MyMoney Online

Three reasons why you shouldn’t have a trust

A trust is a legal entity which controls assets on behalf its beneficiaries. It is managed by trustees in terms of a trust deed which details how the assets should be distributed. It helps some but not everyone.

Here are 3 reasons why a trust is not that beneficial for you:

The size of your estate

All taxpayers receive a deduction of R3 500 000 from the value of their assets in their estate before estate duty of 20% is applied. If you leave everything to your spouse there is no estate duty payable on your death. It is paid when the surviving spouse passes on. The R3 500 000 passes onto the surviving spouse leaving up to R7 000 000 as a deduction on the value of assets before estate duty is applied. So if your estate is under R7 000 000 the benefit of a trust is limited.

Costs

The running of a trust comes with administrative responsibilities. Trusts have to prepare financials and submit tax returns which incur accounting fees and costs. These costs will need to be weighed up against the benefits that the trust provides in the event of your death.

Tax

Trusts are taxed at the highest rate of 41%. If your individual tax rate is lower you should reconsider. A trust does not enjoy any exemptions on interest or capital gains either. For example, if your home is in a trust then you do not enjoy any rebate on the capital gains tax when you sell it. Whereas, if the house was registered in your name you would received a R1 500 000 deduction before capital gains is applied. Similarly, if you have taxable interest you enjoy an exemption on the first R22 800 if the investment was made in your individual capacity. In a trust you will pay 41% on the interest without any exemption.

So a trust does not make any sense if you don’t have a sizeable estate to warrant the costs. The tax concessions are often more effective in your personal capacity compared to a trust. The costs and fees too may not be worth it.

Listen to the audio below for more information...

Read more from Paul Roelofse on www.investforlife.co.za


This article first appeared on 702 : Three reasons why you shouldn’t have a trust


Recommended

by NEWSROOM AI

CapeTalk welcomes all comments that are constructive, contribute to discussions in a meaningful manner and take stories forward.

However, we will NOT condone the following:

  • Racism (including offensive comments based on ethnicity and nationality)
  • Sexism
  • Homophobia
  • Religious intolerance
  • Cyber bullying
  • Hate speech
  • Derogatory language
  • Comments inciting violence.

We ask that your comments remain relevant to the articles they appear on and do not include general banter or conversation as this dilutes the effectiveness of the comments section.

We strive to make the CapeTalk community a safe and welcoming space for all.

CapeTalk reserves the right to: 1) remove any comments that do not follow the above guidelines; and, 2) ban users who repeatedly infringe the rules.

Should you find any comments upsetting or offensive you can also flag them and we will assess it against our guidelines.

CapeTalk is constantly reviewing its comments policy in order to create an environment conducive to constructive conversations.

Read More
Why women must be far more careful with their money than men

Why women must be far more careful with their money than men

Ray White talks to personal finance guru Warren Ingram, who reckons women should take financial planning more seriously than men.

Where to best save and invest so your children can one day go to university

Where to best save and invest so your children can one day go to university

#FeesMustFall, but don’t hold your breath. Take matters into your own hands to ensure a tertiary education, says Warren Ingram.

How to get a tax refund from Sars

How to get a tax refund from Sars

The Money Show’s Bruce Whitfield interviews Daniel Baines, author of “How to get a SARS Refund”.

Inflation robs you into the future….

Inflation robs you into the future….

This week financial fitness coach, Paul Roelofse, explains inflation and how it affects your finances.

How to handle your over indebtedness…

How to handle your over indebtedness…

When you've finally succumbed to the fact that you're over your head in debt and cannot cope any further, here's a way forward.

The bright side of retirement reforms

The bright side of retirement reforms

Paul Roelofse explains the advantages of retirement reforms which will be effective from 1 March 2016.

Popular articles
Nhlanhla Nene asks trade unions for ideas on how to fund wage increase demands

Nhlanhla Nene asks trade unions for ideas on how to fund wage increase demands

Nene asked unions representing Eskom workers to provide ideas to fund wage increases after negotiations with Eskom deadlocked.

[WATCH] Man finds it hard to open his Zam-Buk & pleads for an easier opening tin

[WATCH] Man finds it hard to open his Zam-Buk & pleads for an easier opening tin

Tourists wake up at the crack of dawn to bag the best sunbed and one man even suffers a broken toe in the melee.

How Steinhoff shares doubled in just five days

How Steinhoff shares doubled in just five days

Founder of Herenya Capital Advisors, Petri Redelinghuys, explains how the embattled Steinhoff managed to double its share price in 5 days

Parents no longer have to travel with children's birth certificates

Parents no longer have to travel with children's birth certificates

The new Home Affairs upgrades to the system include printing parents details at the back of the child's passport.

Woolworths explains reasons for rice mix recall

Woolworths explains reasons for rice mix recall

The retailer announced it is recalling its rice mix product for fear of contamination with the Listeria bacteria.

Home Affairs set to undergo an upgrade in move to paperless system

Home Affairs set to undergo an upgrade in move to paperless system

A new live capture system will cover birth, marriage and death registrations.

Criminals targeting homes with aluminium windows, warns neighborhood watch

Criminals targeting homes with aluminium windows, warns neighborhood watch

The Panorama, Welgelegen and Plattekloof Neighbourhood Watch has identified a new house break-in trend.