South Africa’s legal system offers a range of structures through which individuals and businesses can hold assets, conduct trade, and plan for the future. Yet many South Africans hold their most valuable assets entirely in their personal names, leaving those assets exposed to executor’s fees, estate duty, creditor claims, and disputes on death.
The consequences of this approach become apparent only when it is too late to act.
Strategic structuring is the lawful and deliberate arrangement of ownership, using tools that South African law expressly provides, to achieve protection and longevity of wealth. Trusts are the cornerstone of this approach. When used correctly and maintained properly, they can preserve a family’s financial legacy across multiple generations.
JZA assists with trust registration, strategic structuring, and ongoing trust administration support. View our full list of services.
What Is a Trust?
A trust is a legal arrangement in which one person (the founder) transfers ownership of assets to another person or group of persons (the trustees), who hold and administer those assets for the benefit of identified beneficiaries.
Under South African law, trusts are governed primarily by the Trust Property Control Act 57 of 1988. This Act defines the roles and obligations of trustees, governs how trust property is held, and provides for the registration of trusts with the Master of the High Court.
Critically, a trust is not a separate legal person in South African law (unlike a company). Trust property is held by the trustees in their capacity as trustees (not in their personal capacities), which means trust assets are generally protected from the personal creditors of both the founder and the trustees.
The Three Parties to a Trust
- Founder: The person who establishes the trust and donates assets to it. Also referred to as the settlor or donor.
- Trustees: The persons who hold and administer the trust property in accordance with the trust deed. Trustees owe a fiduciary duty to the beneficiaries and must act in the interests of the trust.
- Beneficiaries: The persons who benefit from the trust, either during its operation (income beneficiaries) or on its termination (capital beneficiaries).
Types of Trusts in South Africa
- Inter Vivos Trust (Living Trust): Established during the founder’s lifetime. This is the most commonly used trust for asset protection and estate planning.
- Testamentary Trust: Created by a will and comes into existence on the death of the testator. Frequently used to protect assets for minor children or incapacitated beneficiaries.
- Special Trust: A trust created for the benefit of a person with a disability, or a trust in which each beneficiary is a natural person who is a relative of the founder. Special trusts qualify for certain tax benefits under the Income Tax Act.
Why Strategic Structuring Matters
1. Estate Duty and Executor’s Fees
On death, a South African resident’s estate is subject to estate duty at 20% on the dutiable amount up to R30 million, and 25% on amounts above R30 million (in terms of the Estate Duty Act 45 of 1955). In addition, the executor of the estate is entitled to remuneration of up to 3.5% of the gross value of the estate plus VAT.
Assets held in an inter vivos trust at the time of the founder’s death do not form part of the deceased estate, provided the trust was correctly established and the founder did not retain excessive control. This can result in a material reduction in estate duty and executor’s fees.
2. Asset Protection
Assets held in a trust are generally protected from the personal creditors of the founder and the trustees. If a business owner or professional faces insolvency or litigation, personal assets held in a properly constituted trust are not ordinarily available to creditors.
However, this protection is not absolute. Courts have the power to set aside dispositions to a trust made with the intent to defraud creditors in terms of the Insolvency Act 24 of 1936. Structures must be established well in advance and for legitimate purposes.
3. Continuity of Ownership
A trust does not die. Unlike personal ownership, which triggers an estate administration process on death, trust property continues to be held and administered by the trustees without interruption. This is particularly valuable for family businesses, investment portfolios, and agricultural land, where disruption on death can have significant operational consequences.
4. Income Distribution and Tax Planning
Trusts in South Africa are taxed as a separate taxpayer. The current flat rate of income tax applicable to most trusts is 45%, which is the highest marginal rate for individuals. Capital gains in a trust are taxed at an effective rate of 36% (using the 80% inclusion rate applied to the 45% flat rate).
However, income and capital gains distributed to beneficiaries in the same tax year are taxed in the hands of those beneficiaries at their applicable marginal rates. If beneficiaries are in lower tax brackets, this can result in a meaningful tax saving.
It must be noted that SARS has significantly increased scrutiny of trust structures used to disguise income or evade tax. The general anti-avoidance rules in the Income Tax Act, as well as specific provisions dealing with trusts (notably section 7), apply to attribute trust income back to the founder or trustees in certain circumstances.
5. Intergenerational Wealth Transfer
One of the most powerful benefits of a properly structured trust is the ability to transfer wealth across generations without triggering a fresh estate duty liability each time. Assets placed in a trust during the founder’s lifetime remain in the trust for the benefit of children and grandchildren, without those assets forming part of any individual’s taxable estate.
Using Companies and Trusts Together
In many instances, a trust alone is not the most efficient structure. South African practitioners commonly use a combination of an inter vivos trust and a private company incorporated under the Companies Act 71 of 2008 to achieve optimal results.
