1. The document discusses the practical applications of trusts, from protecting personal assets like during divorce or insolvency, to succession planning and minimizing taxes in business. 2. Trusts allow individuals to retain control over assets while benefiting family members. Income earned by the trust is taxed at lower rates than corporate structures and individuals. 3. Key benefits of trusts include asset protection, passing assets to heirs while avoiding estate duties, income tax savings when distributing to minors, and maintaining control over assets and how they are distributed.

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. A Trust is a vehicle used to own assets give income to its beneficiaries www.TaxBenefits4ngos.co.za

3. Manage , control & run the Trust Decide on distribution to beneficiaries Invest Trust funds Handle Disputes 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 Protect Assets Save Taxes & Duties Transfer Assets to Heirs YOU maintain Control !

7. Protect Assets ASSET PROTECTION DIVORCE INSOLVENCY Parent Beneficiary Trust ASSETS are SAFE

8. INCOME TAX Asset owned in CC/ Co Vs Asset Owned by a Trust Income Tax Give to Minors Private Expenses become tax deductible

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 Education Medical expenses Transport Parent has R 50 000 to spend on

11. Money in Trust R 50 000 R 1 250 TAX Education Medical expenses Transport 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 Donate Assets Sell Assets Bequeath Assets in your Will

28. Unique features Donate Assets –Donations Tax Sell Assets – Loan Account Estate Duty Transfer Costs Beques t - FREE

29. 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 !

30. 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.

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. 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

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 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.