Trust & Tax Seminar

Who should attend this seminar?

  • Existing Trustees
  • Beneficiaries
  • Business owners
  • Financial advisers
  • Estate Agents
  • All people wanting to protect their current and future wealth will all benefit from this hands-on course



Trust Administration

  • How many trusts do I really need?
  • What can I expect from my independent trustee?
  • Should I be a beneficiary of my own trust?
  • Can I change trustees?
  • Can I change beneficiaries?
  • Should one trust be a beneficiary of another?
  • Why is proper administration of a trust so critical?
  • Are annual donations a proposition?
  • How do I transfer assets to my trust?
  • Why will an administrative trust fail?
  • Do rental trusts work?


  • Does it pay to put a life policy in a trust?
  • What are the tax implications?
  • Who carries the risk of theft/fire/damage of trust assets?

Business Intrests

  • Should my trust own companies or CC’s?
  • How does a trading trust work?
  • Trust versus Partnerships
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  • How much of my wealth should go into a trust?
  • Should my primary residence be in a trust?
  • Which assets should I never put in a trust?
  • Is your trust paying for your living expenses?
  • How do I free up cash and improve affordability for bonds?

Estate Planning

  • Which trusts will flop as estate planning tools?
  • Why and how can your trust can live forever?
  • What about offshore trusts?


  • Is the Trust a  Taxpayer taxpayer (Income Tax, Vat, PAYE)
  • How does income tax work in a trust?
  • How does the “conduit principle” affect tax in the Trust?
  • When does Capital Gains Tax apply?
  • How to minimize Capital Gains Tax?
  • Why should your property trust should not register for VAT?
  • How to apply the “conduit principle” for tax minimization?
  • Why the wealthy put trusts in place before they became wealthy?

Trusts have now pervaded all fields of social institutions in common law countries. They are like those extraordinary drugs curing at the same time toothache, sprained ankles and baldness, sold by peddlers in the Paris boulevards; they solve equally well family problems, business difficulties, religious and charitable problems. What amazes the skeptical civilian is that they really do solve them. – Pierre le Paulle

Family Trust – Your Absolute Protectorarticle-0-0C641742000005DC-408_468x380

The Family Trust structure is the recommended vehicle in which to accumulate cash, have ownership of long-term assets and structure your life  and disability cover. Any person, even a salaried employee or a business owner, is at risk in his or her personal capacity, and therefore it is imperative to implement the best legal and tax efficient “structure” to optimise asset protection. To create wealth and to ensure that dependants and future generations are catered for.

A Trust creates a separate legal persona that is allowed to own assets and through the trustees, transact in its own name. An individual is therefore protected in their own name, as well as protected in their capacity as trustee.

A Trust is an entity that has the capacity to outlive the founder. In the event of an individual passing away, the trust will continue to operate as normal and will not incur any unnecessary taxes or forced sales of assets.

Why your Life Cover should be owned by your Family Trust

A strange fact is that more than 95% of clients also have their Life Cover in their private capacity (individual names). They do not enjoy any tax benefits and have very little protection (in many cases – none whatsoever). Spouses are usually nominated as the beneficiary, which results in tax implications that are delayed and have an impact when least expected.

A ‘short and sweet’ benefits list of a trust-owned life policy:

  • No executor’s fees
  • Continuity
  • Protection
  • Tax Benefits

All premiums plus 6 % compound interest are deductible from the value of an estate for the calculation of Estate Duty Tax.

Benefits of a Family Trust

Setting up of a Trust:

An “Inter Vivos” Trust is established during the lifetime of the Member. The process of registering a trust is fairly easy, but it is of utmost importance to consult an experienced trust attorney to draft the Trust Deed. The Trust Deed is the contract that dictates the relationship between the Member (the founder) and the trustees.

Estate Planning:

One of the primary advantages of a living trust is that it offers tax efficient management and control of assets after death. The growth in the estate is “pegged” and the value will increase in the trust. A trust creates a separate legal entity that owns the assets outside of the Member’s personal estate, and therefore the Trust Assets do not form part of a personal estate for the calculation of Estate Duty.

Taxes and costs of up to 35% on death can be saved, including:

1.1    Estate Duty (20% of Estate) as the Trust will continue to persist after death.
1.2    Capital Gains Tax (10% CGT) on growth assets.
1.3    Executor Fees (at 3.99% of the Gross Estate). This is a particularly unnecessary and avoidable tax. Executor fees are calculated on the gross value of an estate and deducted before any other expenses, therefore the executor can receive up to 15% of a net estate.
1.4    Transfer costs on immovable property (as property ownership does not transfer to anyone after death).

