Trusts PDF

TRUSTS ⑥ MERMEN OF TRUSS -1T$ : ↳ Trust relationship a legal...

TRUSTS ⑥ MERMEN OF TRUSS -1T$ : ↳ Trust relationship a legal = ↳ created by a person by means of drawing up a trust deed (founder / donor / settlor ) uses of a Trust : ↳ Trust deed states either owned he controlled : assets are by , or only controlled by , the trustees ↳ Asset protection ↳ Established for benefit of Beneficiaries ↳ can minimize estate 4 IUT @ death duty ↳ ↳ Inter vivos trust founders lifetime separates benefit from control → created during ↳ Testamentary Trust → created on founders death ↳ Not a legal personality i. Trustees take ownership of assets PART / f) TO A TRUST : ↳ no specification of how many must be present ↳ Good to have 2- 3 trustees 7 ↳ benefits on behalf of beneficiaries manage Trustee : ↳ Any person including , founder , who acts as a trustee via authorisation in S6 Trust Property : ↳ moveable interests in + immovable property + contingent property thats administered or disposed of by trustee eg : it flat inY-rusl.is rented out , eg : it flat is Told } again is made , beneficiaries can get the income capital distributed to Beneficiaries * can be an income 4 capital Beneficiary at the same time TRUST INSTRUMENT / DEED : ↳ written agreement or Testamentary writing or court order creating a trust ↳ Trustee may do anything legal empowered by trust deed No power if not authorised by trust deed → ↳ Amendments to Deed : ↳ allowed deed will perscribe how , ↳ be amended in event it founders alive can any TYPES OF TRUSTS : ↳ How was it created ? ↳ Trust Testamentary → last will be testament ↳ Inter vivos Trust contract for benefit of 3rd living trust ) → party ↳ Who owns the assets ? ↳ ownership Trust → trustees in respective capacities ↳ Be wind Trust → Beneficiaries , but under control of trustees ↳ Rights of Beneficiaries ! ↳ demand income Full Discretionary NO right to → ↳ Vested Rights → Entitled to income  REQUIREMENT $ FOR # MAIN FRUIT " ① INTENTION OF FOUNDER TO CREATE A TRUST : ↳ Intention stated in trust instrument clearly ↳ in the preamble to deed eg a trust : ↳ Testamentary Trust intention stated by either : ↳ bequest to trustees for benefit of named beneficiaries ↳ bequest to named beneficiaries + explicit direction that bequest keeps under control of trustees until further date ② INTENTION EXPRESSED IN AGREEMENT OR WILL OR DOL THAT WILL CREATE A LEGAL OBLIGATION : ↳ Inter Vivos Trusts : → trust deed contract that benefits beneficiary = ↳ plates obligation on founder b. trustees ↳ Testamentary trusts : → will is not a contract , but terms oi will creating a trust creates obligations ↳ Obligations on executor of deceased estate + trustees appointed in will / in accordance to will ③ TRUST PROPERTY DEFINED WITH REASONABLE CERTAINTY : ↳ settlement Founder has settled RL00 1- accepted by trustees Sept : → = on. 2011 ↳ Amount held trustees for benefit of beneficiaries by + managed 1 controlled by trustees solely ↳ Powers of Trustees trustees have power to add Trust fund additions via donations inter vivos accepting lawful means : → to by testamentary bequests or or by any ✗ Purpose of the Trust ④ TRUST OB5H-1NE DEFINED WITH REASONABLE CERTAINTY b. THERE MUST BE A BENEFICIARY : ↳ µ usually to provide beneficiaries for : maintenance , education , general well-being ( as individuals or member ' Ot " " " s ) can have both as objectives , but unwise art tax implications ↳ Impersonal Objective : charity , animal welfare , research , educational activities , etc. ⑤ TRUST OBJECT IS LAWFUL : ↳ Objective unlawful it illegal against public policy immoral = : → , ,  TRUSTEES : ↳ i to trust deed b. is authorised by Master to act Appointed REQUIREMENTS TO ACT AS TRUSTEE : ① Appointment made in lawful manner APPOINTMENT OF TRUSTEES : ② Has and NOT to do so capacity to act as trustee , disqualified ↳ Appointed by founder in trust deed or will of founder ③ Written authorisation from Master ↳ Deed : act of deciding who parties are that founder wants to enter into a contract ④ Must accept appointment as trustee ↳ will : testator directly identifies trustees ⑤ Must furnish security it required to do so ↳ can be appointed or