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Accountant Bookkeeper Kenilworth Claremont Cape Town Southern Suburbs


Own Nothing, Control Everything


If you are short on time, please watch our 2-Minute Explainer Video alongside to learn about the most important aspect of using a Trust, which is to protect your estate from death taxes...


The Trust is a separate legal entity, but not a legal persona or a juristic person per se. A Trust can transact, contract and hold wealth. Trusts are generally not used as a trading vehicle (companies are used for this purpose), but rather to hold and control wealth. The Trust and its purpose are contained in a Trust Deed which should detail all aspects of the Trust, including the parties to the Trust and its objectives. Trusts are governed by the Trust Property Control Act 57 of 1988, as well as various case law that has set precedents. There are various types of Trusts, but the most effective Trust used in Risk Management and Estate Management is one that is created when the Founder is alive (Inter Vivos Trust) and the Beneficiaries have no vested rights (discretionary Trust). Therefore, this particular overview is in terms of an Inter Vivos Discretionary Trust.


The formation of a Trust is required for two broad instances namely, RISK MANAGEMENT and ESTATE MANAGEMENT.

RISK MANAGEMENT is the process of limiting the amount of risk that one’s wealth is exposed to. Such risks could include divorce, business risk, civil risk and the more popular risk of having debt such as mortgage bonds.

ESTATE MANAGEMENT involves the process of limiting the vast amount of time-consuming and expensive procedures that are carried out on one’s estate upon one’s death.

Accountant Bookkeeper Kenilworth Claremont Cape Town Southern Suburbs


Simply put, the problem that many people face is that all wealth is owned in a single entity, namely your personal capacity - you own your home, your car, furniture, unit trusts,

investment properties and so on. The issue here is that if you are sued for whatever reason, all assets linked to you could be exposed and could potentially be attached and sold to settle debt owing as a result of any other asset you own.

For example, you are unable to pay the Hire Purchase on your vehicle – the bank repossesses and claims that you still owe another R50,000. The bank can then obtain a court order to attach your furniture or a property and have them sold to generate cash to settle the R50,000 on the vehicle. Although the vehicle lost to repossession is technically unrelated to your furniture, legally the assets are related, as you own those assets - we call this the ‘domino effect’. The problem starts with the vehicle, and then rolls over to your furniture, then to your home and so on. Many of us know someone who has suffered this fate, where you lose everything due to the above effects.

Typical risks that an individual is exposed to include the following: Business Creditors, Failure to Service Debt Repayments (Hire Purchases; Mortgage Bonds), Divorce and Civil Matters

Accountant Bookkeeper Kenilworth Claremont Cape Town Southern Suburbs


Upon your death, many issues arise as the process of winding-up your estate begins. The winding-up of your estate involves the rather long-winded process of valuing your wealth at date of death in order to evaluate the amount of taxes payable to SARS and the process of moving the remaining wealth to the heirs of your estate in terms of your Last Will and Testament. The issue here is simple; the heirs of your estate can only benefit after all of the following has been concluded/considered:

Estate Duties

All estates are subject to Estate Duties of 20%; fortunately some relief is allowed in the forms of rollover and abatements. Estate Duties are taxed on your Net Estate (Assets less Liabilities) in excess of R3.5mil.

Capital Gains Tax

Your death is seen as a disposal of your assets, and therefore triggers Capital Gains Tax on a sliding rate of 0 – 18% (2020/2021 Tax Rates). The tax is levied on the growth of the

asset since its acquisition, and therefore assets such as properties and shares in one’s business are highly susceptible to this tax and are quite often overlooked. Liabilities attached to the particular asset is not relevant in this tax calculation – therefore, even if you home is financed to the hilt, the said finance is not included in the Capital Gains Tax calculation.

Executors Fees

Generally an attorney is appointed to wind-up your estate. The prescribed fee in this respect is 3.5% plus vat on the gross estate (not taking your liabilities into consideration). Most Executors are VAT registered, there the total fee to the Estate is around 4%. On the face of it, 4% seems small but it is important to note that this fee is levied on the value of your total assets, not taking liabilities (debt) into consideration. Therefore, an Estate with R10million Assets and R10million Liabilities, will still carry an Executor Fee of around R400,000 (R10million Assets x 4%).


One cannot die with debt, and therefore all debt (mortgage bonds, hire purchases and so on) must be settled. This places a huge amount of pressure on the liquidity of the estate, and is one of the leading causes of assets of an estate being auctioned off to generate cash.


While the winding-up process above is being concluded (which could take a long, long time), the estate remains frozen and your loved ones have very, very little access to the wealth which you have left behind. Estates can take anything from 6 months to 5 years to wind-up, all essentially depending on the complexity of your estate.

Minor Heirs

Minors (under 18 years old) cannot benefit directly from an estate. Any assets bequeathed to a minor are liquidated and paid to the Guardian’s Fund which is a money market fund administered by government. Needless to say, one should avoid this.

All in all, the process is painful and long, requires a large amount of liquidity (cash), and is extremely expensive in that up to 35% of the estate could be lost to various taxes and winding-up fees, all of which should have been for your loved ones.


Trusts are a complex, specialized field. You can read the full 'Introduction to Trusts' document by clicking the link below, however, there is no replacement for a one-on-one consultation with one of our professionals.

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