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Trusts and Estate Planning

Just as the sale of shares in a company owning mainly residential property is deemed, for Transfer Duty purposes, to be the sale of the property, so too is the sale of a trust that owns residential property. A trust will be recognised as having been sold when there is any change of trustees. So what if it was a shelf trust sold for the purpose of buying residential property?

Firstly, we prefer not to sell shelf trusts as there’s double work involved, first to form the trust, then to change it. However, occasionally a client wants to sign on the purchase of their property and can’t wait for the formation of a new trust.

In these cases, there is a possibility that the property will be registered in the trust’s name, after paying Transfer Duty, before the change of trustees is registered at the Master’s office.

Does Transfer Duty then become payable again on the change of trustees?

In our opinion, no, because the trust was sold before the Offer to Purchase was signed. The registration of the changes at the Master’s office is merely the conclusion of the sale of the trust, in the same way that the registration of transfer at the Deeds Office is merely the conclusion of the sale of the property.

In any event, the correct process, if you’re in a hurry, is to buy the shelf trust and a shelf company. Immediately donate the shares of shelf company to the trust, then have the company buy the property and pay Transfer Duty in the normal way.

An alternative is to buy the property in a “Company yet to be formed”, form a trust, then form the company with the trust as the shareholder.



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