Trusts and Estate Planning Archives

This one arose when we had a trust that owned fixed property. We wanted to convert an existing CC to a company, then use s42 to slot it between the trust and the property. The problem was that a CC does not have authorised capital, so the members are in total always 100% owners of the CC. s42 requires the issue of new shares in exchange for the asset, but if the authorised share capital after conversion was only 100 shares, we would have to first increase the authorised share capital before we could do the s42 asset for share…

The Transfer Duties Act defines “Property” as including the shares of a residential property company so, the sale of those shares attracts Transfer Duty. It also often attracts CGT. Let’s take an example. You own a company that bought a residential property for rental. The net Asset Value of the company started at R100 and has now grown to R3m due to the growth in value of the property. Now, you want to sell the shares to the trust that you registered back in 2020. My first question would be “What was the last tax year for which you submitted…

s54 of the Income Tax Act imposes Donations Tax on the South African donor irrespective of to whom the donation is made. So yes, once you have used up your R100 000 annual allowance, such a donation would be subject to the 20% tax.

Firstly, you need to distinguish between once only costs and ongoing costs. Often, the ongoing costs can be reduced if you do the work yourself. Note that trust assets are not protected from your creditors if you do not have an independent professional trustee, which is why that is a discretionary cost. These are all the possible costs including VAT. You need to cherry pick those that will apply to you.

After months of arm wrestling with the Master of the High Court to simplify the submission of Beneficial Ownership Returns, they’ve now done an about face. So, while we were forced to jump through hoops in the past, these returns are now being done automatically by their internal system. All well and good. But really? The whole point of Beneficial Ownership for companies and for trusts is to force disclosure of the true beneficial owners (aka the Guptas) as opposed to the frontmen. The Master has missed this point completely, but who cares? Do you think the hidden controllers of…

No, no and no again! You die. Hopefully your friends and relatives are grieving. They find the Will. The bank is the Executor. Does the bank employee who gets the job actually care how the family is feeling right now? And do you think they are actually going to do the donkeywork? Not likely! All your family will get is formal requests for all sorts of information and documents and not a tad of true empathy. So sure, you got the Will for nothing. Do you think that was charity? No at all, they just want the 3 1/2% Executor’s…

A B-BBEE consultant got me thinking along these lines. He said that rather than have the Black Employee Share Trust own 51% of the Measured Company, it should rather own 100% of an intermediate company which in turn owns the 51%. The Modified Flow Through Principal then allows the Measured Company to be deemed to be 100% black owned, scoring Level 1. Now, I don’t believe anything that any “expert” says, so I checked the Codes (I always go to source). Here’s what I found So, by my reading, the traditional structure on the right scores Level 1 and…

A strange question that I was asked in a recent meeting. But, there’s no such thing as a stupid question, only stupid people who don’t ask questions. The answer is categorically No. In fact, the main reason for building wealth in a trust is to avoid taxes on death. It’s called Estate Planning.

It all depends on the kind of advice you want. If you are looking for things to be scared of, then you need to Google something like “What must trustees be careful of?” You will probably find various advisors who point out all the responsibilities of trustees. If you are looking to buy a number of trusts, because your buddy did, try Googling “Why do I need three trusts?” If you are looking for legal opinion on the taxes relating to trusts, Google “How are trusts taxed?” If you are looking for free one on one advice on your specific…

I pity those of you who bought three trusts from a firm of “specialists”, rather than just the one that you needed. You now have three Beneficial Ownership returns to submit to the Master instead of one. You also have to be sure that you opened a bank account for each trust and deposited that initial donation of R100 into each account. And, by the way, since it is the initial donation that creates a trust, I am of the view that if you didn’t actually make that donation, then your trust does not exist, despite its being registered with…

I’ve never been keen on the idea of transfering only the bare dominium of a property to a trust structure. Sure, you may save a bucketload of Transfer Duty and CGT but, if you do the numbers, taking into account the time value of money, the total tax paid up to the death of the usufructory is about the same either way (SARS isn’t stupid). And, in the meantime, the trust owns a property that it cannot let out or sell, and it is responsible for the rates and upkeep. So what was the point of the transfer? It runs…

Eish! SARS make life so difficult. They have a lovely website on www.sars.gov.org Go there, log in, select Trust Registration. Then get down to business. They want to know: First name Surname Place of birth Country of Residence ID No. Tax no. Cell No. Email Address Physical Address for every beneficial owner. If there are only two of you, well, that won’t work because they insist on at least one Founder, one Trustee and one Beneficiary. OK, so you meticulously fill in all that, then they want similar information about you as the person requesting the registration. You fill that…

Here’s a quick guide – If you really want to get your head around it, why not book your first of many free Zoom meetings with Derek, our CEO?…

This was a tricky one. The couple had been donating R100k each, every year to the trust on loan account and now owed the trust R2m. Co-incidentally the commercial property was worth about R2m. Over the years they had built up significant favourable loan accounts totalling about R3m in the company. This was the structure: And this is what we wanted: We needed to do four things: Separate the property from the trading company and get it into the investment company. Shift the trading company into the trust as a subsidiary of the investment company. Shift the debt…

A VAT registered trust owns a commercial property. We want to use s42 to slot a VAT registered company between the trust and the property, so that the trust owns the company and the company owns the property. How is this treated from a VAT perpective? I copied the entire VAT Act and pasted it into Word, then searched for section 42. I found s8(25) had the answer and it contains some surprises. s8(25)(i) If it were the business that was being disposed of as a going concern, there is no VAT. 1st surprise – it is not a zero…

The Department of Justice recently announced that the deadline for submission of Beneficial Ownership returns for trusts is 15 November 2024. The penalty for non-submission applies to all trustees and is a R10m fine or 5 years in prison or both. If you are a trustee of any trust and you have not yet complied, then you need to act fast as there is huge international pressure on SA to enforce compliance. I have had to resign as the Independent Professional Trustee of those trusts that have not complied. …

I often meet with someone who registered a trust a few years ago and never used it. They now realise the benefits of building their wealth in a trust structure and wonder whether they should use the old one or create a new one. Advantages of a new one: It can be registered at the Master’s office in Johannesburg. This is the only Master’s office that we are aware of that is actually functional right now (although things may change). Also, we have a dedicated postbox in their office. So, it is much easier to deal with them than others.

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 people are confused by this. So, here it is in as simple terms as the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act of 2022 will allow. Beneficial Ownership of Companies Every company, whether active or dormant, is required (correctly) to submit a BO return to CIPC within 10 days of any change of beneficial ownership. CIPC are also insisting (incorrectly) that this be done annually, before the submission of the normal Annual Return. The beneficial owners of a company that is owned by natural persons are: The shareholders Anybody else who has control over the…

Trusts and Estate Planning

What is the authorised share capital of a CC when converted to a (Pty) Ltd company?

How can I reduce the taxes on sale of a residential property company to my trust?

If I donate to a foreign person or company, is that subject to Donations Tax?

What is the maintenance cost of a trust

How do I submit a Beneficial Ownership Return for a Trust?

Should I accept a free Will from my bank?

How Employee Share Trusts can score Level 1 B-BBEE

Does my trust form part of my deceased estate for tax purposes?

Who is the best trust advisor?

Do I need more than one trust?

What happens to a usufruct on the death of the usufructory?

How do I register my trust for tax?

Should I buy property in my name, a company or a trust?

How to shift a trading company that owns its own business premises into a trust.

VAT registered trust and s42

Deadline for Trust Beneficial Ownership returns

Should I keep my old trust or register a new one?

Can I use my trust before it is registered?

Can a Muslim leave a legacy?

Beneficial Ownership Explained