Trusts and Estate Planning Archives

Last month I talked about moving a service company into a trust. If the company owns assets, such as plant and machinery, then it gets a bit more complicated. The principal is basically the same. You register a new company and issue the shares to your trust. Then you start invoicing from the new company (increasing its value), but continue paying the bulk of the expenses in the old one (reducing its value). The old company rents the assets to the new company, and here you can play around with rentals to balance the profits and expenses…

The first question is, of course, what do you mean by “wealthy”? I like my definition of being “reasonably wealthy” as “having enough passive income to be able to retire”. For us average people, there is, in my view, only one way to achieve this other than by gambling successfully and that is by investing in property. Why property? Because you can buy a R900 000 property with R90 000. You can’t buy R900 000 worth of listed shares except with R900 000. You will need about R12m to 14m invested in rental earning property…

The shares in your company cost you R120 or R100 depending on whether we registered the company or someone else did and they are now worth R1m. Incidentally, the reason we issue 120 shares is that 120 can be divided by 1, 2, 3, 4, 5 and 6, so you can have any of those numbers of equal shareholders. You now want the company to be owned by your trust. You can donate it and pay 20% Donations Tax on R1m – R150K (the Annual allowance) or sell it and pay up to 18% CGT on R1m – R120 (the…

My AI generated weekly update advises me that from 4th May 2026, SARS will be imposing monthly administrative penalties on trusts that fail to submit their annual tax returns. This was gazetted on 27 March and specifically confirms that, as is the case with companies, it will apply even when the trust earns zero income. The probability is that the penalties will be R250 per month for every outstanding tax return. Since posting this article, we have received, on 5th May, our first notification of the imposition of R250 per return for a trust. So, it’s…

You’ve lent money to your trust’s company, perhaps for a deposit on a property purchase or perhaps from selling your property to the trust when it didn’t have the money to pay you. Either way s7C of the Income Tax Act kicks in. In simple terms, it says that you must charge interest at least at the official rate (which is the repo rate plus 1%). If you don’t, then the shortfall that you didn’t charge is deemed to be a donation and that is subject to Donations Tax at 20%. Now it gets interesting.

This is one of the most frequently asked questions during my many Teams meetings. So, here’s the answer. I’ll talk as if you only have one property to deal with. You have to choose between donating the property or selling it. There’s no other way. If you donate it, you’re in for 20% Donations Tax. The only advantage is that you will have moved its value out of your estate and away from your creditors. You can’t do this to escape creditors whom you know are already proceeding against you. Your alternative is to sell…

Yes, you can, but for all tax purposes, it will be deemed to have been sold at market value. So, why mess with the price? You will probably be selling to a company owned by the trust. If the company does not have the money to pay for the property then it will owe you the money and s7C of the Income Tax Act says that you must charge interest at least at the official rate. That interest is taxable in your hands. So, the lower the actual selling price, the lower the Conveyancer’s fees and…

If ever you, as a trustee, are required to sign surety to enable a trust owned company to raise a bond, guaranteed that it’s by First National Bank. They are clueless with regard to a shareholder’s responsibilities to a company. So, if you get this demand from FNB, here’s what you do: Respond that one of the trustees refused to sign on the grounds that it is an improper requirement to ask a shareholder to sign surety for a company. In every instance where I have been involved, they have backed down. Most recently, by saying…

Oddly enough, SARS has not yet latched onto one way in which they can legitimately, and in my view should, attack trusts. But let’s first answer the question. The answer? Categorically, No. I have seen no evidence whatsoever that SARS is, or has any intention of, targeting trusts. So, where does this common misperception come from? Simply the fact that trusts are taxed at a flat 45%. But a properly built trust structure ensures that the trust never earns taxable income and is therefore never taxed. So, the 45% becomes irrelevant. Then where…

I owe this thought provoker to my old friend Marc Quatember, a Director of Maximus Wealth Managment. He had drawn up an Estate plan and included Executors’ fees of 4.025% which I queried. He responded that it was 3,5% + VAT. So, that raised the question “When should an Executor charge VAT on fees?” If he (my apologies ladies, but writing his/her etc. is just too cumbersome) has been appointed in his own capacity as an individual and is not VAT registered, then his practice (or employer) will not invoice the fees, and he will not charge VAT. If…

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…

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…

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. 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…

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…

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…

Trusts and Estate Planning

How can I move my production asset owning company into a trust without paying CGT?

How can I become wealthy?

How can I move my service company into my trust without paying CGT?

SARS imposing Administrative Penalties on trusts

Interest on loans to a trust

How do I move my properties into a trust?

Can I sell a property to my trust below market price?

Trustees beware of FNB

Is SARS going after trusts?

Must the executor of a deceased estate charge VAT on his/her fees?

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?