Page 42 - Nexia SAB&T Trust Guide 2022

By Last Will and Testament: Assets could in terms of a Last Will and Testament be
bequeathed to a trust to assist with the estate duty saving of the heirs.
By sale: Assets can be sold to the trust at fair market value against a loan account.
The sale must be at fair market value, otherwise the founder will probably have
to pay donations tax. Such a sale will also have capital gains tax consequences.
In order to gradually reduce the loan account, the founder may then donate up to
R100,000 each year to the trust without attracting any donations tax liability. The
balance of the loan account will be included in his estate when he dies.
There must be loan agreement or a sale agreement in these circumstances. Without
an agreement, SARS could regard the transaction as a donation.
The loan agreement does not necessarily have to include an interest rate provision,
but must include a repayment date. However, since the introduction of Section
7C to the Income Tax Act, to the extent that interest is not charged on the loan
at SARS’s official interest rate, it will be treated as a donation, as is described in
more detail below.

IMMOVABLE PROPERTY AND TRUSTS

Checklist when buying or selling a property using a trust
■ Review the trust deed, particularly the clauses pertaining to the powers
and authority of the trustees to act. They must have the requisite capacity
to contract on behalf of the trust regarding the acquisition or disposal of
property, or power to obtain a mortgage bond or pass a mortgage bond over
any immovable property held in trust by them.
■ The trustees must be duly authorised to act in terms of the most recent
Letters of Authority issued by the Master of the High Court, or Master’s
Certificate, if the trustees have changed.
■ Obtain all signing trustees’ identity documents, and other FICA documentation.
■ The board of trustees must be properly constituted. The minimum number of
trustees required by the trust deed must be appointed.

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