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for the benefit of themselves as the beneficiary other than for the trusts own benefit.
In essence a trust does have a quasi-judicial personality in the sense that it can be sequestrated or have immovable property registered in the name of the trust in the deeds office.
In simpler terms a trust is created by a settler who transfers some or all of his property to a trustee who then holds the property for the benefit of the beneficiaries. The trustee has legal title to the property and the beneficiaries have an equitable title to the property. It therefore guarantees a separation of ownership and administration from the beneficial enjoyment of the property.
The trustee owes a fiduciary duty to the beneficial owners of the trust. This method is effective where one intends to plan for posterity.
Since a trust has contractual capacity to acquire, hold and dispose of property for the benefit of its beneficiaries subject to the terms written in the specific trust deed between the trustees and founder of trust.
It then affords the founder of the trust a certain assurance of asset protection. Where the founder of a trust has misgivings that the people that will benefit from his property will misuse or dispose of the assets, he can ensure through the terms of the trust what conditions need to be met before any property in the trust can be disposed.
If the property is immovable and it earns rental income, the founder can prescribe how proceeds from the trust should be utilised, for example towards the education of the beneficiaries.
This allows the founder to protect the beneficiaries against themselves. It also assists where the beneficiaries are too young or incapable by disability or otherwise to efficiently manage their own affairs.
The trust creates a simple method to control the day to day management of trust assets.
This method also assists in that it limits the growth of an individual personal estate, reducing the amount payable as estate duty on death of the trust founder.
Should the assets in the trust have increased in value over the years, the growth is excluded from the charges levied on the founder’s estate.
This is largely because there is no need to transfer the trust property from the founder to the heir because the heir is already a beneficiary of trust.
A trust is a flexible vehicle capable of catering for future changes expected or unexpected occurring in a person’s lifetime.
This can be an unplanned growth of the family, insolvency, legislative change, death and other unforeseen circumstances.
Provided that one does not create a trust with the intention of prejudicing creditors, the creation of a trust may assist in the protection of valued assets from creditors in the event that one becomes insolvent.
It is critical that one obtains tax advice when intending to create a trust so as to receive the full tax benefits of a trust.
A trust however is not a panacea for every situation, person or circumstance. One through legal advice needs to ascertain whether a creating a trust for their properties will be the best vehicle given particular circumstances and intentions.
Vengai Madzima is a property investment consultant and analyst with Wisdom Properties Real Estate. He can be contacted on 0772 468093 email: [email protected]
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