Independant trustee

[CLIVE-TRIANGLE]

When the Trustees are also beneficiaries of the Trust and the beneficiaries are related to each other, it is required that an independent third party also be appointed as a Trustee.

Be aware that various offices of the Master will not issue a Letter Of Authority if there is not an independent trustee, anyway.

SARS don't have any role here, other than to register the trust if required, for tax. That they may scrutinize the trust's taxes more closely in the absence of an independent trustee is a given .... but they scrutinize trusts anyway.

Trusts are about as toxic as a sub-prime mortgage.

[Basment Dweller]

Trusts are about as toxic as a sub-prime mortgage.

Care to explain?

[CLIVE-TRIANGLE]

The true intent of trusts is to facilitate estate planning. However that has become incidental and they have in recent times more often than not been used in an attempt to avoid, estate duty aside, other taxes and a place to stash assets that would otherwise be at risk in beneficiaries' hands.

This has resulted in SARS, for at least a decade now, really digging into trusts' activities, especially if it trades, and rental activities is classed as a trade. This oversight really prejudices "true" family trusts. Banks also are very wary of them, especially when mortgages are involved. I have seen more than a few instances where they expect all trustees, including independents, stand surety for any borrowings. Good luck with that.

Also, most trustees don't really have a clue about their fiduciary duties and seldom act in the interests of all of the beneficiaries, especially when minors are involved and often their decisions are open to challenge because they have not grasped the underlying principles, let alone complied with accepted due process regarding approval of dealings.

[Justloadit]

I must admit that having placed most of my assets into a trusts, that it has already served me on one occasion when the sheriff pitched up at my premises to attach. Fortunately nothing in my name so I could negotiate the terms of an unknown court order that was served on me, or had to pay a hefty sum with 14 days.

This is the reason you need the independent trustee, who is in the trade so to speak, who advises you when ever you make any decisions which involves the trust.

[Houses4Rent]

Trusts are not toxic at all, but the bad management of them is. If all is done for the right reasons and if run properly incl having an suitable independent trustee I cannot see anything toxic about trusts at all. Of course if they are set up for the wrong reasons and not run properly they are useless. This applies to pretty much anything.

[CLIVE-TRIANGLE]

Sorry, I put that poorly and I do agree with you.

What I mean is that officialdom have come to regard them with a lot of suspicion and they regard them as "toxic", because of the frequency with which "they are set up for the wrong reasons and not run properly".

[Basment Dweller]

This info is very helpful thanks...this pretty much confirms the research I've done on trusts.

FYI I am currently setting up a company which we will be transferring 5 properties into as a result of a property development. I've set up the trust to be an 85% shareholder in the company of which I will personally hold the other 15%. My brother and I are trustees in the trust along with a third independent trustee. The whole objective was to provide a pension income for my parent as beneficiaries and avoid estate duty when my mother dies (my mother was the owner of the original property upon which we developed and extracted 5 new apartment units.) My brother and I are also beneficiaries of the trust.

As you can see its all very inbred which is why I wanted the independent trustee to avoid being accused of a sham trust or alter ego.

[CLIVE-TRIANGLE]

Hi BD
With that setup you would have issues getting it registered without an independent trustee, so you have approached it right.

[Justloadit]

I would suggest a Trust for each property, of course it all depends on the value of the properties. In this way if there is a catastrophe on any one property, especially if in a commercial sense, rental, building, shopping centre, etc it would not affect all the other properties. Again I would not let the Trust own 85%, all or nothing, as you place the Trust at risk if something goes wrong with you as a share holder or one of the properties. But as I have said before get advice from a Trust attorney, who can look at your complete portfolio and then advise.

[Basment Dweller]

I would suggest a Trust for each property, of course it all depends on the value of the properties. In this way if there is a catastrophe on any one property, especially if in a commercial sense, rental, building, shopping centre, etc it would not affect all the other properties.

This doesn't make sense to me, do you mean set up a different trust for each individual property? This would not be very efficient to run and manage, also the trust is controlling the shares of a property holding company, not the properties themselves.