Under South African law, living trusts are considered taxpayers. Living trusts are subject to two types of taxes, namely income tax and capital gains tax (CGT). A trust pays income tax at a flat rate of 40% (individuals pay according to income scales, usually less than 20%). However, the income from the trust may be taxed either in the hands of the trust or between the beneficiary. A trust pays the CGT with a rate of 20% (individuals pay 10%). Trusts do not pay inheritance tax for deceased persons (although trusts may be required to repay outstanding loans to a deceased estate for which loan amounts may be taxed by inheritance tax). [42] Annexes I and II are declarations of confidence. We accept them with a request if the policy is purchased “fiduciary”. They might consider setting up a living trust for either reason: since information is often insufficient, informal trusts can create difficulties for both the trustee and the beneficiary of the trust in the event of a dispute over the management or distribution of wealth or fiduciary income. Take, for example, a parent who establishes informal trust in their minor child. When the child is 18 years old, he wants to receive the money in person to spend it as he pleases. The parent disagrees because he thinks he will waste the funds and, as a trustee, decides not to distribute the funds. Since there is no trust document proving otherwise, the child, upon reaching the age of majority, would have the right to apply to the court for an order that the funds be paid to that court.

Trusts are widely used internationally, particularly in countries within the English zone of influence, and although most civil courts generally do not contain the concept of trust in their legal systems, they recognise the concept of the Hague Convention on the Law Applicable to Trusts and their Recognition (sometimes only to the extent that they are parties to the agreement). . . .