Trusts for Property Owndership

If you want to buy property and pass it on to your family someday, you can consider setting up a trust. A trust is like a safe place for your property that you control even after you're gone.

Usually, people buy property thinking about where they'll live or if they'll move later. But if you want to do more with your property, like protecting it for the future, a trust is a good option. With a trust, you technically don't own the property; the trust does. But you can still be in charge.

A trust is like a special legal container that holds your property and protects it. But it's not a simple decision, and you should think about the pros and cons part.

Pros
Avoiding Estate Taxes
If you pass away, the property in the trust doesn't count as part of your stuff, so it can save you taxes.
Savings on Property Transfers
If you don't need to give the property to your family, it saves on taxes.
Tax Benefits
Trusts often have lower taxes than regular estate taxes.
Protection from Debt
If you have money problems, the property in the trust is safe after some time.

Cons
Losing Control
You won't have full control over the property anymore because trustees will take care of it.
Higher Taxes
Trusts pay higher taxes, and any money the trust makes gets taxed at 45% with no discounts.
Property Buying Costs
Trusts pay taxes when they buy property, and there are taxes for giving away assets.
No Home Tax Breaks
If the property is your main home, some tax breaks won't work if it's in a trust.

It's essential to know that trusts are great for protecting things, but you need to think about your situation. Compare trusts to other options and ask financial experts about setup costs.

When you decide on a trust, you need to create it while you're alive. An expert can help you with the legal stuff and tell you how much it will cost.

The Basics for Making a Trust
-You need a founder who starts the trust.
-A legal document (trust deed) with details like the trust's purpose, who gets the stuff, and what the trustees can do.
-You need to pick trustees who can manage the trust.
-You should hire an accountant to take care of the trust's money.

Setting up a trust can be expensive, especially because of the legal document. The cost can vary, but a simple trust that owns one property could cost more than R10,000.

When you choose trustees, think about what kind of trust it is. For family use, you don't need experts. But for more complicated trusts, it's better to have someone with the right knowledge. Trustworthy, reliable people are essential as trustees, and they should have a clean history.

If you want to sell a property held in a trust, be careful when picking property professionals. Inexperienced trustees can cause delays, and you need to sort out trustee changes before selling.

In simple terms, a trust is like a safe way to protect your property for your family's future. But whether it's a good idea depends on your situation. Think about the good and bad things and talk to experts to make the right choice.


Credit: P24