Trusts and Estate Planning

If you have investment properties, then when the second of you and your spouse dies, up to 38% of their value will go in tax and that is payable in cash. The answer is to hold them in a trust. The tax is made up of Estate Duty (20%) and CGT (18%). But when you die, the trust does not die and those dreaded taxes do not kick in. Should you wish to make an appointment, please feel free to visit Derek’s diary and book a time that suits you.

Your trust does not protect you, but it can protect your assets. Let’s take a look at what you own. Probably a house, two motor cars, household goods and furniture and then, if you are building your wealth for eventual retirement, you will have, or plan to have, some investments like listed shares or property. You will also own shares in your business.

If you bequeath money to a minor (under 18 years of age) in your will, you would, if you were still alive, be horrified to find that your bequest cannot be fulfilled. The cash must be deposited into the Guardian’s Fund which is administered by the Master of the High Court. Interest is earned on the money and school fees etc may be paid out of the fund. However, the process, like everything else administered by the Master’s office, is cumbersome and burdensome so is best avoided. Avoidance is a simple matter. All you need to…

It’s not just a question of trusting your trust. It is really how much you can trust your independent professional trustee to get things right and keep them right. Ever since the Badenhorst vs. Badenhorst case it has been considered essential to have an independent professional (accountant or attorney) on board as a trustee of a discretionary trust whose object (or at least one of them) is to protect the trust assets against external creditors. But this professional trustee should not be selected just for window dressing (i.e. to give the appearance that the trustees are truly independent of the…

One good reason to hold your investments in a trust is to protect them from creditors in the event of bankruptcy. Oh, of course, you’ll never be bankrupt will you? Let me ask you something. What is the difference between the type of person who will become a multi millionaire and one who will be a bankrupt. Answer – none! Or quite simply, if you don’t want to risk bankruptcy, go get a 40 hour a week job! So yes, you are at risk. If you’re not, then you’re probably not going to become the sterling millionaire that you need…

I meet so many people who have a family trust (often three depending on who they bought from) gathering dust in a file somewhere. Often the trusts were bought after attending a seminar on the subject, but because there was no follow through they never got to put the trust(s) to the use for which it was intended. So let’s explore one good reason for forming a trust during your lifetime (it’s called an inter vivos trust meaning “during life”). When you die, you’ll probably leave everything to your spouse and there will be no estate duty and no capital…

There’s a firewall between your creditors and the trust assets, but how strong is it? This gets tested in the courts relatively often and two cases were reported in De Rebus, the Law Society magazine recently. In both cases the firewall held and quite rightly because these trusts were properly constructed and properly administered. The first case was the classic – a divorce. Both the husband and wife were trustees and beneficiaries and her attorney sought to get the trust assets included in the accrual calculations. He claimed that the husband had treated the trust as his alter ego (other…

Who should be the beneficiaries of your family trust? Lot’s of clients say that the trust is for their children as beneficiaries, but that is fundamentally unsound. There’s no question in my mind that the beneficiaries must include the client and their spouse as well as their children. The reason is that you simply do not know what the future holds, so be ready to deal with the unexpected. You might be quadraplegic this time next year! You can’t possibly predict that, but it happens to some, maybe you. OK so now we’ve got the immediate family on board –…

I get lots of people (always men, oddly enough) who are very concerned about what will happen to all their hard earned wealth once they are dead and no longer able to act as trustee for their trust. Well, the first thing to understand is that when you’re dead, you’re dead. The second thing is that you don’t know in what way circumstances may change after your death. The worst thing you can do is to tie everybody’s hands so that when a real need arises they are not able to fulfil it simply because you wanted to rule from the…

SARS have brought out a new tax return for trusts (the ITR12T). There’s bound to be more pub talk about SARS clamping down on trusts, but the pub experts simply pass on hearsay and never actually take the trouble to find out the facts. The reality is that there’s nothing to be concerned about here. All SARS want is the following – 1) The trust will have to give proper details of all transactions during the year – no big deal unless you’re Julius Malema maybe. 2) Details of all parties contributing to the trust. Again no big deal except…

I recently wrote a post called By all means copy me Now I’m going to get quite specific. We are talking about so called professionals here. “Professional” attorneys and accountants who have no principals and no pride and bring their peers into disrepute. I have in front of me two trust deeds. One prepared and sold to their client by a banking institution (let’s call it the “mother”) and another by an accountant (let’s call it the “child”). I received the child for review first and after a read through, decided that it was such rubbish that…