Protect your legacy: The power of a Family Trusts

RUTENDO MANHIMANZI

After years of hard work, Mr and Mrs Mpofu have built a substantial portfolio of assets, both movable and immovable.

Yet, they grapple with a pressing concern: What will become of our wealth after our passing?

More importantly, how can we ensure our children and family benefit from it securely and equitably?

For families like the Mpofus, establishing a Family Trust is the ideal solution.

This article delves into the legal framework of Family Trust, explaining their creation, benefits and purpose as a critical  tool for estate planning  and wealth management.

What is a family trust?

A Family Trust is an asset / estate management tool used by families to manage, distribute and keep assets for current and future generations. In other terms, a Trust is a tripartite legal relationship between three parties, who are the settlor/founder, trustees, and beneficiaries.

A Family Trust is constituted through a legal document called a Notarial Deed of Trust or Notarial Deed of Family Trust. This document must be prepared only by a Notary Public who is a Legal Practitioner.  The Notarial Deed of Trust is lodged and registered at the Deeds Registry Office in terms of the Deed Registries Act [Chapter 20:05].

Creation of a Trust

A Family Trust can be created by either one of the following means

1. It can be a Trust inter vivos that is a trust created during the lifetime of the founder.
2. It can be a testamentary trust/ trust mortis causa that is trust created by will, it only becomes effective after the death of the testator.

 Key legal requirements

For one to register a Family Trust they must comply or meet the key requirements. These include;

• The proposed name of the Family Trust
• Founder(s)
• Trustees
• Beneficiaries
• Notarial deed of trust.

1.         The name of the Family Trust-for example the Mpofu Family Trust.

1.         Founder(s) – A Founder is the creator of the Family Trust. A Founder can be one or more persons. The full name of the Founder(s) as appears on identity documents must be provided, their date of birth dates, identity number and addresses. A Founder can also be a trustee. The Founder can provide for certain conditions to be fulfilled before beneficiaries can fully benefit from the Trust for instance a beneficiary may have to attain a certain age to enjoy benefits of the Trust.

                 iii.        Trustees – These are persons appointed by the Founder(s) to administer, control and distribute the trust assets for the benefit of the beneficiaries in accordance with the terms of the trust and applicable law. A Trust must have at least two Trustees at any given time. In most cases the Founders also become Trustees. The full names of the Trustees, their date of birth, identity numbers and physical addresses are requisite. Their appointment, tenure, removal, remuneration and duties will be stated in terms of the provisions of the Trust Deed, otherwise known as the constitution of the Trust.

1.         Beneficiaries – these are people who are intended to benefit from the Trust. In most cases the Beneficiaries are children of the Founder(s) or any other relatives extending to grandchildren as well as the unborn children of the Founders. Beneficiaries must also provide their full names, date of birth, national identity numbers. The terms and conditions on how the Beneficiaries will benefit will be stated in the Trust Deed. It should be noted that Beneficiaries have no right to the property in the trust however there are entitled to benefits of the Trust. It is important to note that he names of the founder(s), trustees or beneficiaries must not be assumed names or alias, but their actual names as appears on their national identity documents.

1.         Notarial deed of Trust – the Deed must be prepared by a registered Notary Public who is a Legal Practitioner, it must be signed by the founder(s) and trustees before the Notary Public. It must be registered with the Deeds Registry. The Trust deed must clearly provide for all the terms and conditions governing the Trust in relation to founders, trustees, beneficiaries, objectives and all issues pertaining to the functioning of the Trust. This is basically the constitution of the Trust.
2.         The object of the Trust –the objects of the Trust differs and are dependent on the intentions of the Founder. The object of the Trust must be lawful and clearly defined, its purpose must not violate the law.

Benefits of Family a Trust

• Family Trust is good for estate planning as it provides asset protection from creditors, lawsuits and financial risks.
• A Trust has perpetual succession, meaning a trust does not die even upon the demise of the founder it continues to be operational until dissolved by the Trustees of the time being in accordance with the provisions of the Trust Deed.
• It is a good mechanism to preserve wealth for the future generations and minimize family conflicts. It also enables the distribution of assets or inheritance according to the founder’s wishes.
• A Trust can be a tool to protects the interest of minors and loved ones by ensuring that assets are managed and protected in their best interest.
• A Trust can also be good for reduced estate taxation, income and capital gains tax.
• A Trust is flexible in that it can be customized to meet specific desires and goals of the family.
• A Trust has contractual rights, this means that a Trust can enter into legally binding agreements with individuals or entities.

Property donation and acquisition

The founder(s) can donate assets to the Trust, both movable and immovable that is;

1. Houses;
2. Vehicles;

iii.  Farms, plots;

1. Business;
2. Shares in a company etc

Conclusion

A Family Trust is a good mechanism for estate planning, protection of assets and tax reduction. It is essentially a good wealth management tool for the benefit of the future generations. Therefore, it is important for one to decide based on their personal circumstances and consult and seek professional advice from a Legal Practitioner in order to make an informed decision.

Rutendo Manhimanzi is a registered legal practitioner at law firm, Ruzvidzo Legal Counsel. She can be reached on +263 773 589 265 or email rmanhimanzi@yahoo.com