I have been asked the question over and over – is it still worth the trouble to set up a trust for an asset portfolio?
The perception is that SARS is attacking trusts, but here is one scenario that made me choke a bit:
We just prepared the documents to file the Liquidation and Distribution account for a deceased estate with the Master of the High Court. A Liquidation and Distribution account is a summary of the assets and liabilities of the deceased and also takes in consideration possible capital gains tax and estate duty. Estate duty is levied at 20 % of the dutiable estate of a deceased.
I was shocked when I went through the calculations in the estate and realized that the children of the deceased will inherit +/- R2,5 million less, after taxes and administrative costs are calculated.
Here are some calculations to reflect the R2,5 million losses – on an estate of R14 million – that is large amount of the estate “wiped out”.
The deceased owned 3 properties valued at R10 million rand and other assets.
The asset portfolio attracted the following death expenses, that can be directly associated with the 3 fixed properties:
It adds up to R2 510 000.00 less money available for inheritance by the heirs.
COULD THIS HAVE BEEN AVOIDED?
The question that came up in my head – as the children inherited the entire estate and will continue to own the fixed properties, R2,5 million could have been saved, if a Trust owned these assets and the children “took over” the trusts and being appointed as Trustees.
One must bear in mind that capital gains tax would come into consideration when a trust owns, and in the future sells a property.
If you need to explore your own estate duty situation – contact Meyer – firstname.lastname@example.org
Meyer de Waal