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The trust, as
we know it, developed in England during the Middle Ages as a
result of, inter alia, attempts to circumvent onerous feudal
land taxes as well as the requirement on the part of crusading
knights to protect their estates whilst abroad.
The English law
of trusts has developed steadily since then and now consists of
a wealth of case law with certain statutory modifications.
Moreover it has spread to many Common-law jurisdictions
throughout the world, including South Africa.
As a result of
the British occupation of the Cape Colony and further
territorial expansions, British settlers brought the trust
concept with them to the Colonies and as a result, many earlier
court decisions can be found which deal with trusts according to
English principles and without questioning their validity within
the context of our Roman Dutch jurisprudential system.
As case law
developed, the courts gradually adopted the view that the
English law of trusts has not been received in South Africa
entirely and that the trust principle would be developed
according to principles of our Roman Dutch system. The problem
that the courts faced was that our Common Law did not directly
recognize the trust concept, although attempts were later made
by our courts to force trusts into a Roman Dutch mould. These
decisions have been subject to considerable criticism.
In order to
remove any uncertainty as to the validity of trusts at South
African Law, the Trust Property Control Act was signed into law
in 1988. This short piece of legislation firmly grounds the
trust concept in our law and provides for certain administrative
requirements.
As a result of the acceptance of the trust concept in our law,
the position at present is as follows:
The trust is a
valid legal institution. The property settled upon trust is
separate from the estates of the trustees personally. Although
the trust is not a legal person, the trustees hold property
settled upon trust in their official capacities and solely for
the benefit of the beneficiaries of the trust. Thus the trustees
are not beneficially entitled to the property and enjoy only
"bare dominium" or limited ownership of the property.
As such, creditors of the trustees are not entitled to attach
assets held upon trust to settle debts of trustees in
their personal capacities. By the same token, debts incurred by
trustees in their official capacities, whilst acting as
trustees, can only generally be settled from the trust fund or
estate, being the goods held upon trust by the trustees.
The effect of
the above legal regime is that trusts are a vital tool in estate
planning. By proper planning, it is possible to, over a period
of time, divest one's self of one's estate into what is in other
jurisdictions referred to as an "asset protection"
trust so that one's precious assets are secure from the claims
of one's personal creditors.
Moreover,
trusts have found significant use in business structures and
remain an important tool in strategic tax planning.
As can be seen,
the trust is a vital tool to be employed in one's business and
private life. The aim is to protect one's hard earned money and
assets from the claims of creditors.
To achieve
these goals, various types of trust have been developed. They
are merely modifications of the same thing, tailored to the
specific needs of the planner. Thus certain trusts create vested
rights on the part of the beneficiaries, whilst others create
merely a spec or hope of a benefit at some future point on the
part of the beneficiaries, subject to the discretion of the
trustees.
The fundamental
rule in using trusts is and will always be that a planner must
maintain a relationship with a trusted and skilled advisor. This
is vital in interfacing the use of one's trust in an overall
estate plan, having regard to one's will, liquidity and estate
duty issues and of course Income Tax.
The following
questionnaires will assist should you wish to instruct our
offices to attend to the registration of a family or business
trust:
Business
Trust Questionnaire
Family Trust Questionnaire |
