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Trusts and Estate Planning

Let’s take a simple scenario that I come across almost daily.

You own a R1,5m property and would prefer it to be owned by the company that your trust owns.

It cost you R1m.

We look at the cost of the transfer and it adds up

CGT about R82 000

Transfer Duty R12 000

Conveyancer’s fees about R27 000

That’s a whopping R121 000

You have the money available, but is it worth it?

(a) You don’t do it and you die in, say, 40 years’ time. Assume inflation averages 7,2% and there’s no change in the tax laws.

Value on death R24 000 000 (use the Rule of 72 to get this). R1,5 x 2 x 2 x 2 x 2

CGT = R4,3m

Estate Duty R3,9m

Executors’ fees R0,84m

Cost of dying R9m

Cost at present day values R9m/2/2/2/2 = R562 000

(b) You do it and you die in, say, 40 years’ time. Assume inflation averages 7,2% and there’s no change in the tax laws.

Also assume that you donated R100 000 to the company on loan account every year, so the initial debt of R1,5m was wiped out long ago.

Cost of dying = Nil

Cost at present day values = R121 000 (from above).

Saving at present day values R562 000 – R121 000 = R441 000.

(c) The easiest way to prove this is to ignore inflation and calculate at today’s values –

Cost of dying =

CGT 18% x R1,5m = R270 000

Estate Duty 20% x R1 230 000 = R246 000

Executor’s fees 3,5% x R1 500 000 = R52  000

Total R568 000 (same as (a), but for the rounding)

So, if you can afford it, it is a no-brainer.


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Looking for even more informative content? Check out the books I have written which have proved to be very popular.

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