- As in the case of companies, trusts are a vehicle for protection of the assets against creditors.
- Promote continuity and succession planning (particularly in the case of businesses).
- Reduces Estate Duty
- An effective planning mechanism for future generations, by preserving assets in the trust.
- Promote the same benefits as for a usufruct (right of use).
Special trusts are afforded tax advantages not applicable to other trusts. These trusts are those created for special needs individuals, not able to provide financially for themselves, or are created in terms of a will (testamentary trust) as one or more beneficiaries is a minor (under 18 years of age). Special trusts are taxed at the marginal income tax rate applicable to natural persons and not at the 45% rate applicable to normal trusts.
Additional CGT benefits for trusts created for special needs cases are:
- Inclusion rate of 40% compared to normal trusts’ 80%
- Annual exclusion R40,000
- Enjoys primary residence and personal use assets exclusions
Various factors need to be considered in the creation of a trust. We advise our clients to engage with our Trust Accounting Services team before setting up a trust, to ensure a clear understanding on the impact on the donor’s assets of creating the trust.
Our team is experienced in the functioning and income tax treatment of trusts. Should you require trust accounting services for your trust, contact our team.
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