The use of South African trusts as estate planning and wealth preservation tools

Abstract

Much focus has been placed on the ability of trusts in achieving the function of serving as estate planning and wealth preservation tools. Throughout the years, trusts have held a primary function to provide asset protection and continuity of ownership, and in certain circumstances trusts have been seen to also provide tax advantages. Various committees, legislation and Acts have played an integral part in providing guidance and recommendations to the use of trusts to ensure its proper use through policies and laws that disincentivise the ill-use and abuse from the time a trust is set up, throughout its course of existence. This research will investigate whether trusts are a viable estate planning and wealth preservation vehicle where Chapter 3 focuses on understanding the different types of trusts and their uses highlighting the need and practicality of use for each type. Chapter 4 unpacks the elements and importance of estate planning as well as how estate planning marries into other principles such as wills, taxation, donations, and estate administration. Chapter 5 will illustrate five wealth preservation principles and recommendations within the South African context. Chapter 6 identifies how trusts can be utilized as asset protection mechanisms by expanding and detailing on the areas of insolvency of the different trust role-players, attachment of debt by creditors, the look into how unsuccessful marriages and divorce may impact trust assets, the value and of business trusts as well as various applicable case law that complement this chapter. Lastly, Chapter 7 details the different types of taxation on trusts and the impact these taxes have, along with anti-avoidance provisions that have been promulgated overtime into the Income Tax Act 58 of 1962.