A typical structure involves the trust holding shares in a company. The company conducts business or holds investment assets, and profits are distributed to the trust as dividends, which are then allocated to beneficiaries. This approach separates operational risk (in the company) from wealth preservation (in the trust) and allows for flexibility in income distribution.
The interplay between the Companies Act and the Trust Property Control Act requires careful drafting and ongoing governance to remain effective and legally compliant.
SARS Scrutiny of Trusts in 2026
SARS has consistently increased its focus on trusts as part of its broader efforts to address tax avoidance and aggressive tax planning. Key risk areas include:
- Trusts used merely as conduits to shift income to lower-taxed beneficiaries without genuine economic substance.
- Founders who retain effective control of trust assets, undermining the trust’s integrity and potentially bringing those assets back into the estate for duty purposes.
- Loan accounts between founders and trusts that are not properly documented or charged at the official rate of interest prescribed by SARS.
- Dormant trusts that have been registered but not properly administered, leaving them exposed to re-characterisation by SARS.
The common law concept of the ‘sham trust’, where the courts look past the trust form and find that the founder in substance retained ownership, remains a live risk for poorly structured or administered trusts.
Trustees who fail to maintain proper records, hold trustee meetings, and exercise independent judgment may find that the trust’s protective benefits are challenged by SARS or by creditors in litigation.
Practical Implications for South Africans in 2026
The following considerations are relevant to individuals and families reviewing their structuring in 2026:
Review Existing Trusts
Any trust that has been in existence for more than five years without a formal governance review should be assessed by a qualified attorney. Changes in legislation, SARS interpretation, and personal circumstances can affect both the validity and effectiveness of the structure.
Loan Accounts Must Be Properly Structured
If assets were sold to a trust on loan account, that loan must bear interest at SARS’s prescribed rate (currently 9.25% per annum for the 2025/2026 tax year, as published in the Government Gazette). Failure to charge the correct rate results in a donation being deemed to have been made, triggering donations tax at 20% on amounts above the annual exemption of R100,000.
Trustee Independence
At least one trustee should be independent of the founder and the family. Courts and SARS are increasingly willing to disregard trusts where the founder acts as the sole effective trustee and exercises unfettered control over trust assets.
Succession Planning
The trust deed should contain clear provisions for the appointment of successor trustees and should be reviewed in conjunction with the founder’s will and any buy-and-sell agreements relating to business interests.
Beneficiary Distributions
Distributions to beneficiaries must be recorded in trustee resolutions and supported by proper accounting records. Undocumented distributions create tax and legal risk.
Conclusion
Trusts remain one of the most versatile and effective legal tools available under South African law. When properly established in terms of the Trust Property Control Act 57 of 1988, correctly administered, and reviewed regularly, they serve as the foundation for durable wealth protection and legacy planning.
JZA works with individuals, families, and business owners across South Africa to design structures that are legally sound, tax-efficient, and built to last across generations. Contact us.
Frequently Asked Questions
1. Can a trust own property in South Africa?
Yes. A trust can own immovable property registered in the names of the trustees in their capacity as trustees. The property is registered in the Deeds Registry in terms of the Deeds Registries Act 47 of 1937 and held in the name of the trustees “in their capacity as trustees” of the named trust. Transfer duty and conveyancing costs apply to the transfer of property into a trust.
2. What is the tax rate for a trust in South Africa?
Most trusts in South Africa are taxed at a flat income tax rate of 45%, which is the highest marginal rate applicable to individuals. The effective capital gains tax rate for trusts is 36%, based on an 80% inclusion rate applied to the 45% flat rate. Special trusts, as defined in the Income Tax Act, are taxed at individual marginal rates, which may be lower.
3. Does a trust avoid estate duty in South Africa?
Assets held in a correctly established inter vivos trust at the time of the founder’s death do not ordinarily form part of the deceased estate and are therefore not subject to estate duty. However, this benefit can be lost if the founder retained effective control of trust assets or if the trust is found by SARS or a court to be a “sham trust”. The structure must be properly constituted and administered.
4. Who registers a trust in South Africa?
Trusts are registered with the Master of the High Court in the jurisdiction where the trust is administered. The founder’s attorney submits the trust deed, a completed application form, trustee acceptance letters, and the requisite fee. The Master issues Letters of Authority to the trustees, which authorise them to act on behalf of the trust.
5. What is the difference between a living trust and a testamentary trust in South Africa?
A living trust (inter vivos trust) is created during the founder’s lifetime and comes into immediate effect on registration with the Master of the High Court. A testamentary trust is created by a will and only comes into existence after the founder’s death, following the winding up of the deceased estate. Living trusts are generally preferred for asset protection and estate planning purposes, as they remove assets from the estate during the founder’s lifetime.
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