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Not a week goes by without a financial planning enquiry from someone wanting to know whether they should set up a family trust or not.
Now for the vast majority it simply doesn’t make sense since they have nothing to put in the trust, but for others it makes perfect sense.

So…being the lazy so-and-so I am, I thought that, instead of writing about insurance all the time, I’d write a couple of articles on trusts and then refer all enquiries to these articles.

Let’s start off by taking a look at what a trust can do for you.

Estate Freezing
I reckon there’s nothing better in life than reminiscing over the “Good Ole Days”.

“Can you believe I bought this house for R85, 000 twenty years ago and its now worth R1, 2 million!”
“Can you believe I bought Anglo shares at RX ten years ago, and they’re now worth RZ!”

Problem is that the “Good ole days” can bit you in the rear when it comes to things like capital gains tax and estate duty.
Now I can already hear the argument: “But I never plan on selling these assets so I won’t have any tax problems.”
Problem is, we all have to die sometime, and when that happens the gov’ment is coming collecting.

Wouldn’t it be great if there was a way for those assets to never increase in value?

Well there is…and its called a trust!
Assets can be transferred from one generation to the next without falling into each generation’s personal estate.

Without a trust this is how it would work:

Dad dies and leaves holiday home to son. Dad’s estate pays capital gains tax on the property and estate duty
The holiday home grows in value in the son’s name.
Son dies and leaves it to his daughter, Son’s estate pays capital gains tax on the same property as well as estate duty…can you see the pattern?

With a trust this is how it works:

Dad buys the holiday home in the name of the trust.
Dad dies with son as beneficiary of the trust. Dad’s estate pays zero capital gains tax on the property or estate duty since it is owned in the name of the trust
The holiday home grows in value in the trust’s name.
Son dies and his daughter is the beneficiary.
Son’s estate pays zero capital gains tax on the property nor estate duty…can you see the pattern here?

But this is only good and well if you never really plan on selling the assets held in the trust.

Later we’ll discuss another major benefit of owning a trust.

InsuranceFundi has partnered with some of SA’s most reputable insurance and investment companies. We believe that everyone should have access to a wide range of comprehensive and affordable solutions. Pick the product you are interested in below, and expect a call-back from our partners.

Until next time.

The InsuranceFundi Team


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