With the emigration of South African families, the effectiveness of long-established family trusts is being challenged. Financial planners urge families to reassess their trusts in light of new tax legislation and changing family dynamics.
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As more South African families spread across the globe, long-established wealth structures are coming under pressure, particularly family trusts created at a time when beneficiaries still lived and paid tax locally.
Financial planners say the emigration of adult children is increasingly forcing families to reassess whether their trusts still achieve the objectives for which they were originally established.
Desiree Raghubir, associate director and certified financial planner at BDO Wealth, says many trusts were created with a long-term vision of protecting wealth and supporting future generations, but changing family circumstances are exposing new tax and administrative risks.
“Families often set up trusts with a very specific vision in mind, to support children, grandchildren, and long-term legacy goals,” she says. “But as families grow, change, and disperse geographically, those structures don’t always adapt automatically.”
According to BDO Wealth, more families are reviewing trusts that were established years ago, often when all beneficiaries were South African tax residents.
That is becoming increasingly important following changes to South African tax legislation that came into effect on March 1, 2024.
The amendments effectively limit the so-called “conduit principle”, which previously allowed trust income and capital gains to flow through to beneficiaries for tax purposes, to South African tax residents only. Income vested in non-resident beneficiaries is now generally taxed in the trust itself, potentially exposing families to significantly higher tax rates and, in some instances, double taxation risks.
“In practice, it’s often the emigration of children that becomes a turning point,” Raghubir says. “Once beneficiaries are no longer South African tax residents, trust distributions may attract higher local taxes and, in some cases, create the risk of double taxation.”
The South African Revenue Service (Sars) has also tightened its approach to trusts in recent years amid growing scrutiny of offshore structures and cross-border wealth planning. In October 2024, Sars welcomed a Constitutional Court judgment reinforcing limits around the application of the conduit principle in complex trust structures.
Raghubir says these legislative shifts mean many trusts that once worked efficiently may no longer align with a family’s current reality.
“These changes mean that structures which were perfectly compliant and efficient in the past may now be misaligned with a family’s current circumstances. That doesn’t mean trusts are no longer useful, but it does mean they need to be reviewed,” she says.
In one recent case, BDO Wealth advised a multigenerational family whose trust had originally been established to hold business interests and provide for future generations. As adult children emigrated and settled abroad, the family began questioning whether the trust still served its intended purpose in a practical and tax-efficient manner.
“The starting point is always to revisit why the structure exists in the first place. We look at the original intent, compare it to the family’s current reality, and then explore the available options and their implications,” Raghubir says.
She says these discussions are rarely only about taxes.
Trusts often carry emotional significance, representing family legacy, values, and long-term intentions built up over decades.
“For many families, reviewing a trust can feel emotional. But done properly, it can also bring clarity and relief, especially when there is a clear plan that respects the legacy while adapting to change,” Raghubir says.
Raghubir says the key mistake families make is treating estate and trust planning as a once-off exercise rather than an evolving process that should reflect changing family circumstances.
“Trusts are valuable wealth-planning tools, but they must remain fit for purpose. My advice to families is to review existing structures regularly and ask whether they still align with your family values, your circumstances, and where family members now live. That’s how you keep a legacy alive, relevant, and sustainable,” she says.
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