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To Do or Not to Do: Shall I purchase property in a trust? 

The word “trust” in a legal sense, originated from the Latin word fiducia, meaning “confidence, courage, security”, and also translates to “pledge” or “guarantee” which indicates a concrete sign of commitment. The Latin word fides, means “faith, conviction, belief” which is more of a reliance without guarantees. This makes us wonder if it could be safer for you to hold property in a trust than in your own name, in which case it forms part of your estate.

Interestingly, the verb that most commonly indicates the beginning of a relationship is “I give you my trust” and the verb that marks the end is “I have lost my trust in you”. So what do you have to give and what is there to lose? Personal circumstances would have an influence e.g. whether you are prone to risks of insolvency, whether your personal income tax rate is already high and if there is a history of mental illness in your family. Let us look at the options that you have when investing in property, and how buying it in a trust could benefit you.


  • “Perpetual succession” means that a trust does not “die” and is therefore not liable for estate duty, transfer duty, executor’s or conveyancer’s fees, or capital gains tax (CGT) that might otherwise happen on the death of an owner.
  • A trust is a legal entity that holds assets for the benefit of beneficiaries, on behalf of its founder(s).
  • A trust is not liable for estate duty, transfer duty, executor’s, or conveyancer’s fees.
  • There are administration costs involved in setting up a trust, and it is taxed at the top marginal rate.
  • The founder tasks a trustee or trustees with the management of the trust’s assets for the benefit of one or more beneficiaries.


Property registered in a trust does not form part of your personal estate and is thus protected from creditors. Upon your death, the property would not be wound up in your estate subject to various costs such as estate duty, capital gains tax, executor’s fees, transfer duty (subject to the relevant exemptions), and transfer fees.

Your trust and the property registered therein will not be affected by your death.  If your heirs are beneficiaries of the trust, it should not be necessary to transfer the property into the name of the heirs.   If old age or an illness prevents you from managing your affairs, the trustees would be able to sell the property if need be without your family having to undergo a High Court application to apply for a curator to manage your affairs to sell the property.

Income from the trust’s property is for the trust, and expenses such as repairs, maintenance, water, and rates bills are also for the trust’s account. In the situation where you struggle with an age-related illness to the extent that you are no longer capable of managing your affairs, the property owned by the trust would ensure that your illness does not affect the management of the property.

Having property registered in a trust rather than your own name means the value of your personal estate is reduced, which lessens your estate duty exposure.

If a property is tenanted, the trust will produce an income that would be taxed at a 45% rate. The trustees have the authority to distribute the profits to the beneficiaries to minimise the tax implication. The beneficiaries would then pay tax on such distributed profit according to their own personal tax rate (which would be lower than 45%, depending on your annual income).


There are setup and administration costs involved.

Problems may occur if the trust is not properly established or managed. The trust will be a separate taxpayer, meaning the cost of another tax return. 

If you lend money to the trust, you will have to charge interest at the SARS rate.

If the property is tenanted, the rental would be considered an income earned by the trust which would be taxed at a rate of 45% (whether the rent income is substantial or not). If the property is sold, the capital gains tax percentage is far higher than if the property was owned in your personal capacity. If you utilise the property as your primary residence but it is owned by the trust, there are provisions available but the relevant costs involved could prove the exercise impractical.

If the trust requires finance to purchase property, financial institutions are reluctant to give 100% mortgages. Procedures are far more complex if there is a default in payment, so banks require one or more of the trustees to stand surety for the loan. If the person who signed surety dies, the banks could submit a claim and subsequently sell the house to settle the outstanding bond if the estate does not have sufficient equity. The balance would be paid to the estate.  There is no quick yes or no answer to the question “to do or not to do” when  it comes to trusts, so it is best to make use of expert tax consultants or property practitioners to help you make the right decision taking into account your circumstances and goals. Whether purchasing a property for a trust or in your name, AED Attorneys can advise you about choosing the right option, and assist you in getting the paperwork right.

AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.