or whether the trust deed is drafted after death to reduce costs...
Click to expand...

As far as I know, the testamentary trust is set up when you die. And dissloved when the minors reach 18yrs of age.
So, if your kid is underage when you die, the trust will be set up. But when your kid turns 18, he/she will be given the proceeds & the trust is legally dissolved. If your kid is smart (rare at age 18), he/she will open an IV trust... but usually they just squander the money & waste their parent's life savings away *sigh*
 
ice_cubes said:
As far as I know, the testamentary trust is set up when you die. And dissloved when the minors reach 18yrs of age.
Click to expand...

Sure, but the trustee needs to be appointed beforehand and the trust deeds need to stipulate distribution of the assets and cash, so my worry is that testamentary trusts can be open to abuse by the trustee. I'm not an expert on trusts though whatsoever but I am involved in a few...
 
DJ... said:
Celine can go into a little more detail than I can on this subject but the law has tightened around trust funds, estate duty and capital gains tax. I switched out my property from a trust fund for this very reason because it became far more tax efficient to do so. Trust funds are no longer the tax-havens they used to be. Nowadays it makes more sense to declare it in a spouse's name because the tax efficiencies in that department have increased while the noose around trusts has been tightened...
Click to expand...

The noose has tightened, but so have the legal loopholes :)
To avoid paying ALL the CGT, you must do an bare domuim/usufruct donation of your assets. This will reduce the amount to about 20% & the balance (which does not increase with inflation) can be paid when you die...eg if the total CGT is supposed to be R100k, then you will only pay R20k when you register the usufruct & the balance of R80k will be due when you die. So if you die after 60yrs, you (your estate) will still be liable for R80k, but you that it will be peanuts in 60yrs time.

Dont know how to explain it in simpler terms, but thats how it works.

With regards to estate duty, if you transfer all your assets to a trust now & you die. The only asset that will fall into your estate will be your salary & probably your pension payout (but not the whole amount IF the trust is the beneficiary)

Also remember that all donations up to R100k are exempt from tax, so if your assets are more than R100k, the balance of the assets will be *sold* to the trust & the trust will *owe* you money which will be written off at the maximum donation value per annum.

ok, enough preaching for today.

have a lovely weekend guys!
 
DJ... said:
Sure, but the trustee needs to be appointed beforehand and the trust deeds need to stipulate distribution of the assets and cash, so my worry is that testamentary trusts can be open to abuse by the trustee. I'm not an expert on trusts though whatsoever but I am involved in a few...
Click to expand...

Thats why it is important to have an INDEPENDENT trustee as a 2nd independent trustee (not ypur accountant or lawyer!), eitherwise the trust will be deemed to be an extension of your personality & will be dissolved & be subject to *estate duty*.

The independent trustee is there to make sure that the nominated trustee ie your brother consults & gets approval for every transaction that happens in the trust. Which means, everytime the trust wants to purchase an asset or sell, there must be a resolution signed by both parties. And yes, the banks will never allow any transaction without those documents.
 
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Thanks for the explanation. My understanding is that spousal donations are tax exempt which makes them very efficient in comparison to a trust in today's environment. You do pay the duties but they are less than the CGT of a trust...
 
ice_cubes said:
As far as I know, the testamentary trust is set up when you die. And dissloved when the minors reach 18yrs of age.
Click to expand...
No testamentary trusts aren't dissolved when minors reach 18 years...thats the special trusts. Which are an entirely different ball game altogether.

ice_cubes said:
rather set up an (Inter vivos) trust now & donate/sell all your assets to the trust. This way u will avoid estate duty & capital gains tax when u or wifey dies!
Click to expand...
So you manage to avoid estate duty...but end up paying donations tax. Which by some strange coincidence is also at 20%. Plus you manage to miss out on the 160k capital gain deduction on death.

Seriously ice you need to be more careful giving advice. That advice in the bursary thread was also off.
 
My dad did the same and listed my brother and myself as a beneficiary ... and that alone made me never want one.

A stipulation of the Will was age 28 to inherit - which meant a waiit for 6 years for me and 12 years for my brother. With the costs involved for 'management' of the trust and inflation, the cost of the money was far greater initially than now. Nothing worse than getting a bill of R30,000.00 for the year when did ... nothing. Worst of all knowing it's coming from YOUR money at the end of the day.

That said, I feel a portion of the issue was a badly written Will on his part - as well as highy conservative financial advisors that gave me a real 3% per year. In the 3 years I've managed my own money, I've increased it 60%+ ... a far amount greater than they did.
 
Woo Haa.
Thats quite a bit of info though it makes sense (for a Friday Afternoon anyway).
Thanks guys, need to dissolve this info.

My issue is if my daughter is left alone.
I would like everything i own to go into the trust.
She will have guardians who will be paid maintenance fees (that i will have to stipulate somewhere).
Then i must also look at investments of that money in the trust (to counter inflation...).

Guess my weekend is on research.
 
Go see a tax lawyer.

What you are speaking about is a testamentary trust and it is contained in a will the same way as a trust deed will contain all the trust stipulations in the trust deed.

Another option is to create an inter vivos trust with very little assets and then make the trust the sole beneficiary of your will.

A inter vivos trust is registered at the Master of the High Court and not the Magistrates court. You can do it yourself and it should not cost more than the Master's Fee which I think stands at R100.00. It will however be much better to do it through a tax specialist for advice.
 
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