assumed by existing trustees → it trust deed allows it t ↳ Power of substitution eg takeout policy in late you give bad advice : : and lose trusts money ↳ can be given to existing trustees ↳ Allows trustees to resign 4 appoint person in their place ↳ Power to appoint given by founder : ↳ can empower of beneficiaries to beneficiary 1 group appoint or elect trustees ↳ can empower person designated in trust deed to appoint or elect trustees ↳ Master can appoint trustees it. : ↳ office of trustee becomes vacant or cant be filled + no provision in deed for this → Master can appoint trustee ↳ Master can appoint co - trustees ↳ Appointment by statue : Appointment clause example : ↳ when parliament creates a trust for a specific purpose through legislation ↳ Appointment by court : ↳ trust never fail due to no trustees may i. Court has power to appoint trustees it all else fails ↳ Person appointed as Trustee must accept appointment AUTHORISATION OF TRUSTEES : ↳ Trustees may only act as a trustee once they have been authorised by the Master ↳ Master may require security even trust it , deed says otherwise ↳ section 6 Of Trust Property control Act : FIDUCIARY DUTY ON A TRUSTEE : ↳ Duty to exercise powers in the best interests of the present } future beneficiaries of the trust , holding scales impartially between different classes of Beneficiaries ↳ Duties towards beneficiaries = paramount ↳ Obey law + put beneficiaries interests first  DUTIES OF A TRUSTEE : 11h POWERS OF A TRUSTEE : ↳ Derived from trust deed ① 3 Skill Act with care , diligence ↳ it no provisions made for particular power ② To open a separate trust account at a Bank ↳ assume founder intended for trustee to not have that power ③ Make trust property identifiable as trust → asset register must be known that owner property of account = trust , not trustee ↳ Power to sell property is not the power to it ④ / mortgage Make every account / investment identifiable as a trust account / investment ↳ Actions of trustees outside their hill 3 void powers = ⑤ May not destroy trust does within b- yrs of trust termination , without masters written consent ⑥ Administer + protect trust property PERSONAL LIABILITY OF TRUSTEE : ⑦ Conserve the trust property ↳ Can be responsible 4 accountable to beneficiary ⑧ Give practical effect to terms of trust deed ↳ " skill " wider than acting in good faith = ↳ Trust deed cant attempt ⑨ Act in utmost good faith towards all beneficiaries to protect trustee that acts negligently or recklessly ④ Exercise an independent discretion ① Invest trust property productively ① Account to all Beneficiaries ① Act within powers granted ④ Only take remuneration they're entitled to ④ Transfer income / capital Beneficiaries when to obligated REMOVAL OF TRUSTEES : > ↳ Trustee loses office by : ↳ Vacating the office by : ° Death 0 Vacation ito deed vacation of office 0 Termination of trust 0 Revocation of doc. Under which trustee was appointed ↳ Resignation ↳ Removal Master court by or ↳ Removal of Trustee Master by : ↳ Trustee guilty of a crime with element of dishonesty or other crime it penalty imprisonment without option of a fine = ↳ Failure to furnish security required by Master ↳ Trustees estate = sequestrated / liquidated / Under judicial management ↳ Declared court mentally ill by ↳ Failure to perform of a trustee or any duty comply with any lawful request of Master ↳ Removal of Trustee court by : - ↳ in office will staying hamper proper administration " it removal will be in the interest of the ↳ detrimental > staying = to beneficiaries trust and its Beneficiaries " G- rounds for Removal ← ↳ irreparable conflict of interest ↳ Fraud ↳ Breach of trust - ADDITIONAL PROVISIONS : ↳ Trustee must trust deed with Master with jurisdiction over area that trust property held lodge is ↳ Foreigners can be trustees ↳ Trust does not form part of trustees estate property ↳ Master must supply copies of trust deeds at a fee on request ↳ Remuneration must be fixed in trust instrument ↳ it not , reasonable amount ↳ it dispute fixed Master , by  IB3E-1NE FF1H # TRIES 1219171T$ : ① Vested Rights → entitlement to benefits : can demand ② Discretionary Rights → hope to relieve