Trusts as a vehicle for holding property are not as popular and in vogue as they once were, says Lanice Steward, MD of Anne Porter Knight Frank, and the main reason for this, she believes, is that the capital gains taxes on property held in a trust are now higher than those for individuals. 
 
Nevertheless, says Steward, in her opinion, trusts will always have an important part to play in estate planning because they offer safeguards against misuse of the legacy. 
 
“The decision as to how to hold the property should be made in conjunction with the client’s financial advisor and not the estate agent who is usually unaware of the client’s financial situation,” said Steward.
 
“Regrettably,” she added, “it has to be admitted that many of the less experienced agents have caused problems here because they are not completely au fait with the legal and tax differences applicable to trusts, companies and close corporations.”
 
Over the last ten years or more, said Steward, a number of High Court judgements have caused agreements entered into by trustees to be set aside.  The main reason for this being that widely recognised, widely accepted legal principles have not been observed.
 
“The attorneys, Smith Tabata Buchanan Boyes,” said Steward, “have produced an excellent summary of the four main reasons why trust agreements involving property are “void ab initio” (i.e. invalid from inception) and these should be learned by all estate agents and the public.  They are
 
·         the trustees’ appointments have not been registered with the High Court;
·         new trustees, although nominated by the existing trustees, have not yet been issued with the essential letters of authority.
·         the trustees signing the agreement have not obtained full written authorisation from other trustees (this particular problem, said Steward, had led to a number of sometimes acrimonious disputes with senior trustees questioning the right of others to disagree with them);
·         the party or parties buying property on behalf of the trust have not yet formed that trust or, again, are acting without approval of other trustees.
 
“If therefore a person is planning to buy or sell through a trust, it would be advisable to consult a lawyer first.  The benefits of setting up a trust revolve around the fact that it can prevent one person from misusing a legacy or assets – but safeguards make it essential to get various confirmation and authorisations on any deal and to ignore these requirements is sure to lead to the Master of the Court throwing out the agreement should it ever be disputed.”
 
For further information contact Lanice Steward on 021 671 9120 or email lanice@anneporter.co.za.