Bank accounts and cash reserves will not be frozen during the winding up of the estate, which can take up to 2 (two) years. A trust will ensure rapid access to capital and income after death.

Protection of Minors. In South African Law, a minor cannot be the registered owner of property, therefore the asset is liquidated and the proceeds invested in the Guardian Fund at 3% interest rate. Assets are also protected against spendthrift children, who will not be able to reduce the assets to zero.

Multi-ownership of assets. Some assets can not be divided (e.g. businesses, farms or other property). By placing these types of assets in trust, the heirs can be the beneficiaries of the income generated by the assets.

Confidentiality. A Will becomes a public document on death. A Trust does not form part of an estate, and therefore the list of assets held in a trust remain confidential.

Risk Planning:

Protection of assets against creditors. Personal liability is limited to the assets in an individual’s name. Creditors cannot access the assets in trust, unless it was set up with the intention to defraud creditors. Each risk poses a potential threat that could result in dire consequences.

The major risk categories are:

  • Financial Risk: Mortgage Bonds or Hire Purchase / Lease agreements – the majority of South Africans need to make use of these sources of finances to purchase houses or vehicles. In event of default, all assets in one’s own name are at risk of being sold in execution. In a market where interest rates are fluctuating, banks execute against bonded assets when consumers default on payments.
  • Business Risk: A business owner (whether a sole proprietor, a member of a CC or as a shareholder in a company) is likely to have signed personal surety for loans or credit agreements to the company, or are the co-principal debtor with the company in respect of any supplier’s credit arrangements.
  • Personal Risk: Car accident/s, defamation in a public place, involvement in a scuffle or conflict with neighbours etc, (claims between natural persons that may arise from social interaction).
  • Divorce or Family Risk: Statistically, a spouse can be the largest biggest creditor. Statistically, nearly 2 out of 3 marriages end in divorce. A large portion of an estate can be awarded to the ex-spouse, as well as possible claims for maintenance.

Tax Planning:

  • The advantages of proper tax planning in a well-structured trust are clearly defined in the tax legislation.
  • Even minor beneficiaries can enjoy tax-friendly distributions.
  • “Conduit Principle”: Unlike companies or close corporations, the Trustees can decide to pay the Income Tax (40%) or CGT (20%) in the hands of the Trust or distribute the tax liability to the beneficiaries at their marginal rate of tax (Income Tax 18% to 40% or CGT at 10%), thereby paying much less tax.
  • Income Splitting: Trustees can use the “conduit principle” and pay beneficiaries who have tax exemptions (individuals have nearly R60 000 income per year, free of tax).

Leaving a Legacy:

  • A Trust is an entity that will “outwit, outplay & outlast'” an individual. It will not terminate (unless decided by the Trustees), therefore it can own properties and assets for generations, and pass the  portfolio of assets to the next generation tax free.
  • A Trust is the only vehicle which allows the accumulation of wealth and the transfer of assets from generation to generation, without incurring costs and taxes. By taking action, Members can ensure their children receive all the present wealth and assets they have accumulated and to which they can still increase. The dilemma that employment, economic cycles and market conditions present can be avoided for one’s children, if they know that there is an income producing Trust providing passive income streams (primarily through property).


Multiple Trusts for a Comprehensive Structure


Property Investment Trust

Property carries a certain amount of risk (through bond finance) and should be in a Trust, which is an asset holding entity. The costs and taxes (transfer duty) can be efficiently structured if a unit is purchased directly from a development company.

Residential Property Trust

In circumstances where the primary residence is bonded, it is best not to transfer that particular property into a “Family” Trust, as it introduces a “secured risk”, which could affect the other assets in the Trust should the mortgage bond be executed and the home loan recalled.

A preferred strategy is to “ring-fence” the risk and place the primary residence (bonded) into a separate Residential Property Trust.

Shareholding Trust/Business Trust

The shares in a company or membership interest in a close corporation, can be held in a trust and in the vents of death, those shares or interests will not be included in the calculation of estate duty as part of the estate. The transfer of those shares or membership interests can easily be done, with minimal costs.

Experts agree that it would be better to place shares or membership interest into a Shareholding Trust to eliminate the business value being included in an estate.

From a personal protection point of view, a CC and less frequently, a private company, are occasionally subject to the Courts “piercing the corporate veil” and holding the individual personally liable. The benefits of having these assets registered in a business trust will ensure complete peace of mind.