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 and drafting set-off agreements, you can gradually reduce the amount that the company owes you down to the amount that gives you just the right amount of tax free interest.

At some stage, the company will become independent of you, and you will no longer need to make those donations.

That’s the time to stop. Otherwise, you could end up owing, between you, about R5m to the company. Whilst that would reduce your personal estate on death and thereby possibly reduce your Estate Duty, it could, on the other hand, cause your liabilities to exceed your assets, leading to an insolvent estate.

It’s all a question of timing. So, bear this in mind, and ask for professional guidance, if necessary, when you think the time has come.