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Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
Practical Application of Trusts
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Practical Application of Trusts

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  • 1. Practical Application of Trusts- From the Bedroom to the Boardroom Hoosen Agjee 2 nd February 2010 www.TaxBenefits4ngos.co.za Business solutions for commerce & NGOs
  • 2. <ul><li>A Trust is a vehicle </li></ul><ul><li>used to own assets </li></ul><ul><li>give income to its beneficiaries </li></ul>www.TaxBenefits4ngos.co.za
  • 3. <ul><li>Manage , control & run the Trust </li></ul><ul><li>Decide on distribution to beneficiaries </li></ul><ul><li>Invest Trust funds </li></ul><ul><li>Handle Disputes </li></ul>Trustees = Directors of a Company www.TaxBenefits4ngos.co.za
  • 4. Beneficiaries = Shareholders Spouse, Children Grandchildren Charities / PBOs Other Trusts
  • 5. Types of Trusts Family Business Charitable
  • 6. Unique features UNIQUE FEATURES <ul><li>Protect Assets </li></ul><ul><li>Save Taxes & Duties </li></ul><ul><li>Transfer Assets to Heirs </li></ul>YOU maintain Control !
  • 7. Protect Assets ASSET PROTECTION <ul><li>DIVORCE </li></ul><ul><li>INSOLVENCY </li></ul><ul><ul><li>Parent </li></ul></ul><ul><ul><li>Beneficiary </li></ul></ul>Trust ASSETS are SAFE
  • 8. INCOME TAX <ul><li>Asset owned in CC/ Co </li></ul><ul><li>Vs </li></ul><ul><li>Asset Owned by a Trust </li></ul>Income Tax <ul><li>Give to Minors </li></ul><ul><li>Private Expenses become tax deductible </li></ul>
  • 9. Income to minors MINORS can receive income from a Trust Income CANNOT be given to minors from a Co. or CC . Minors Pay Tax
  • 10. Parent’s income R 70 000 R 20 000 TAX <ul><li>Education </li></ul><ul><li>Medical expenses </li></ul><ul><li>Transport </li></ul>Parent has R 50 000 to spend on
  • 11. Money in Trust R 50 000 R 1 250 TAX <ul><li>Education </li></ul><ul><li>Medical expenses </li></ul><ul><li>Transport </li></ul>Child spends R 48 000 on R 18 750 SAVED
  • 12. DISCRETIONARY Income R 40 000 R 40 000 R 40 000 R 40 000 R 160 000 Wife Son Daughter Son
  • 13. DISCRETIONARY TRUST R 60 000 R 40 000 R 60 000 R 0 R 160 000 Wife Son Daughter Son
  • 14. 35 % Company Tax Net Profit Rental income R 500 000 R 500 000 R 175 000 R 325 000 R 175 000 Net to S/holders R 325 000
  • 15. Individuals pay Tax Net Profit Rental income R 500 000 R 500 000 R nil R 500 000 R Nil R 500 000 Income to Individuals
  • 16. SPOUSE 3 Individuals receive R 500 000 SON www.TaxBenefits4ngos.co.za Income Tax 165 000 20 000 170 000 20 000 165 000 20 000 DAUGHTER Total Tax = R 60 000 !! www.TaxBenefits4ngos.co.za
  • 17. Taxed on TOTAL Income R 50 000 R 150 000 R 20 000 R 1 260 Tax Trust income Salary
  • 18. Capital Gains Tax Gain ½ Gain Taxable CGT @ 40 % Share Gain Gain ¼ Taxable CGT @18% 240 240 240 240 60 60 60 60 -16 -16 -16 -16 1 1 1 1 44 44 44 44 Tax = R 4 000 R 188 000 SAVED = R 960 000 = R 480 000 = R 192 000 Rebate
  • 19. Estate Duty R 1 m (2010) Value Today R 6 m (2020) Estate Duty 20 % on R 6 m = R 1.2 m Value Date of Death Asset in name of individual
  • 20. Estate Duty Value Today R 1 m Asset owned in a Trust Value at death R 6 m 20% Estate Duty on R 1 m = R 200 000 m R 1 000 000 SAVED
  • 21. HEIRS Your Heirs in terms of the Islamic Law of Succession
  • 22. Donations Tax 20 % Donations Tax Assets over R 100 000 GIVEN AWAY Free Of Charge or at Below Market Value
  • 23. Parent gives to child Parent Child gets takes 20 % Parent gives R 600 000 - R100 000 R 500 000 = R100 000 Child
  • 24. Trust Gives to Child Trust Child gets NO Donations Tax Trust gives R 600 000 - R nil R 600 000 = Child
  • 25. SUCCESSION PLANNING Assets owned in Co / CC Heir Sold to Heir R 1 000 000 Heir owes you Pay estate duty on this loan Heir pays duty on asset value at date of death HIGHER VALUE
  • 26. Using a TRUST Assets owned in TRUST Heir Given to Heir If heir is a trust NO estate duty is payable on death of heir NO ESTATE DUTY
  • 27. Unique features MOVING ASSETS TO YOUR TRUST <ul><li>Donate Assets </li></ul><ul><li>Sell Assets </li></ul><ul><li>Bequeath Assets in your Will </li></ul>
  • 28. Unique features <ul><li>Donate Assets –Donations Tax </li></ul><ul><li>Sell Assets – Loan Account </li></ul><ul><li> Estate Duty </li></ul><ul><li> Transfer Costs </li></ul><ul><li>Beques t - FREE </li></ul>
  • 29. Funds Remain In Your Group <ul><li>Children lend money BACK to the group </li></ul>Transfer <ul><li>Money is given to children – lower rate of income tax paid . </li></ul>YOU maintain Control !
