Posted on: 23rd May 2025

Using Trusts for Long-Term Wealth Preservation

When it comes to preserving wealth for the long haul, few tools are as effective—or as misunderstood—as trusts .

Whether you're planning for your children's future, managing a family business, or simply looking to protect your hard-earned assets, trusts can offer security, flexibility, and peace of mind.

In this article, we’ll explore how trusts work in South Africa and why they might be a smart addition to your financial planning strategy.

What Is a Trust, Anyway?

At its core, a trust is a legal arrangement where a person (called the founder) transfers assets to trustees.

The trustees then manage those assets for the benefit of chosen individuals—known as beneficiaries. Think of it as a safety vault for your wealth, with clear instructions on how it should be used, even after you're no longer around.

In South Africa, trusts are governed by the Trust Property Control Act 57 of 1988. They come in different types, but the three most common are:

• Inter Vivos Trusts – Set up while the founder is still alive.

• Testamentary Trusts – Created through a will and activated after the founder's death.

• Bewind Trusts – A uniquely South African structure where beneficiaries own the assets, but trustees manage them.

Why Consider a Trust?

Let’s look at the key reasons people use trusts for long-term wealth preservation:

1. Protecting Your Assets

One of the biggest benefits of a trust is asset protection. Once assets are legally transferred into a trust, they’re no longer part of your personal estate. That means they’re generally safe from personal creditors or financial claims—so long as the trust is properly set up and managed.

Just a heads-up: If you transfer assets into a trust while you’re insolvent, the move can be challenged by creditors. Timing and transparency matter.

2. Planning for the Future

Trusts are brilliant for estate planning . They let you outline exactly how your assets should be used—not just now, but decades down the line. This is especially helpful if you want to support:

• Young children

• Family members with special needs

• Future generations of your family

A trust keeps your wealth intact and ensures it’s passed on according to your wishes, without the delays and public scrutiny of the probate process.

3. Managing Taxes Smartly

Trusts are taxed in South Africa at a flat rate of 40% on income and 20% on capital gains . That may sound steep, but with the right planning, a trust can actually reduce your overall tax bill.

How? You can distribute income to beneficiaries who are in lower tax brackets. For example, if your adult children earn less than you do, they might pay less tax on income paid out from the trust.

Over time, this strategy can lead to substantial tax savings.

4. Flexibility and Control

Not every financial structure gives you the freedom to adapt.

A discretionary trust , however, puts decisions in the hands of your appointed trustees. They can decide who gets what—and when—based on what’s best for the beneficiaries.

This is especially useful in uncertain times or for families whose circumstances may change. You're giving your trustees a guiding hand, not rigid instructions, which keeps the trust relevant over time.

What to Consider Before Setting Up a Trust

Setting up a trust isn't something to rush. Here are a few things to think about:

• Get the trust deed right – This document spells out the rules of the trust. It needs to be crystal clear to avoid confusion or disputes later on.

• Choose your trustees wisely – You’re handing over a lot of responsibility. Trustees can be family members, professionals, or a mix of both. Ideally, they should be financially literate, trustworthy, and impartial.

• Professional help is essential – Managing a trust properly requires knowledge of tax law, compliance, and record-keeping. Organisations like the Fiduciary Institute of Southern Africa (FISA) can help you find qualified professionals.

Trust Management and Compliance

Trusts aren’t a “set and forget” solution. They need regular care and attention to stay effective. This includes:

• Filing annual tax returns

• Keeping accurate financial records

• Reviewing the trust deed and asset structure every few years

• Staying on top of any changes to legislation

Proper administration also builds trust (pardon the pun) among beneficiaries. Transparency and professionalism go a long way in maintaining family harmony and legal protection.

Is a Trust Right for You?

Not everyone needs a trust—but many people benefit from one without even realising it. A trust might be right for you if:

• You want to protect family wealth from divorce, debt, or disputes

• You have minor children or financially dependent relatives

• You’re planning to leave behind property, shares, or a business

• You’re thinking about tax-efficient ways to pass on your legacy

Everyone’s situation is different, which is why we always recommend speaking to a financial planner or fiduciary expert.

Final Thoughts

Using a trust is one of the smartest ways to preserve and grow wealth for future generations.

In South Africa, they offer a powerful blend of protection, flexibility, and control—but only if they’re properly set up and actively managed.

If you’re serious about long-term financial planning, trusts deserve a place in your strategy.

Ready to Get Started?

If you’re curious about whether a trust could work for your situation, our financial advisors are here to help. We’ll walk you through the options, answer your questions, and help you structure a plan that suits your goals.

Get in touch today and take the first step toward protecting your legacy.