Should I transfer my property into a trust?


If securing your assets for your children or other dependents is a major priority, you may have considered the option of putting your property into a trust - but is this approach right for everyone? 

In the wake of COVID-19 many families are taking a closer look at their assets, inheritance and succession planning. This article will explore the process involved in placing your home in a trust and weigh up the benefits of doing so. 

How does a trust work? 

A trust is a legal entity akin to a company but with several key differences:

  • Instead of shareholders, the trust has a founder who places assets in it and designates specific people as beneficiaries - these are typically relatives who will benefit from the assets in the trust

  • The trustee(s) are specially appointed and are charged with managing the assets of the trust in the best interest of the beneficiaries. They typically don’t have the authority to sell the assets without the founder’s permission.

Is it the right structure for my residential property? 

If you’re keen to secure your home from a legal and financial point of view, you may want to place it in a trust and benefit from the following unique features that this type of legal structure provides:

  • Protection from creditors in the event of personal bankruptcy

  • Avoidance of inheritance tax as the property does not form part of your personal estate

  • Absence of estate executor’s fees (usually 3,5% of the estate’s value)

  • Peace of mind for dependents in the event of your death 

As with any legal and financial decision, there are disadvantages as well as benefits to bear in mind.

  • Before opting for a trust structure, you may want to look into the setup costs involved.

  • It’s important to note that if you sell your property while it’s in a trust, a CGT (capital gains tax) rate of 36% applies to the sale 

Overall, if you plan to pay off your home in the short to medium term and would like to place it in a secure legal structure for your relatives or other beneficiaries, a trust may be an excellent option to consider. 

If you’re in the market to invest in a Cape Town home and benefit from the potential for excellent long-term returns, contact the Cape Realty team today. 

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