Because of the recent, more restrictive legislative and tax changes relating to trusts, clients are doubtful of the relevance and place for trusts going forward. Notwithstanding this, you should continue to consider the true purpose for creating and the continued use of your trust as an estate planning vehicle.
If your trust is still in line with its original purpose and continues to be legally sound, then recent changes should not necessarily affect your perception as to your trust’s relevance.
For your peace of mind, Phia van der Spuy, in the below article, comments on common myths and truths relating to trusts in South Africa.
Trusts do not generally form part of estate planning discussions between clients and their advisors. This is often since many advisers – including accountants, attorneys, and financial advisers - do not understand trusts themselves. Either that, or they have limited knowledge of them. It is often, and quite sadly, a case of the blind leading the blind. Due to the limited knowledge that surrounds trusts, compounded with the scepticism towards them in the current marketplace, people who don’t own trusts are generally sceptical to set them up in the first place.
Fortunately, in this quagmire of misinformation, a rope has been thrown out to rescue those
who are sinking deeper and deeper into confusion and despair. If you currently have a trust, it is possible to empower yourself to become smarter than your lawyer, your accountant, or your financial adviser.
There is nobody who knows and understands your financial circumstances better than you do. As such, why would you want to leave decisions in terms of what you want to achieve with your estate plan in the hands of a “professional” who is not ultimately impacted by the outcome of your financial plan?
I often hear people say, “I have an excellent lawyer who is taking care of my trust, and I trust him.” I would usually respond by asking these same people whether they have taken the time to read their trust deeds, or – in cases where the trust was set up years, or even decades, earlier – whether their trusts have been adapted for changing circumstances, for example marriage or after a divorce. They may also not be aware that 90% of trust deeds in South Africa are problematic, and that theirs may very well be part of this statistic. Many trustees have little knowledge of what is expected of them as managers of a trust.
Many have never even read the trust deed; a contract that can create serious problems down the line if its management is not strictly adhered to. And no trustee can ever claim ignorance.
It has become necessary for trust “owners” to educate themselves, so that they know enough to at least be able to question their “professionals”. A good starting point is to understand the general myths and truths surrounding trusts. Once you are familiar with both sides of the equation, you will be able to decide whether a trust remains an option as part of your estate plan, and whether you have been negatively influenced by the media and “professionals”.
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