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Trusts and Estate Planning

The decision as to what a trust should own is largely dependent on the main purpose for which it was created. Although most trusts serve both purposes, some are formed principally for estate planning and others for asset protection. Let’s look at each of these –

Estate planning

Your objective here is to minimise the Estate Duty and CGT, both of which kick in on death. Estate Duty is based on the net value of your estate, whilst CGT is levied on the gain in value of each asset from the date of purchase to the date of death.

In order to keep these taxes as low as possible, the growth in value of assets held by you needs to be kept to a minimum, so your trust, rather than yourself, should own all growth assets. This includes fixed property, shares and other investment assets, such as art, antiques, classic cars etc. The one exception is your primary residence. The allowances on death are usually sufficient to eliminate tax on your home and since there’s a R2m allowance before CGT is imposed on each sale, provided the home is held in your personal name, it is better that you keep the home out of the trust.

Asset protection

Clearly, you will want to protect the assets mentioned above, but there will be other things that you really don’t want to lose to creditors if you are sued or bankrupt.

The most important one is your car, because if you have no assets at all except your car, at least you can get a job and drive to work!

Next are your personal effects. If you lose your house, you can get a job and rent another one. If you still have the furniture, rugs etc., it will still feel like home, and the lady of the house (whether that is you or your spouse) and the children will adjust much more easily to the new circumstances.

And finally, you may decide that the house should be owned by the trust. You will forfeit the CGT allowance on sale, but it may be worth it.


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Looking for even more informative content? Check out the books I have written which have proved to be very popular.

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