Trust fund

[Basment Dweller]

If you do not have an independent Trustee SARS will most likely call your trust a sham and you will get nasty surprises in many ways. If you treat the trust assets 100% as yours you might as well not have a trust in the first place.

These trustee companies will tell you this and cite some obscure case law where some trust got pierced because there was no independent trustee. That fact is that it's 100% legal to run a trust without an independent trustee and as long as you govern the trust correctly (which you can easily do yourself), you will be fine, many many trusts operate this way.

You're not a pension fund.

[CLIVE-TRIANGLE]

The Act has not yet been amended to make this a requirement, but the Master is highly unlikely to register a trust without one.

The Master devised this requirement in response to the findings of the SCA in what is known as the Parker case. The case is was pretty much a landmark judgement.

The judgement included this bit "the Master should in carrying out his statutory functions ensure that an adequate separation of control from enjoyment is maintained in every trust. This can be achieved by insisting on the appointment of an independent outsider as trustee to every trust in which (a) the trustees are all beneficiaries and (b) the beneficiaries are all related to one another" and much of our law is that of precedence.

If you do attempt to register without an independent trustee and resort to the Trust Property Control Act, you will indeed find no such requirement, but the chances of a successful registration are practically non-existent, so much so that legal circles are campaigning to have the Act amended to include it as a requirement.

If you are successful, bear in mind possible negative consequences:

Acting Judge Gautschi, in the recent Morrell case, declared that the trustee was an ‘independent trustee’ in name only and that there was no real evidence of any interaction between him and the co-trustee (incidentally also the founder). The learned judge also held that given the evidence, the probable inference was that the said independent trustee allowed the founder to treat the trust assets as his personal property. Consequently the court deemed the trusts’ assets to be that of the founderfor all purposes, including for that of the redistribution order.
This is the first judgement in which the trust is regarded as the alter ego of the founder for all purposes. It effectively means that SARS may rely on this judgement to regard the trusts’ assets as the property of the founder for capital gains tax and estate duty purposes on his death, which could result in the demise of many estate plans with similar shortcomings.

[mosescapetown]

This is a interesting thread indeed.

If i may can I simplify some things i notice from the original posted by Andrecv.

the main idea behind a trust is to provide protection against creditors and To prevent difficult and expensive estate taxes.

Firstly as previously also noted the 3 siblings will have to qualify for the loan themselves even if they buy this home in the trust. The father can stand surety (not recommended) But the trust will still in no way be a safe protection for the future assets. In a Bond a home is a liability and not an asset yet. Only once the house is paid for will the trust provide any proper protection provided the trust DOES NOT stand surety for anyone or anything in future.

Definitely make sure you have an independent trustee on the trust. It might not be a pension fund but it provides pensions for many...

It was also mentioned to buy property in the company. this is not a bad option but that would mean allot of admin work for the directors.

Why not make a simple partnership for now and in the mean time repair the credit profiles of the siblings.