How Do Trust Work In South Africa?

A trust is a legal arrangement that permits someone to hold assets for the benefit of the trust beneficiaries without actually possessing them. The transfer of ownership and management of the trust assets from the donor or founder to one or more trustees, who handle the trust assets not in their personal capacity, but for the benefit of the trust beneficiaries, is a critical component of the trust arrangement.

A trust beneficiary is entitled to benefits under the trust arrangement, which are established by the trust deed and include vested or discretionary rights. 

How does trust work in South Africa?

The Trust Property Control Act of 1988 governs trusts. A trust deed serves as the trust’s constitutional document, laying out the framework within which the trust must operate, as well as its rights and limits. 

Trusts must be registered with the Master of the High Court in the relevant jurisdiction where the trust’s assets are located as a general rule. Trustees can only act if the Master has given them letters of permission to do so.

Because a trust is essentially a collection of assets, it lacks legal personality. It is viewed as having a separate legal identity in some circumstances, such as for tax purposes. A trust can have legal ability despite its lack of legal personality, and the trustees can execute legal acts if the trust document permits it.

A trust can be used to hold and protect personal or commercial assets, which is especially useful if the assets are liquidated, sequestered, or divorced later. Trusts can also be used to keep stock in enterprises and assure asset ownership continuity. Donating assets to a trust or selling assets to a trust are both options for putting assets in a trust.

Types of trusts in South Africa

Inter Vivos Trust

Inter Vivos Trust is one created during the founder’s lifetime. In South Africa, there are two forms of living trusts: vested trusts and discretionary trusts. The beneficiaries’ benefits are specified in the trust deed in vested trusts, whereas in discretionary trusts, the trustees have complete discretion over how much each beneficiary receives. A living trust is established by preparing a trust deed and registering it with the Master of the High Court (together with various necessary forms). As soon as the trust is registered, it becomes operational.

 Mortis Causa Trust

 Mortis Causa Trust is one that is established by a deceased person’s will. When that person dies, the will will specify that a trust be established. Testamentary trusts are commonly used to manage assets on behalf of minor children.

For the sake of this post, we’ll concentrate on living trusts and go over some of the things you should know about them.

Benefits of Trusts in South Africa

It is not subject to estate duty because the increase on assets transferred to a trust belongs to the trust. The value of the assets as of the date of transfer stays an asset of your estate if you used a loan to the trust.

Trust do not die. This implies the trust is not responsible for estate duty, other taxes, or expenditures such as transfer duty, executor’s fees, or conveyancing fees that would otherwise be paid by the estate or heirs. A trust also does not have to pay CGT if an asset is not sold.

After you die, the assets and benefits of a trust continue to be paid to the beneficiaries. Because the estate is frozen throughout the winding up procedure, assets in the estate may not be freely available to your dependents. This means that your dependents might not get paid until your estate is settled.

Asset protection is essential. A trust right cannot be sold by a beneficiary (unlike shares in a company for example). If a beneficiary becomes bankrupt, the trust’s assets are still secured. In the same way, if you, the donor or trustee, fall bankrupt, the trust’s assets are secured.

Other things to know about Trust in South Africa 

  • A trust can also be governed by a statute; for example, the Companies Act 2008 allows a trust to hold shares that have been issued but not fully paid for, and the Financial Institutions (Protection of Investment of Funds) Act 2001 allows financial institutions to safely hold and administer trust property.
  • The trustees have a fiduciary duty to the trust’s beneficiaries under both common law and statute. The trustees are responsible for administering the trust only for the benefit of the beneficiaries. No one can be a trustee if they are ineligible or disqualified under the Trust Property Control Act. The Master should make sure that the trust is not entirely controlled by those who profit from it. The Master can insist on the appointment of an impartial outsider as one of the trustees in family trusts if the trustees are all beneficiaries and the beneficiaries are all connected to one another.
  • Employee share schemes benefit from trusts because the trust can keep the shares for the benefit of the employees and distribute dividends to the beneficiaries without the need for the ownership of the shares to change when employees join or leave the company.
  • A trust is liable to a 40% income tax rate as well as capital gains tax. The conduit concept allows trust income to be dispersed to the trust’s beneficiaries, with tax only being paid at the receiving beneficiary’s individual marginal tax rate. The trust does not owe any estate duty on assets transferred to the trust after the transferor’s death, with a few exceptions.
  • A trust can be terminated by written agreement, on the founder’s specified date, or upon the achievement of the trust objective or the realization of the trust objective’s impossibility. The assets of the trust will be distributed according to the trust deed upon dissolution.



A trust is frequently referred to be a three-part legal relationship. A trust is a legal entity established by the founder to which property is transferred and which is subsequently managed by trustees on behalf of one or more beneficiaries in line with the trust deed or will (as the case may be).