If you’re looking to set up a trust in South Africa – whether it’s to protect your family’s assets, manage an inheritance, or ensure smooth estate planning – you’ve probably come across the terms “trust bank account” and “trust account.” They sound like the same thing, right? But here’s the thing: they’re not.
In fact, confusing these two types of accounts could land you in a bit of hot water. So, let’s clear up the difference, explain why it matters, and help you figure out which one is right for your needs.
Trust bank account – the everyday account for trusts
Let’s start with the more common of the two. When you set up a trust – say, a family trust to manage assets or distribute income – you need somewhere to park the money. That’s where a trust fund bank account comes in.
This is a standard business bank account opened by the trustees of the trust. In South Africa, this requirement falls under the Trust Property Control Act, which states that if the trust is going to receive or hold money, the trustees must open an account at a bank in the name of the trust.
Important to note: While the Trust Property Control Act refers to this as a “trust account,” what it really means is a trust bank account which is a regular bank account used by a trust.
Read more: Protecting your assets and beneficiaries with a trust in South Africa: advice for expats.
What do you need to open a trust bank account in South Africa?
Each trust type has its own specific paperwork requirements, but generally, to open a trust bank account, you’ll need:
- A certified copy of the trust deed
- Letters of authority from the Master of the High Court
- Certified ID copies of all trustees and beneficiaries
- Proof of address
- A SARS trust tax number
Trust account – a regulated legal professional’s tool
Now, let’s talk about the other kind of trust account – the one most commonly used by attorneys, estate agents, and debt collectors.
This is not an account you can simply walk into a bank and open for your family trust. Instead, this type of trust account is a legal obligation governed by the Legal Practice Act. It’s designed to safeguard client funds that are held temporarily by professionals.
These accounts are highly regulated, must be audited, and are subject to specific rules. Any interest earned on these accounts is paid to the Legal Practitioners’ Fidelity Fund, not to the business or the clients.
The three main types of Section 86 trust accounts
Under the Legal Practice Act, legal professionals can open three types of trust accounts:
- Section 86(2) Trust Account: A general purpose trust account for client funds held temporarily during legal transactions.
- Section 86(3) Trust Account: An investment account opened at the specific instruction of a client, where interest earned may benefit the client.
- Section 86(4) Trust Account: An account designated for client investments that must be clearly separated from general trust funds.
These accounts are complex, tightly regulated, and require monthly bookkeeping and annual reporting to the Legal Practice Council.
Trust bank account vs trust account: how do you know which one you need?
Let’s break it down:
| TRUST BANK ACCOUNT | TRUST ACCOUNT (LEGAL/PROFESSIONAL) |
| Used by trustees managing a trust. | Used by attorneys, estate agents, or debt collectors |
| Opened at any major bank. | Opened under the Legal Practice Act. |
| Funds belong to the trust. | Funds belong to a third party and are temporarily held. |
| Required under the Trust Property Control Act. | Required under the Legal Practice Act (Section 86). |
- If you’re an individual or trustee setting up a family trust, investment trust, or testamentary trust, you’ll be opening a trust bank account.
- If you’re an attorney holding client funds during a property transfer or litigation, you’ll need a trust account that complies with Section 86.
Trust bank account vs trust account – why the confusion?
Even lawmakers seem to mix up the terminology. The Trust Property Control Act often refers to a “trust account,” but it’s clear from the context that they mean a bank account for a trust, not a regulated legal trust account. This mix-up has led to confusion among new trustees, professionals, and even some banks.
So, here’s a handy rule of thumb:
- If you’re holding money for a client, it’s a trust account.
- If you’re holding money for a trust, it’s a trust bank account.
Trust accounts and emigration – why it matters
If you’re planning to emigrate from South Africa, your trust structure (and where the money is held) becomes even more important. For example, if you’re moving money out of a family trust abroad, you may need:
- A foreign exchange transfer strategy
- A tax clearance certificate
- A clear understanding of SARS’ trust income treatment
Read more: Foreign trust beneficiaries – the truth about trust taxation in South Africa.
FinGlobal: cross-border financial specialists for South Africans
Whether you’re setting up a trust fund account in South Africa, managing an inheritance, or opening a trust bank account for a family trust, knowing the account type you need is essential. If you’re unsure, it’s always a good idea to get advice from financial migration specialists. At FinGlobal, we’re ready to help South Africans figure out the ins and outs of trust structures, emigration, and cross-border finance, as well as handle tax clearance, retirement annuity withdrawal, and more.
Still have questions about trust bank accounts and trust accounts? Leave your contact details below and we’ll be in touch to discuss how we can assist.