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Practical Application  of  Trusts- From the Bedroom to the Boardroom Hoosen   Agjee 2 nd  February 2010 www.TaxBenefits4ng...
<ul><li>A Trust is a vehicle   </li></ul><ul><li>used to own assets </li></ul><ul><li>give income to its  beneficiaries  <...
<ul><li>Manage , control & run the Trust </li></ul><ul><li>Decide on distribution to beneficiaries </li></ul><ul><li>Inves...
Beneficiaries = Shareholders Spouse, Children Grandchildren Charities / PBOs Other Trusts
Types  of  Trusts Family Business Charitable
Unique features UNIQUE FEATURES <ul><li>Protect Assets </li></ul><ul><li>Save Taxes & Duties </li></ul><ul><li>Transfer As...
Protect Assets ASSET  PROTECTION <ul><li>DIVORCE </li></ul><ul><li>INSOLVENCY  </li></ul><ul><ul><li>Parent </li></ul></ul...
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 ...
Income to minors MINORS can receive  income from a Trust Income  CANNOT  be given  to minors  from a  Co. or CC .  Minors ...
Parent’s income   R 70 000 R 20 000 TAX <ul><li>Education </li></ul><ul><li>Medical expenses </li></ul><ul><li>Transport <...
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>...
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...
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 -...
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 na...
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 0...
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 ...
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   N...
Unique features MOVING ASSETS TO  YOUR TRUST <ul><li>Donate Assets </li></ul><ul><li>Sell Assets </li></ul><ul><li>Bequeat...
Unique features <ul><li>Donate Assets  –Donations Tax </li></ul><ul><li>Sell Assets     – Loan Account </li></ul><ul><li> ...
Funds Remain  In  Your Group <ul><li>Children lend money BACK to the group </li></ul>Transfer <ul><li>Money is given to ch...
Trust   vs  Co. / CC <ul><li>Retain CONTROL </li></ul><ul><li>Freeze value of assets  - Save ESTATE DUTY </li></ul><ul><li...
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 P...
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...
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
<ul><li>Practical  </li></ul><ul><li>Meet your personal requirements </li></ul><ul><li>Control over funds given to childre...
‘ Our trusts  work for you  from the bedroom to the boardroom’ With a TPC Trust you benefit from  our experience and all t...
Visit our website: www. TaxBenefits4ngos .co.za Family Trusts for individuals Trust Deeds/ Constitutions & Section 21 Co’s...
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 00...
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 ...
Recepient  pays tax on income received from the trust  at progressive rates Income trust  Tax Payable  Tax  rate  R  50 00...
Trust   vs  Co. / CC <ul><li>Retain CONTROL </li></ul><ul><li>Freeze value of assets  - Save ESTATE DUTY </li></ul><ul><li...
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Practical Application of Trusts

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Practical Application of Trusts

  1. 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. 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. 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. 4. Beneficiaries = Shareholders Spouse, Children Grandchildren Charities / PBOs Other Trusts
  5. 5. Types of Trusts Family Business Charitable
  6. 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. 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. 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. 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. 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. 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. 12. DISCRETIONARY Income R 40 000 R 40 000 R 40 000 R 40 000 R 160 000 Wife Son Daughter Son
  13. 13. DISCRETIONARY TRUST R 60 000 R 40 000 R 60 000 R 0 R 160 000 Wife Son Daughter Son
  14. 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. 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. 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. 17. Taxed on TOTAL Income R 50 000 R 150 000 R 20 000 R 1 260 Tax Trust income Salary
  18. 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. 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. 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. 21. HEIRS Your Heirs in terms of the Islamic Law of Succession
  22. 22. Donations Tax 20 % Donations Tax Assets over R 100 000 GIVEN AWAY Free Of Charge or at Below Market Value
  23. 23. Parent gives to child Parent Child gets takes 20 % Parent gives R 600 000 - R100 000 R 500 000 = R100 000 Child
  24. 24. Trust Gives to Child Trust Child gets NO Donations Tax Trust gives R 600 000 - R nil R 600 000 = Child
  25. 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. 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. 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. 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. 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. 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. 31. Child Trust gives to individual Transfer Parents Trust R 100 R 100 - 10 On hand 90 R 90 BELONGS to child
  32. 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. 33. Child’s Trust Parent’s Trust R 100 Child - 10 Surplus 90 R 100
  34. 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. 35. Child’s Trustees Child Child deals with Trustees Control Child’s Trust
  36. 36. Parent’s Trust Child’s Trust Child Child’s trustees deal with Parent’s trustees Individual not involved
  37. 37. Trust
  38. 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. 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. 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. 41. Conclusion Asset protection Give to Minors Estate Duty MAINTAIN CONTROL Succession planning Save Income Tax No Donations Tax
  42. 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. 43. TAX RATE COMPARISION Company / CC ; Individual & Trust 38.75 % 30 % 5 %
  44. 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. 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. 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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