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AN IN-DEPTH LOOK AT TRUSTS

7 Reasons you should set up a Trust:

  1. In the case of a law-suit, assets held in a Trust are unable to be attached.
  2. In the case of a divorce, assets held in a Trust will be protected.
  3. Should you lose your employment and not be able to meet your payments, the assets held in a Trust will be protected.
  4. If you own a business, creditors won’t be able to claim any assets held in the Trust to satisfy your debts.
  5. In the case of signing surety for anyone, a Trust will protect assets from a surety claim.
  6. In the event of your death, assets in a Trust are not subject to Capital Gains Tax or estate duty, thus the wealth will remain at the disposal of the family.
  7. Passing assets through the generations in a trust will save on the 20 % Donations tax and estate duty.

AN IN-DEPTH LOOK AT TRUSTS: PART 2

The essence of a trust

  1. The essence of a Trust is the arrangement through which control and ownership of the property is by virtue of a trust instrument, made over or bequeathed to another person or persons (The Trustees) for thebenefit of the beneficiaries

Therefore, for a valid Trust to come about:

  1. There must be a valid trust document (A Trust Deed)
  2. There must be at least one Trustee and one beneficiary
  3. The Trustees have bare ownership of the Trust property, not beneficial ownership
  4. The Trustees hold the property for the benefit of the beneficiaries
  5. There must be a clear separation of the control from the enjoyment of the trust assets

AN IN-DEPTH LOOK AT TRUSTS: PART 3

The key ingredients to a trust:

  1. The Trust Deed
  2. The donor
  3. The trustees
  4. The beneficiaries

The trust deed

The written document in terms of which a Trust is established. The Trust Deed sets the guidelines on how the Trustees are to manage the Trust assets. The Trust Deed also specifies how the beneficiaries benefit from the Trust.

The Donor

The person who forms the Trust by making over or bequeathing property to the Trustees.

The Trustees

The persons who have the bare ownership of the Trust assets and who administer the Trust assets for the benefit of the beneficiaries.

The Beneficiaries

The person or people benefiting from the Trust and the Trust Deed would determine how and to what extent they would benefit.

AN IN-DEPTH LOOK AT TRUSTS: PART 4

The Trust Deed

  1. The Trust Deed is the document which establishes the trust
  2. The Trust Deed must identify who the beneficiaries of the Trust are to be and to what extent they will benefit from the Trust
  3. The Trust Deed must clearly identify the initial Trust property
  4. The object, or purpose of the trust must be well defined
  5. The Trust Deed is the Trust’s “constitution” and set out the terms and conditions of the Trust.
  6. The Trust Deed must appoint the initial Trustees and should stipulate how the succession of the Trustees should take place
  7. The Trustee’s powers are derived from the Trust Deed and they should be given sufficient powers to manage the Trust’s affairs properly. If the Trustees do not have a certain power, then the Trustees will not have the capacity to act and the resulting transaction will be null and void

AN IN-DEPTH LOOK AT TRUSTS: PART 5


The Trust Deed and the provisions of section 3(3)(D) of the Estate Duty Act

  1. The above mentioned section of the Estate Duty Act can over rule the fact that a property is held in the Trust, depending upon the Trust Deed and whether or not there are certain provisions in the Trust Deed.

    2.  Should the Estate Duty Act deem the property to be owned by the deceased, then although the property is not in the deceased’s name, the property will be included in his/her Estate Duty calculation

    3. SARS is able to use these provisions where a Trust Deed contains certain provisions, even if these provisions were never actually utilised by the deceased.

    4. Should the Trust Deed contain provisions such as:

4.1 A Donor or Trustee is given the power to hire and fire Trustees

4.2 A Donor or Trustee is given the power to veto decisions

4.3 A Donor or Trustee has to be part of a majority decision

4.4 A Donor or Trustee is given the power to dispose of Trust assets in terms of his or her will.