Education required on the benefits of Trusts

Absa Trust, one of South Africa’s leading trust companies, says it is concerning that only a small portion of the population are aware of the benefits of having a trust and how it can significantly ease the individual’s tax burden, serve to protect assets

Recent statistics released by the Fiduciary Institute of South Africa (FISA) indicate that given the growth in wealth in South Africa, only 16 376 clients had created an inter vivos Trust in 2011, which represents only a fraction of the population. “This means that an inter vivos Trust as a tool of Estate Planning is not being utilised to its full extent,” says Vanya Terblanche, National Manager: Trust Services at Absa Trust.

“With September being Heritage month, it is befitting to direct attention to the importance of building a strong financial heritage for yourself and your family and a Trust is an effective tool in reaching your estate planning objectives,” says Terblanche.” However, there is the perception that Trusts are instruments only for the affluent and few people realise that the real value and purpose of a Trust can be applied to all income segments.”

Terblanche says proper education around the working of Trusts is essential as there are a number of ways that a Trust can help in leaving a legacy. “One method is through a testamentary Trust in your will. This stipulated testamentary Trust is a vehicle created in terms of a will, which comes into existence after the death of the testator/testatrix. For example, funds bequeathed to a testamentary Trust may provide for the maintenance, education and general well being of minor children, other dependants such as parents or employees or people with disabilities.

It is of particular value, in many instances, to provide for a testamentary Trust (first dying Trust) either at the death of a single person or at the death of the first dying in a marriage or partnership. This will afford immediate protection of assets for your ultimate beneficiaries. It is believed that as much as 70% of self created wealth never reaches further than the 3^rd generation.