The Administration Process of a Trust

The Administration Process of a Trust

Introduction

Now that the Family Trust has been registered and the Letters of Authority been issued by the Master of the High Court, you need to start the administration process of the trust.
The Trustees now have the authority to act on behalf of the trust: – Open a banking account – Register as a tax payer with SARS, etc

A Trust is, in most cases, a discretionary trust – Trustees have discretion to allocate trust income and capital to beneficiaries – Beneficiaries have a hope to benefit and no vested right (bewinds trust)
There a various reasons for setting up a trust:

  • Part of estate planning and structuring
  • Tax advantages
  • Provision / maintenance for dependants
  • Protection of assets over following generations

How to transfer assets in the trust:

  • Sale agreement
  • Donation
  • Loan account

First things firsts

Open a File

  • Documents are filed herein
  • LOA, Deed of Trust, Resolutions etc…

Copies

  • Only use certified copies of the above
  • Retain original LOA and resolutions

Minutes Book

  • At least 1 meeting of Trustees must be held annually
  • Minutes of all such meetings must be recorded in the Minutes Book
  • All decisions taken must be reduced to writing and recorded as Resolutions
  • Resolutions are the only documents with which the trust can communicate with the outside world.

Agenda for a Trustee meeting

  • Welcome
  • Attendance register
  • Confirming that a quorum is present as required by the Deed of Trust
  • For discussion:
    • Elect a Chairman and Secretary
    • Work process for the administration of the trust
    • Bank account
      • Signing power
      • What type of banking account
      • Internet banking
      • Which trustee will be in charge of the bank account
    • Accounting officer to:
      • register the trust as a tax payer
      • compile the financials
      • lodge tax returns
      • Bookkeeping
    • Allocation of funds
    • Anticipated projects for the year
      • Buying a fixed property
      • Investing
      • Loaning funds to beneficiaries
      • Etc.
    • Next meeting

Meeting

  • Arrange the meeting
  • Date, time, venue
  • Take minutes of the meeting
  • Conclude

Confirm address of trust

  • The accounting officer must confirm on his Letterhead
  • Present to banks, SARS, etc…

Trustees / Beneficiaries

  • FICA requirements

Open Banking Account

  • Required when money starts flowing in and out of trust
  • Must be in the name of the Trust
  • Banks require:
    • Resolution by trustees
    • LOA
    • Deed of Trust
    • ID’s and FICA of Trustees
    • FICA of beneficiaries (Any person named as beneficiary in the deed of trust!!)

Register as taxpayer with SARS

  • Required by law
  • Income retained is taxed at 40%
  • If turnover exceeds R1m, must be registered as VAT vendor

Accounting/ Bookkeeping

  • Must be kept on a monthly basis
  • Record all income and expenses
  • Draw up annual Income and Expense Account, as well as a Balance Sheet recording all assets and liabilities
  • Trust Properties Control Act does not require the financial statements to be audited
  • Entries can be done by way of journals and T-accounts

Bank Statements

  • All transactions must be recorded in the Income and Expense Account on a monthly basis
  • Serves as voucher for entries

The Recipe

Each project performed by the Trustees should follow a general recipe to ensure all requirements are met.

Per Project (Once Off)

  • A resolution by the Trustees tasking a specific Trustee to manage the project
  • Trustees to gather information, such as:
    • Quotes
    • Invoices
    • Inventories
    • Valuations
    • Documentation
    • Applications
    • Contracts and agreements etc…
  • Conclude the project
  • Additional agreements and contract, if required
  • Accounting
  • Update inventory

Per project, per month

  • Payment of installments
  • Accounting

Per project, annually

  • Depreciation of assets on inventory
  • Accounting
  • Financial statements
  • Tax returns

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Crest Trust Services (PTY) Ltd. is an Authorized Financial Service Provider with FSB No: 28966