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Practical Application of Trusts

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Practical Application of Trusts Practical Application of Trusts Presentation Transcript

  • 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
    • A Trust is a vehicle
    • used to own assets
    • give income to its beneficiaries
    www.TaxBenefits4ngos.co.za
    • Manage , control & run the Trust
    • Decide on distribution to beneficiaries
    • Invest Trust funds
    • Handle Disputes
    Trustees = Directors of a Company www.TaxBenefits4ngos.co.za
  • Beneficiaries = Shareholders Spouse, Children Grandchildren Charities / PBOs Other Trusts
  • Types of Trusts Family Business Charitable
  • Unique features UNIQUE FEATURES
    • Protect Assets
    • Save Taxes & Duties
    • Transfer Assets to Heirs
    YOU maintain Control !
  • Protect Assets ASSET PROTECTION
    • DIVORCE
    • INSOLVENCY
      • Parent
      • Beneficiary
    Trust ASSETS are SAFE
  • INCOME TAX
    • Asset owned in CC/ Co
    • Vs
    • Asset Owned by a Trust
    Income Tax
    • Give to Minors
    • Private Expenses become tax deductible
  • Income to minors MINORS can receive income from a Trust Income CANNOT be given to minors from a Co. or CC . Minors Pay Tax
  • Parent’s income R 70 000 R 20 000 TAX
    • Education
    • Medical expenses
    • Transport
    Parent has R 50 000 to spend on
  • Money in Trust R 50 000 R 1 250 TAX
    • Education
    • Medical expenses
    • Transport
    Child spends R 48 000 on R 18 750 SAVED
  • DISCRETIONARY Income R 40 000 R 40 000 R 40 000 R 40 000 R 160 000 Wife Son Daughter Son
  • DISCRETIONARY TRUST R 60 000 R 40 000 R 60 000 R 0 R 160 000 Wife Son Daughter Son
  • 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
  • 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
  • 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
  • Taxed on TOTAL Income R 50 000 R 150 000 R 20 000 R 1 260 Tax Trust income Salary
  • 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
  • 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
  • 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
  • HEIRS Your Heirs in terms of the Islamic Law of Succession
  • Donations Tax 20 % Donations Tax Assets over R 100 000 GIVEN AWAY Free Of Charge or at Below Market Value
  • Parent gives to child Parent Child gets takes 20 % Parent gives R 600 000 - R100 000 R 500 000 = R100 000 Child
  • Trust Gives to Child Trust Child gets NO Donations Tax Trust gives R 600 000 - R nil R 600 000 = Child
  • 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
  • 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
  • Unique features MOVING ASSETS TO YOUR TRUST
    • Donate Assets
    • Sell Assets
    • Bequeath Assets in your Will
  • Unique features
    • Donate Assets –Donations Tax
    • Sell Assets – Loan Account
    • Estate Duty
    • Transfer Costs
    • Beques t - FREE
  • Funds Remain In Your Group
    • Children lend money BACK to the group
    Transfer
    • Money is given to children – lower rate of income tax paid .
    YOU maintain Control !
  • Trust vs Co. / CC
    • Retain CONTROL
    • Freeze value of assets - Save ESTATE DUTY
    • Give profit to minors
    • - Save INCOME TAX
    • Can give assets away - SUCCESSION PLANNING
    • PERSONAL EXPENSES are Tax deductible
    • Lose CONTROL
    • Pay Estate Duty on VALUE @ Date of Death.
    • Pay Tax first then give profit to minors -- Double Tax
    • Donate to children pay 20%Donations Tax
    • SELL Assets-
    • Create LOAN Acc
    • Cannot save Tax on personal expenses.
  • Child Trust gives to individual Transfer Parents Trust R 100 R 100 - 10 On hand 90 R 90 BELONGS to child
  • 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
  • Child’s Trust Parent’s Trust R 100 Child - 10 Surplus 90 R 100
  • 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
  • Child’s Trustees Child Child deals with Trustees Control Child’s Trust
  • Parent’s Trust Child’s Trust Child Child’s trustees deal with Parent’s trustees Individual not involved
  • Trust
    • Practical
    • Meet your personal requirements
    • Control over funds given to children
    • Business requirements
    • Minimise taxes & duties
    At TPC we share our 27 years experience to give you trust deeds that are
  • ‘ 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.
  • 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
  • Conclusion Asset protection Give to Minors Estate Duty MAINTAIN CONTROL Succession planning Save Income Tax No Donations Tax
  • 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 %
  • TAX RATE COMPARISION Company / CC ; Individual & Trust 38.75 % 30 % 5 %
  • 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
  • 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 %
  • Trust vs Co. / CC
    • Retain CONTROL
    • Freeze value of assets - Save ESTATE DUTY
    • Give profit to minors
    • - Save INCOME TAX
    • Can give assets away - SUCCESSION PLANNING
    • PERSONAL EXPENSES become
    • - Tax deductible
    • Lose CONTROL
    • Pay Estate Duty on VALUE @ Date of Death.
    • Pay Tax first then give profit to minors -- Double Tax
    • Donate to children pay 20%Donations Tax
    • SELL Assets-
    • Create LOAN Acc
    • Cannot save Tax on personal expenses.