Trusts and Estate Planning

A trustee cannot act until he/she has Letters of Authority from the Master. So, the trust can do nothing until it is registered. But that usually does not matter. Why? Because you should be registering a company as well. The trust will own the company and the company will do whatever business you are planning, whether it be trade or property investment. If it’s trade, then you should probably have two companies, the trading company is owned by the property investment company and that company is to be owned by the trust. Let’s say that you want to buy a…

I was interested to speak to a Muslim who said that he could not leave a legacy via a trust that continued generation after generation (see my book “16 Steps to Wealth”) because Shar’iah Law dictates how the assets of a deceased shall be distributed amongst his wife and children. My interest arose, because I have formed legacy trusts for a number of other Muslims and this question was never raised. This got me to reading the translation of Sahih Muslim, Book 13, the Book of Bequests. Three things jumped out at me. A Muslim is entitled to bequeath no…

So many of the people that I speak to express a desire to leave a legacy. Many of them have formed a trust in the belief that it will achieve just that. But it won’t. Why? Because the trust that they formed is a discretionary trust. That means that the Trustees have absolute discretion as to what they do with the trust income and trust assets as long as they benefit one or some of the beneficiaries. When the founder of the trust dies, she/he appoints a trustee or trustees to succeed her/him. Almost invariably they appoint their children. When…

So, you paid about R4 000 or less for a trust drafted by an attorney. Then you read my book “16 Steps to Wealth” and realised that you’d made a mistake. You should have spent about R11 000 and got yourself a Legacy Trust and one which did not have all the faults that yours contains. Can you change your Trust Deed? Yes. fortunately, the Master once again (after much flip-flopping) allows us to completely replace one Trust Deed with another. It remains the same trust, with the same name and registration number. And the cost? Well, we feel for…

We have always favoured defining the beneficiaries of a trust as the client, spouse and relations within the first degree of consanguinity and the descendents of any beneficiary. This has the advantage of being both dynamic (if more children are born) and avoiding having to provide details of all the beneficiaries and their guardians if minors. However, we are finding that many people don’t understand consanguinity, so we decided to change our trust template to replace it with the spouse, parents, siblings and children of …. While doing this, Helen,  being her usual thorough self, Googled the definition of 1st…

Hopefully, you are in the habit of donating R100 000 every tax year to your trust or your trust owned company. But should you continue until you retire, or die? Let’s first look at the reason for making the donations. In the early days of building the property portfolio, the company will need seed capital for bond deposits and, possibly, for shortfall on bond repayments or expenses. Since you’re the one with the money, you would then have to lend it to the company and that triggers s7C interest, which may be a nuisance. By donating regularly on loan account…

I owe this one to Regine Masson, one of my 5 000 plus readers. She asked me the question that forms the title to this post. I answered yes, both trusts have a conduit. She then sent me a link to Cluver Markotter Attorneys. They had written an article about the Commissioner, SARS v Thistle Trust case (516/2021). Interestingly, the Tax Court in this case came to the same conclusion as me. Then the crunch. SARS went on appeal to the Supreme Court of Appeal and won. The court found that when the capital gain lands in the hands of…

You own the shares in a successful company, but now you want to move it into your trust. Problem! It cost you R100 (the share capital) and now it’s worth, conservatively R4m. That means a Capital Gain of R4m when you sell it to the trust and that’s about R0,7m CGT. Is there another way? Yes, there is. It can take a bit of effort, but R0,7m is a lot of CGT, so it’s worth it. Let’s say your company is called Delta One (Pty) Ltd. Form a new company called, say, Delta One Services (Pty) Ltd. The director of…

There is often confusion about these donations, so let’s try to clarify the whole story Every natural person can make donations totalling R100  000 each tax year free of the normal 20% Donations Tax. If you have a trust then you and your spouse must remember to make these donations every year. You do not have to have the money. You say I hereby donate R100 000 to xxxxx on loan account. In other words you then owe xxxxx the R100 000. If, as should always be the case, the trust owns a company which holds the wealth, then xxxxx…

Let’s suppose that your parents are both 65 years old. They own shares in a (Pty) Ltd company which you run worth R5m. Cost zero their home worth R5m. Cost R3m a company which owns unbonded investment properties worth R10m. Cost R7m Should they form a trust? Let’s assume that the trading company value will increase by 5% a year on average. nominal property values will increase at, say, 9% per year on average. inflation averages 7% Now let’s suppose that at least one of them lives to be 85 years old. What will be the nominal values of their…

Generally, when you appoint an Independent Professional Trustee, you can dump them anytime you want, because the Trust Deed says that the majority of trustees can remove a trustee (except that they cannot remove you). However, what if there are only 2 trustees, you and the professional? Again, this should not be a problem as long as the trust deed allows you to appoint additional trustees. You will simply appoint a new professional and the two of you will remove the first. Of course, the simplest way is to ask the professional to resign, which any self respecting professional would…

There are so many things that can go wrong with a trust deed that I devoted a whole chapter to this in my book “16 Steps to Wealth” Here are a few of them – The founder makes a donation of R100 to form the trust, but that means the Trustees are obliged, in terms of the Trust Propert Control Act, to open a bank account and deposit the R100. Because this hardly ever happens, then, in my view, the trust was never…

It’s not unusual to have a trust or two lying around doing nothing. Especially if you were persuaded to buy three trusts when you really only needed one. So, I occasionally get asked to quote to de-register a trust. Here’s my advice. Distribute all remaining trust assets (if any) to beneficiaries and keep evidence of having done so. Submit your Beneficial Owner return to the Master. We’re still not confident about how to do this, but it will soon become routine. Then, forget the trust and ignore SARS. What will happen? The trust will gather dust in some Master’s office.

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…