FAMILY trusts are not the panacea for all succession and inheritance disputes as is now unfortunately commonly touted. There was a vivid example given last week that showed why family trusts are not suitable for every family.

It must be reiterated very plainly that family trusts should not be established when there are insufficient liquid resources that will enable the trust to sustain itself without burdening the trustees or the beneficiaries.

If the founder or founders of the trust have no financial means to make the trust self sustaining they should not form the trust.

Trustees and beneficiaries have no business using their personal resources to sustain a trust.

Trusts should never be created only to preserve and protect a family house without providing the money to maintain the house.

Failing or neglecting to provide for the maintenance of trust property leads to problems amongst beneficiaries because they will never all share the financial responsibilities and benefits of the trust property equally.

There are other less rigid and suitable ways to protect and preserve property such as wills and companies.

Trusts are only for those who can afford them and what they require.

However, for those who can afford them, trusts are a good idea and some of the advantages discussed herein.

Trusts can be created during the lifetime of the founder and these are called an inter vivos trusts.

They can be established after the founder’s death, where property is donated into the trust by means of a will. These are called testamentary trusts.

Trusts provide for a much tidier and more secure way of administering and safeguarding property for the appointed beneficiaries.

It is essential for a trust to have funds because only when it is viable can it function properly.

If there is money or access to it, the beneficiaries can invest in it or can run a family business or businesses through the trust.

The proceeds of the businesses will be shared for the further benefit of the beneficiaries.

Trusts are also relatively cheap to register and in addition, they benefit from some tax exemptions and concessions.

Estate duty is avoided when transferring property into the trust when the founder dies.

A trust enables the beneficiaries to avoid the Master of High Court’s processes through which estate assets are transferred to them.

Ordinarily, the deceased’s property will be sold and distributed among the beneficiaries as approved by the Master.

The Master collects 4% of the value of the estate, which is expensive such that some families end up selling the estate property in order to pay the Master’s fees.

Trusts circumvent this because if there is no money for the transfer, a caveat can be placed on the property which can be transferred into the trust when the money becomes available.

Transferring property into a trust removes the need to sell the immovable property to meet the Master’s fee and other state taxes.

Trust property is also protected from the founder’s creditors because it will belong to the trust when it is transferred and not the founder.

Trusts function as independent and autonomous bodies separate from their founders.

No one individual makes decisions because ownership is transferred from the founder to the trust.

The founder or the beneficiaries cannot make unilateral decisions to dispose of any trust property.

All trust decisions are made by the trustees in terms of the rules set out in the trust document.

Trusts can be contested in court but not as easily as wills which are often contested by disgruntled family members who may have been disinherited.

The details and terms of trusts are also much more private than wills because the details of trusts do not form part of the Master’s public records which can be inspected by the public.

Trusts eliminate incidence of individual family members selling family property and depriving other family members of their inheritance.

Trusts can acquire and dispose of property in their own name because there is a clear separation between trust property and personal property.

Well-resourced and financially-resourced trusts minimise family conflicts and bickering.

Poorly-resourced family trusts do the exact opposite and should never be established in the first place.

Trusts should clearly prescribe how beneficiaries will benefit and what will happen in the event of conflicts.

The trust deed should prescribe how the trust affairs will be conducted until the trust is wound up and terminated as prescribed.

Trust documents provide for how the trust will terminate. In some instances, the trust is wound up when the objective for which the trust was set up is achieved.

For example, if it was for the education of beneficiaries, the trust winds up when the level of education specified in the trust has been attained.

The founder and trustees and the beneficiaries can also terminate the trust by mutual agreement.

Trusts can also be dissolved and terminated by court order if there is a valid reason after the trust has been contested.