25 Mar

Setting up a trust can be an excellent way to protect your assets, but it requires careful consideration before taking the plunge. In this article, we will provide you with some tips on how to set up a trust correctly. Before you create a trust, make sure that it fits into your overall estate plan. A trust is a legal structure that allows you to transfer assets to a third party, the trustee, who holds and manages those assets for the benefit of the trust's beneficiaries. 

This can help protect your assets and ensure they are managed according to your wishes. However, setting up a trust requires careful consideration and preparation.The first thing to consider is whether you are willing to relinquish direct control over assets transferred to the trust. If not, the trust may be considered an alter ego of yourself and disregarded, defeating the reason for registering a trust. 

It is possible to structure a trust in such a way that you are a trustee and beneficiary, provided there is a clear separation between control and ownership, and enjoyment.

Another important factor to consider is whether the benefits of the trust justify the cost and administration involved in setting up and running the trust. You should calculate the benefits, including risk mitigation, which is difficult to estimate accurately. Once you have decided to set up a trust, you need to consider the formalities. 

A trust is created when property is transferred by a written agreement, testamentary writing, or court order. Before doing that, you need to have the necessary documentation in place.You must decide on the following before you can have a trust deed drafted by a professional:

  • The desired name of the trust, preferably not your name or surname.
  • The type of trust, whether discretionary or vested.
  • The purpose or object of the trust, which should be clearly defined in the trust deed.
  • The name of the founder, who is the person setting up the trust.
  • The names of the proposed trustees, with care taken to appoint experienced and knowledgeable individuals.
  • The nomination of beneficiaries, with income and capital beneficiaries chosen according to your preferences.

Once you have chosen your trustees, each will be required to complete a J417 Master form to be appointed as a trustee.

Finally, it is worth considering whether it is necessary to appoint an independent trustee. This is a requirement for a "family business trust" and can add another level of protection for your assets.In conclusion, setting up a trust requires careful consideration and preparation. Make sure that it fits into your overall estate plan, calculate the benefits, and have all the necessary documentation in place. By following these steps, you can protect your assets and ensure they are managed according to your wishes. 

Author: Louwrens Koen 

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