something , cant demand it ↳ only when trustees use their discretion to distribute to beneficiaries ③ combo of vested 4 Discretionary Rights → income b. capital beneficiaries ④ Income Beneficiary ⑤ Capital Beneficiary DHANI # G-E- $ * * +☒ v1 : "" ① Estate freezing : ↳ create a trust and sell assets to trust to freeze our estates living ↳ When assets sold creates loan account for ED purposes a property = → ↳ money frozen : no tax until moneys used ↳ loans interest :-b CGT estate pays will 4 in value ↳ sell growth assets to trust : ↳ assets excluded from deceased estate : IED payable ② Asset protection : creditors claims if terminated ↳ protection against + marraige ↳ protects beneficiaries against their lack of experience in business ③ Easy suasion of Interests : ↳ Assets in trust a rent frozen at death : beneficiaries can continue to enjoy assets without disruption ↳ No impact on beneficiaries future enjoyment of trust assets ④ Business use ⑤ Instead of creating limited Rights ↳ usufruct still included in deceased estate i. can avoid TD it put limited into trust right ⑥ court orders ⑦ Multiple Ownership ↳ Cant be que th a farm to multiple people in SA law , but allowed it farm in a trust ⑧ Limited liability ⑨ Effective estate Planning ④ Simple to form ④ Continued existence ④ Possible tax savings ↳ Beneficiaries are taxed , not the trust = better be cut individual tax rates < Trust tax rates ↳ it client pays income tax at highest marginal he has an asset tax rate attracting high tax → putting asset into trust will I tax liability ☒ 1$ # WANT # 4- E- § a # *☒ HIM : "" ① Cost of Assets Transferring : ② Duties of Trustees : ↳ Duties can be onerous ↳ Trust deed cant exempt trustees of personal ↳ liability Beneficiaries can be of trustees demanding ③ Give up control : ↳ Trustees take full control of assets ④ Trust deeds can be amended ↳ Trustees can become hostile towards founder ↳ :B to have an independent trustee from outside the family  THRUSTS his ☒ ④ ME THAT ☒ : ↳ Normal trusts = taxed on income at flat rate = 45% ( Not special trusts ! ) ↳ Income tax in hands of either : Donor , Beneficiary or Trust " " ↳ conduit pipe principle Trust income retains its nature when it rests in a ↳ beneficiary ↳ i. Beneficiary taxed when income relieved or accrues to them from trust ↳ : It trust relieves rental income → Beneficiary taxed on the rental income ↳ Beneficiary entitled to all deductions that trust is entitled to ↳ section I5B of ITA : ↳ Beneficiary liable for income tax it income distributed to them or rests in them ↳ Otherwise , trust taxed anti avoidance toff - ↳ provision section Z5B Of ITA subject to provisions of section ↳ Founder of trust is taxed on income attributable to a Donation or settlement made by founder to trust ↳ it the income is Only... ↳ Kept in the trust ↳ Distributed to founders minor child ↳ Trust Discretionary trust who relieves rental income Donor taxed. i. ↳ rental income distributed to minor child ↳ it owner = Deceased : ↳ trust pays ↳ it trust pays income to minor → minor taxed ( trustees handle admin ) TT1R # IS the ¢4T : ↳ capital Gain = taxed in trust until an unconditional right to those assets = vested in a beneficiary ↳ Par 80 of 8th Schedule : ↳ vests in capital Gain taxed in hands of Beneficiary to whom right ↳ Unless : Gain attributable to another person ↳ similar to S25 B0T 1TA ↳ It Beneficiary = minor child : ↳ No flow through 01 Capital Gains allowed ↳ trust asset must be acquired trust via donation or settlement minor Childs parent by by due to certain condition ↳ or it gain gain does nt rest in Beneficiary :  * E- ¢1 ☒ TRUSTS : ↳ special trusts = tool to protect assets intended for minors or Beneficiaries with special needs ( mentally or physically disabled or unable to provide financially ) ↳ Type of trust = Testamentary or inter vivos → Depends on founders objectives ↳ Good way to ensure Beneficiaries not taken advantage of TAX IMPLICATIONS : ↳ special trusts taxed on sliding scale from 18% - 45% ↳ Income tax = 181. - 45% ↳ Inclusion rate : 401. ↳ Under -18 trusts : ↳ Dont for PUA primary residence or annual R40 0OO exclusions qualify : , ↳ Also known as Testamentary trusts