  • 30. Trust vs Co. / CC <ul><li>Retain CONTROL </li></ul><ul><li>Freeze value of assets - Save ESTATE DUTY </li></ul><ul><li>Give profit to minors </li></ul><ul><li>- Save INCOME TAX </li></ul><ul><li>Can give assets away - SUCCESSION PLANNING </li></ul><ul><li>PERSONAL EXPENSES are Tax deductible </li></ul><ul><li>Lose CONTROL </li></ul><ul><li>Pay Estate Duty on VALUE @ Date of Death. </li></ul><ul><li>Pay Tax first then give profit to minors -- Double Tax </li></ul><ul><li>Donate to children pay 20%Donations Tax </li></ul><ul><li>SELL Assets- </li></ul><ul><li>Create LOAN Acc </li></ul><ul><li>Cannot save Tax on personal expenses. </li></ul>
  • 31. Child Trust gives to individual Transfer Parents Trust R 100 R 100 - 10 On hand 90 R 90 BELONGS to child
  • 32. Child lends to Parent’s Trust Parent’s Trust Child R 90 Surplus R 90 Parent’s Trust owes Child R 90 Child lends to Parent’s trust
  • 33. Child’s Trust Parent’s Trust R 100 Child - 10 Surplus 90 R 100
  • 34. Parent’s Trust Child’s Trust Child R 90 Child Trust has loan in Parents Trust Received from HIS trust Child lends to his trust Trustees lend to Parent’s trust Lending money R 90 Child has loan acc in his trust Trust owes child R 90
  • 35. Child’s Trustees Child Child deals with Trustees Control Child’s Trust
  • 36. Parent’s Trust Child’s Trust Child Child’s trustees deal with Parent’s trustees Individual not involved
  • 37. Trust
  • 38. <ul><li>Practical </li></ul><ul><li>Meet your personal requirements </li></ul><ul><li>Control over funds given to children </li></ul><ul><li>Business requirements </li></ul><ul><li>Minimise taxes & duties </li></ul>At TPC we share our 27 years experience to give you trust deeds that are
  • 39. ‘ Our trusts work for you from the bedroom to the boardroom’ With a TPC Trust you benefit from our experience and all that we learn from our clients who come with unique and varied family, cultural and financial needs.
  • 40. Visit our website: www. TaxBenefits4ngos .co.za Family Trusts for individuals Trust Deeds/ Constitutions & Section 21 Co’s. for NGOs Formation of CCs Estate planning and Wills Business solutions for Commerce & NGOs Produced by: Cave Man inc (031) 207 3323
  • 41. Conclusion Asset protection Give to Minors Estate Duty MAINTAIN CONTROL Succession planning Save Income Tax No Donations Tax
  • 42. Recepient pays tax on income received from the trust at progressive rates Income trust Tax Payable Tax rate R 50 000 R 3 600 7.2 % 70 000 5 400 7.7 % 100 000 14 500 14.5 %
  • 43. TAX RATE COMPARISION Company / CC ; Individual & Trust 38.75 % 30 % 5 %
  • 44. TRUST’S INCOME R 180 000 TOTAL TAX Only R 9 000 Only 5 % Trust income R 180 000 to beneficiaries R 180 000 Wife 60 000 Son 60 000 Daughter 60 000 3 000 3 000 3 000 NiL
  • 45. Recepient pays tax on income received from the trust at progressive rates Income trust Tax Payable Tax rate R 50 000 R 3 600 7.2 % 70 000 5 400 7.7 % 100 000 14 500 14.5 %
  • 46. Trust vs Co. / CC <ul><li>Retain CONTROL </li></ul><ul><li>Freeze value of assets - Save ESTATE DUTY </li></ul><ul><li>Give profit to minors </li></ul><ul><li>- Save INCOME TAX </li></ul><ul><li>Can give assets away - SUCCESSION PLANNING </li></ul><ul><li>PERSONAL EXPENSES become </li></ul><ul><li>- Tax deductible </li></ul><ul><li>Lose CONTROL </li></ul><ul><li>Pay Estate Duty on VALUE @ Date of Death. </li></ul><ul><li>Pay Tax first then give profit to minors -- Double Tax </li></ul><ul><li>Donate to children pay 20%Donations Tax </li></ul><ul><li>SELL Assets- </li></ul><ul><li>Create LOAN Acc </li></ul><ul><li>Cannot save Tax on personal expenses. </li></ul>

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