My Trust Structure: Q & A

by Annemarie Schutte


FAQ

At the Wealth Masters Seminars and during consultations, a lot of questions are repeatedly asked. Today I will answer four of these frequently asked questions, namely:

  1. Do my trust beneficiaries have a claim on trust assets?
  2. Why should I rather set up a living (inter vivos) trust instead of a testamentary trust?
  3. Do I still require a Will when my assets are in trust?
  4. What happens when my Independent Trustee dies or leaves the company?

1. Do my trust beneficiaries have a claim on trust assets?

If you have our living discretionary trust, the answer is no, however I need to qualify this answer.

A discretionary trust assigns the sole discretion relating to all decisions, to the trustees. These decisions include but are not limited to the investments made, allocations/distributions of income or capital, etc. This means that no beneficiary has a vested right or claim against trust assets, they only have a hope to receive a benefit.

The beneficiaries do however have a right to proper administration of the trust, since trust assets are administered for the benefit of the beneficiaries.

If you distribute taxable income to a beneficiary and the cash does not leave the trust's bank account, that beneficiary will now have a loan with, or vested right in, the trust. We do however have a solution for this possible problem: Destinata Accounting will draw up supporting documents for the Beneficiary to donate the funds to the trust, to clear the vested right account.

2. Why should I rather set up a living (inter vivos) trust instead of a testamentary trust?

A living trust is created while the founder is alive and a testamentary trust is created through the deceased's Will on death, thus the founder is deceased.

With a testamentary trust you will first pay estate duty, executor's fees, capital gains tax, and most probably auction fees, before effect is given to your bequests. By this time, you might have lost more than half your asset value just to cover these costs.

We recommend setting up a living, discretionary trust, as we want you as the initial beneficiary to receive the benefit while you are alive. Some of these benefits are full asset protection against creditors, continuity of your legacy, tax savings (conduit principle) and eradicating your personal estate to eliminate or reduce estate duty, executor's fees, capital gains tax, etc.

3. Do I still require a Will when my assets are in trust?

Yes, you do. Even though all your assets may be in trust, you may still have a loan account with your trust, which is an asset in your estate until settled in full. Since 2017, when legislation regarding loan accounts changed, it is even more important to address this in your Will.

You also need to appoint an executor to administer your estate. If you have minor children, you need to appoint a guardian for them. If you do not have a valid Will on death, you will die intestate, then the Master needs to appoint an executor and your wishes will not necessarily be carried out, since the heirs will be determined by the Intestate Succession Act. 

4. What happens when my Independent Trustee dies or leaves the company?

It is important to note Treasury Trust Services Pty Ltd is your independent trustee, represented by your trust advisor, thus if your trust advisor leaves the company or is unable to act, we just have to change the representative at the Master's offices. We suggest you entrust us with your original Letter of Authority to prevent delays if any changes thereto are required.

If you have questions regarding your trust structure, please do not hesitate to contact your trust advisor. If you'd like to get in touch with a trust advisor, please contact services@wealthmastersclub.com.




 
      Dhrystone
Top