When discussing comprehensive wealth planning, it is virtually impossible to ignore the strategic role of trusts. Most of us have witnessed the complications of a poorly planned deceased estate, or the consequences of having no plan at all. This article explores how a trust acts as a shield, with a specific focus on mitigating the high costs and risks associated with deceased estates.

1. Eliminating Excessive Deceased Estate Costs

The most common hurdle in wealth preservation is the immediate erosion of capital upon death. Executor’s fees are legally capped at 3.5% of the gross value of the estate, plus 15% VAT. Furthermore, the executor is entitled to a 6% fee (plus VAT) on all income earned by the estate after death, such as rental income or interest.

Once you add the costs of advertisements, valuations, Master’s fees, funeral expenses, and transport costs, the total cost of administering a deceased estate can cripple a family’s liquidity. By holding assets in a trust, these assets fall outside your personal estate, bypassing these fees entirely.

2. Navigating the Estate Duty Burden

Beyond administrative costs, the South African Revenue Service levies Estate Duty. If the net value of your estate exceeds R3.5 million, a tax of 20% is charged on the balance, with estates over R30 million taxed at up to 25%. A trust allows you to separate these assets from your personal estate, ensuring that future growth takes place within the trust and remains outside the estate duty calculation upon your passing.

3. Safeguarding the Future of Minors

Under South African law, children under the age of 18 cannot legally manage an inheritance. Without a trust, any cash inheritance is paid into the Guardian’s Fund, which is managed by the government.

This creates a significant hurdle for the surviving parent or guardian, who must submit formal requests for every expense – from school uniforms to medical bills. Not only is this process time-consuming, but the fund typically offers lower growth rates than private investments. Perhaps most concerning are the recent security breaches involving misappropriation and cyber-theft within the fund, which have left many beneficiaries temporarily without support. A trust ensures that your children are cared for by people you choose, with immediate access to funds and better growth potential for assets.

4. Lifetime Asset Protection and Creditor Shielding

South Africans are currently operating within a fragile and unpredictable economic landscape, accompanied by high unemployment and frequent market shocks that make wealth preservation a challenge. By transferring an asset to a trust, you relinquish personal ownership, effectively separating the asset from your personal risks.

In a discretionary trust, creditors cannot claim trust assets to settle your personal debts because you do not own the assets in your personal name. The trust acts as a standalone entity that owns the assets, ensuring that they are controlled by trustees rather than by any individual, which provides a critical layer of protection. A creditor only has a claim once the trustees formally decide to distribute a benefit to you, helping to ensure that the wealth intended for your family’s legacy remains intact, even if you face personal financial hardship or litigation.

It is clear that a deceased estate can accumulate significant fees, minimising the inheritance left for your loved ones or leaving them vulnerable during a lengthy administration process.

A trust is designed for continuity – it does not “die.” With proper administration, your assets remain out of reach of both the executor and personal creditors. It allows your wealth to grow at market-related rates, rather than rates set by the government for a fund outside your control, and it ensures that minors have immediate support for living expenses. While trusts require administrative diligence, the protection they offer makes them an undisputed cornerstone of long-term wealth planning.