How To Protect Your Assets From Creditors

One of the main benefits of a trust is the ability to protect the assets belonging to a trust over time from creditors.
If there is a loan account in the trust (the trust owes you money) the creditors can attach the loan account as it is a personal asset in your own name. Thus until the loan account is reduced to zero the creditors can attach the loan account. The objective is therefore to reduce the loan account to zero as quickly as possible.

Once the loan account is zero, all the assets in the trust are protected from creditors.

For example, if you had R5 500 000 worth of Assets in the Trust and the Loan Account was R1 000 000 you would be able to protect R2 500 000 worth of assets, with the Creditor being able to attach R1 000 000.
If the Loan Account was Zero then the full R3 500 worth of Assets would be protected from Creditors.

All future growth of the assets in the Trust would be protected from Creditors.

This is all on the proviso that the Trust did not sign surety for the Creditors.

How To Reduce The Loan Account

You would reduce the loan account by doing the following:

  1. Repaying the Loan Account. This would be done from money generated by the Trust. i.e. If the Trust owned a Company and the Company made a profit which in turn was paid to the Trust by way of a Dividend the Trust would have generated its own money.
  2. Repaying the Loan Account via a Donation. The Trust would repay the Loan Account by paying you R100 000. This has to be a physical transaction where the money actually was transferred vi a Bank Account. After a few weeks you would then make a R100 000 Donation back to the Trust. This has the effect of reducing the Loan Account whilst at the same time moving the money back into the Trust.
  3. Renting Certain Assets from the Trust. Certain assets can be rented to you from the Trust against the loan account.

Mark Fuhr

Mark Fuhr

For more information on how to protect your assets, please contact Mark Fuhr CFP on 011 026 5463 or by filling in the contact form.