BREAKING NEWS: Budget amendments affecting you and your Trust by 29th February 2016

Currently trusts are used as an important vehicle for estate planning, asset protection and tax structuring. Typically, assets are sold (at market value) to a trust and the purchase price is left outstanding as an interest free loan. In addition, no donations tax is currently triggered and the assets are not included in the estate of the donor at death.

To limit a taxpayers’ ability to transfer wealth without being taxed, government proposes to ensure that the assets transferred through a loan to a trust are included in the estate of the founder (we assume this to mean the lender/donor) at death, and to categorise interest-free loans to trusts as donations. Further measures to limit the use of discretionary trusts for income-splitting and other tax benefits will also be considered.

Therefore, it is now absolutely critical that where your trust owes you money, we urgently advise you to take advantage of the annual R 100 000 donation exemption (you must ensure that the original trust cash donation of R100 is made) before Monday 29th February 2016, to avoid/ minimise the consequences of the new trust tax legislation being mooted in the Budget.

As per the Trust Property Control Act, all trusts are required to open a bank account and we are able to assist you with this process to facilitate the payment of the donation to the trust.

Please contact Juanita Roman, Fatima Bapukee or your partner urgently should you require any assistance.

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