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Protection of assets using a trust

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Using a trust to fend off your partner from claiming ownership of assets during a divorce.

A client often consults me in a divorce matter and asks me whether he or she has a claim to a fixed property which is registered in the name of a trust. This no doubt depends on what the terms and conditions of the trust deed are. A trust offers a great deal of protection against the other spouse in the event of a divorce, but only of course if the trust deed is properly drafted.

The only problem with registering a property in the name of a trust is that it is a costly procedure. One would need to use an attorney who specialises in this field to draft the trust deed properly. In a trust the trustees are the parties that manage the trust assets. The trustees would have certain authority to make investments. The beneficiaries of the trust must also be stipulated in the trust deed. The beneficiary can be a beneficiary of a monthly income or of a capital amount. If the beneficiary is a beneficiary of a capital amount, then that person is only entitled to such capital on dissolution of the trust.

The trust deed would also stipulate what the trust assets are. In certain instances the trust assets would be a fixed property. The trust deed would also stipulate any authorities that a trustee may have to transfer a fixed property. The trustees would have to give approval before such transfer is made.

I sometimes get a query where the parties are for example living in a house which is registered in the one party’s name. The house is then transferred to a trust, and the other spouse is the beneficiary. In such a situation a question may arise for example if the fixed property can be transferred from the party in whose name the house is registered to a third party without the consent of the beneficiary. This would no doubt depend on what the terms and conditions of the trust deed are and what the authorities of the trustees are.

Another way of protecting one’s assets such as a house which you have purchased before the marriage would be by getting married with an antenuptial contract with the exclusion of the accrual system. The other party would have no claim to any asset which is registered in their spouse’s name in the event of dissolution of the marriage.

I would advise anybody seeking protection of assets acquired before marriage to get legal advice on trusts, as they offer a great deal of protection in the event of a divorce. But this is on condition that the trust deed is drafted properly.

article written by Cape Town divorce attorney, Peter M Baker

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