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Trusts and Estate Planning

Why would you want to form a trust for your aged parents?

Firstly, here’s why you wouldn’t.

  • The cost of transferring assets into a trust structure may be prohibitive. They can include –
    • Transfer Duty
    • Capital Gains Tax
    • Securities Transfer Tax
    • Conveyancer’s fees
  • Depending upon the remaining life of the second dying of the parents, the protection from taxes on death of the gain in value of the assets may not warrant the above costs
  • Their estate may not be big enough, bearing in mind the allowances for CGT and Estate Duty on death.

Then why would you?

  • The above may not produce excessively negative results. For instance, with property, there may be no Transfer Duty and minimal CGT. Add to that that if at least one of the parents is in good health, they may well live long enough that the asset grows significantly in value by the time they die. That growth is protected from taxes on death.
  • The parents may want to leave a legacy rather than a bequest. I have written about this in another article.
  • The parents can immediately start diminishing their taxable estate by each making a donation, on loan account, of R100 000 to the trust structure every tax year. This donation is free of Donations Tax.
  • The children can also make similar donations and reduce their wealth by the same amount to protect it from creditors and to reduce their taxes on death.
  • The winding up of the estate is much simpler because the first dying leaves everything to their spouse and the second dying leaves everything to the trust structure.

So, there’s no one size fits all. Each individual set of circumstances needs to be examined before a decision is made.


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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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