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.
Trusts and 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 owed to…
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.
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…
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…
It is often suggested that, in order to avoid CGT and/or Transfer Duty, it is advisable to sell only the Bare Dominium (that is, the physical property) of a fixed property into a trust structure, retaining the usufruct (right of use) in the hands of the original owner. If the owner is relatively young, the usufruct has a high value and the bare dominium has a low value, hence the apparent avoidance of tax. What are the problems with this scheme? The tax in the long run, bearing in mind the time value of money, works out about the same,…
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…
I had a meeting with a guy who had this great scheme to save tax. He’s an investor in residential property and was going to register various properties in his own name, his wife’s name and his childrens’ names so that each of them was in a business doing less than R1m turnover. Then he was going to register each of the businesses as a micro enterprise and pay turnover tax. Tax on R999 999 turnover = R14 120 Brilliant! It doesn’t work because of the anti-avoidance rule in the 6th Schedule of the Income Tax Act. This says that…
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…