Register property in the name of a Trust
It has become a fairly popular practice (especially amongst affluent people) to register property in the name of a legal entity such as a close corporation, company or trust rather than in their personal names. A trust is a popular choice, particularly where residential property is involved. Many people elect to go this route without having a clear understanding of the nature of a trust or the implications of registering their property in a trust.
There are different types of trusts but the most commonly used trust in residential property transactions is the inter vivos discretionary trust. This article relates to such trusts and the registration of property in this type of trust.
Such trusts comprise three persons or classes of person, namely the founder, who creates the trust and donates property to the trust; the trustees, who administer the trust's property; and the beneficiaries for whose benefit the trust is created. The inter vivos trust is created by a contract called a trust deed. The contract is signed by the founder and the trustees. The trust deed sets out, inter alia, the purpose for which the trust has been created, the powers of the trustees and the procedures that must be followed by the trustees in administering the trust.
The trust is registered in the Master of the High Court's office. The process of drawing up and registering a trust takes approximately three weeks under normal circumstances but quicker registration is possible if urgency requires it.
As with most things in life there are both advantages and disadvantages to registering property in the name of a trust. One of the advantages is that trusts facilitate estate planning. Furthermore having property registered in the name of a trust is a means of protecting the property against one's creditors. In addition there may also be certain tax advantages to having a property registered in the name of a trust.
The question of whether or not to register a property in the name of a trust must be considered in relation to the buyer's particular circumstances. Factors to be taken into consideration are inter alia, the purpose for which the property has been purchased (for example whether it is a primary residence, an investment property or a commercial property) and the buyer's financial affairs in general (for example the size of his or her estate, whether he or she is self employed and the inherent tax implications for that particular buyer).
I advise buyers to get advice from their attorney and accountant before making a decision on registering property in the name of a trust. Expert advice, whilst costing money in the short term, could save you a lot of money in the long run.