How does a family trust fund work?

How does a family trust fund work?

Established by one spouse for the benefit of the other. The surviving spouse gets assets in the trust along with any income. This allows surviving spouses to avoid paying taxes on assets during their lifetimes. But heirs must pay taxes on remaining assets that they inherit.

How does a family trust work in South Africa?

There are two types of living trusts in South Africa, namely vested trusts and discretionary trusts. In vested trusts, the benefits of the beneficiaries are set out in the trust deed, whereas in discretionary trusts the trustees have full discretion at all times about how much each beneficiary is to benefit.

What are the benefits of a family trust in South Africa?

Trusts benefit from total asset protection and, as such, ensure that properties cannot be seized by creditors. Because a property in a trust no longer falls into one’s personal estate, it is not subject to inheritance tax. Trusts also do away with estate executor fees.

How does a trust fund work in South Africa?

Currently a trust is defined widely in the South African income tax legislation as meaning any trust fund consisting of cash or other assets that are administered and controlled by a person acting in a fiduciary capacity, where such person is appointed under a deed of trust or by agreement or under the will of a …

How is a trust taxed in South Africa?

Where the trust itself is taxed, it is taxed at a flat rate of 45%. Special trusts are taxed on a sliding scale from 18% to 45% (same as natural persons). Top Tip: Trusts do not qualify for any of the rebates provided for in Section 6 of the Income Tax Act.

Who owns the assets in a family trust?

trustee
The trustee controls the assets and property held in a trust on behalf of the grantor and the trust beneficiaries. In a revocable trust, the grantor acts as a trustee and retains control of the assets during their lifetime, meaning they can make any changes at their discretion.

Is a family trust a good idea?

Family trusts are designed to protect our assets and benefit members of our family beyond our lifetime. A family trust may be useful to: Protect selected assets against claims and creditors – for example, to protect a family home from the potential failure of a business venture.

What can I do with my South African family trust?

Financial assistance from the family trust in South Africa in the form of income and/or capital distributions will certainly greatly assist in either paying tuition fees, daily living expenses, or to eventually buy a property. Trust distributions to beneficiaries outside South Africa

What are the different types of trusts in South Africa?

There are two main types of trusts: trust between living persons (inter vivos trusts) – created by and between living persons through an agreement, for example a family trust or an employee share ownership trust; and testamentary trusts – created in terms of a will.

Why are assets moved to a trust in South Africa?

Furthermore, the building is a family legacy. The family feels that moving assets to a trust would protect the building for the next generation. We understand that forming a trust is very expensive and that tax on trusts in South Africa can be heavy.

How are assets donated to a family trust?

The founder’s assets are sold to the trust and a loan account (debt) is created. Assets can also be donated to the family trust, but this has donations tax implications. Throughout its existence, the trust can accumulate other assets through purchases or an inheritance.