Why you need a Trust
It is said that the most important thing in a relationship is to have trust, so why not take your business relationship to the next level and start a trust with us. Starting a trust is not only easy but it also protects valuable assets.
What is a trust?
Trusts are often formed by trustees acquiring a nominal sum of money in terms of the trust deed. The trustees on behalf of the trust subsequently purchase the majority of trust assets, often from a planner (often referred to as the founder on loan account). In practice, therefore many trusts have acquired assets from a planner on loan account, the planner holds a loan account in the trust. In this way any increase in the market value of assets takes place in the trust, and the planner is able to effectively freeze his or her estate at the time the assets were acquired by the trust. It must be remembered that the essence of the trust is that there must be a trust deed in terms of which property is made over or bequeathed to trustees.
Different types of trusts to suit your needs
The family trust is designed to secure the interests and protect the property of a group of family members. For estate planning purposes this type of trust is used as the assets will be accumulated within the trust itself and are therefore largely shielded from the increase in value of those assets and on the levy of estate duty.
A business trust is a Commercial entity whereby the Trustees control all the assets in the Trust for the benefit of the Beneficiaries with the united purpose of administration, management and the eventual transfer of assets to a beneficial party. In practice, what is normally created will be a share trust whereby the shares of a company will be held in trust. The benefit of the share trust again is estate freezing. For example, a company could be formed with a trust as its shareholder. The Founder can then sell his or her assets to that company on a loan account. The growth in the value of the assets and hence the increase in value of the shares then takes place in the hands of the trust and not in the hands of the founder.
Your Company and the Business Trust.
A Trust in honest comparison to a private company:
There are a number of advantages of choosing a Trust as your preferred entity over the private company. A company is subject to the Companies Act 71 of 2008 (“the Act”) which has numerous accounting standards which are more onerous than the trust. The annual financial statements and accounting records must be held at all times at the company’s principal place of business and will need to be audited.
It is not a requirement of the Trust to prepare financial statements every year nor do they need to be audited annually, unless of course The Master orders such a process.
As stated in the Act a company or body corporate whom is considered unable to pay its debts is subject to being wound up or liquidated should an amount of R100 be owing to creditors.
A Trust cannot be liquidated by any regular means, unless there is a loan account within the trust that has significant outstanding balances. Trust deeds may provide a termination date of the trust or trusts can continue in perpetuity depending on the wishes of the Founder.
Why you need a trust.
Your Business and your Family need a Trust to protect their future.
A Trust can be used very effectively to freeze an estate for estate duty purposes and
The trust affords great flexibility in determining in whose hands an amount will ultimately be taxed, unlike a company in which a receipt of an amount will never be regarded as a conduit or channel for tax purposes through which amounts pass and will be taxed in the hands of the shareholders.
• Amounts can be loaned by the trust to certain beneficiaries instead of making a distribution. On the death of the beneficiary any amounts owing to the trust will be regarded as a liability in determining the beneficiaries estate;
• Interest-free loan of an amount of the purchase price of assets sold to a trust ensures that any growth in the assets will take place in the trust; therefore the loan account will be pegged at the value of the assets at their market value when they were sold to the trust;
• Donations tax is levied at 20% and donations of R50 000 per person per annum can be levied without attracting donations tax;
• Donations between spouses are free from donations tax.
Should you want to set up a Trust, Contact us today.
011 608 1338