A Family Trust is created through a legal document called a Notarial Deed of Trust or Notarial Deed of Family Trust. This document is prepared only by a Notary Public who is a Legal Practitioner. A Notarial Deed of Trust is lodged and registered at the Deeds Registry Office in terms of the Deed Registries Act Chapter 20:05. The document sets out all the terms governing the trust in relation to founders, trustees, beneficiaries, objectives and all issues to do with the functioning of the trust.
Requirements
The following are the key requirements in registering a Family Trust or any other Trust for various purposes and objectives. A Trust is required to have:
- The proposed name of the Family Trust
- Founder(s)
- Trustees
- Beneficiaries and
- The objectives of the Trust.
A proposed or suggested name of the Family Trust is required. In most cases the founders propose the family surname for example Moyo Family Trust.
Founder
A Founder is the person desirous of creating a Family Trust. A Founder can be one person or more. The full name of the Founder as appears on identity documents must be provided as well as their date of birth, identity number and addresses. Usually Founders are parents or a relative who creates a Family Trust for their children and grandchildren as well as those not yet born, to benefit from certain donated properties. A Founder is entitled to make a donation to the trust and it can be immovable or movable property. If the Founder donates an immovable property to the Trust, transfer of rights is done through conveyancing from the individual names of the Founders to the trust. The immovable property is then registered in the name of the Trust not in the individual names of the beneficiaries. A Founder can also be a trustee.
Trustee(s)
A Trustee is a person appointed and authorised by the Founder to manage property on behalf of the beneficiaries. The property does not belong to the Trustees but the Beneficiaries. It is required that a Trust must have a least two Trustees at any given time. In most cases the Founders become the Trustees or they can appoint a trusted relative or any other person who may be a professional or has knowledge in property management. It is advisable to appoint as Trustees people who own properties and have knowledge in running a business to ensure the efficient management of the Trust property. The full names of the Trustees are required, date of birth, ID number and physical addresses. Appointment, tenure, removal, remuneration and duties of the Trustees will be stated in Trust Deed.
Beneficiaries
Beneficiaries are people who are intended to benefit from the Trust. Property is donated by the Founders to the Beneficiaries but is managed by the Trustees on behalf of the Beneficiaries. In most cases the Beneficiaries are children of the Founders or any other relatives. Grand children may also be listed as Beneficiaries as well as the unborn children of the Founders. Beneficiaries can be as many as the founders desire since there is no minimum or maximum limit. If the Beneficiaries are known, their full names, date of birth, ID numbers are required. If the Beneficiaries are minors the names and identity details of the guardians are required. The terms and conditions on how the Beneficiaries will benefit will be stated in the Trust Deed.
Objectives
Objectives of the Family Trust are also required when registering a Trust. The objectives must be lawful. The objectives differ depending with the intentions of the Founders. Usually it is the love and affection that the Founders have for the Beneficiaries. It is more often the role of the Notary Public (Legal Practitioner) to formulate the objectives with the instructions of the founder. Another requirement is the registration fee required by the Deeds Office which is gazetted by the government as well as the legal fees for the Notary Public for preparing the document.
Benefits
There are a number of benefits that comes with registering a Family Trust, which are:
- A trust has perpetual succession. This means that a Trust does not die. Upon the death, demise or incapacitation of the Founder or Trustees the Trust is not liquidated but continues to operate until dissolved by the Trustees of the time being in accordance with the provisions of the Trust Deed.
- There are tax benefits. A Trust enjoys some tax exemptions for example when the Founder passes on, property registered in the Trust is not distributed under the Deceased Estates Succession Act where the government calculates taxes against the total value of the Estate. The property survives as if nothing happened.
- A Family Trust also prevents inheritance wrangles and disputes between children and relatives. The property registered or donated in a Trust is not subject to distribution upon death of the Founders. The property remains as if nothing happened.
- Property belonging to a Family Trust is also protected from creditors in the event that the Founder has passed on. Creditors cannot claim a property registered in a Family Trust.
- There is protection of family property as it is managed by Trustees on behalf of the Beneficiaries or children. A Family Trust can benefit future generations. No child can sell or destroy property belonging to the Trust. A Family Trust also prevents abuse of property and funds as it is managed by Trustees. Beneficiaries can equally enjoy the profits accrued in a Family Trust.
- A Trust, through Trustees, is considered by the law as a separate legal entity. This means that even where there is a legal dispute be it contractual, criminal or matrimonial against the Founder or Trustees, the property in the name of the Family Trust cannot be regarded as belonging to the Founder or Trustees. They are treated separately except in exceptional cases provide for by the law.
- A Trust enjoys contractual rights. This means that a Trust can enter into valid contracts with individual or entities. A Trust can also operate and own a company. A trust can be a shareholder in any business and is allowed to trade for the benefit of the Beneficiaries. A Trust can also own or dispose immovable or movable property.
This article is published for information purposes only – seek professional legal advice from an attorney.
