Must a Trust be revised?
I see it so many times in practice that clients just assume everything is still in order with their Trust and providing us with a copy of his/her Trust deed.
The most popular reason for buying in a trust is for estate purposes. Be careful as many times the funds still come from an individual to fund the transaction and the loan will be recreated in favour of the individual (which will form part of his/her estate) and haven’t kept Tax implications in mind where donation tax can be incurred by the Lender.
Records
Keep records of any changes of the Trust for example changing of Trustees, adding of beneficiaries etc. follow the procedure as prescribed in your Trust document.
Bank Account
This is important as it is a requirement for a valid trust as well as proper financial records by at least an accountant and not necessarily an audited statement (depending on the type of Trust).
In short, it is good practice to review your Trust regularly and understand the purpose of the Trust and the relevant Tax implications.
Every situation is different and therefore if you are pro-active, you can avoid unnecessary negative consequences.
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Few Aspects regarding Trusts
Trusts are regulated by a very short Trust Property Control Act 57 of 1988, which on first impression can look very simple. Since implementation of this act has many concerned parties involved in a trust has made mistakes. If you are considering erecting a trust or being a trustee or beneficiary of a trust, keep the following in mind:
- Acting on behalf of a Trust
A trustee can only act on behalf of a trust if he is duly appointed and the Master issued a Letter of Authority. If a Trustee or someone else acts on behalf of a Trust, there must be a resolution signed by all existing Trustees authorizing the person to act on behalf of the Trust and such resolution recording the boundaries of the person’s authorization. If you enter into a contract with a Trust make sure of the above. - Trust and Tax
One gets the impression that the Receiver zoomed in on Trusts and I strongly advise clients to make sure of their current status of their Trusts especially in regard regulations related to loans between the trust and a natural person. Also be aware of Capital Gains Tax that are much higher when a Trust sells a property. Make sure there are good reasons why you buy a property in a Trust and get professional advice in this regard.