Page 42 - Nexia SAB&T Trust Guide 2025

■ The founder may transfer assets with growth potential into a trust, preferably
a discretionary trust, with his children and grandchildren as beneficiaries.
■ Assets can also be bequeathed to an inter-vivos or testamentary trust.
■ The growth in the assets from the date of transfer to date of his death
accrues to the trust, and at most, only the value of the asset at the date of
the transfer (usually in the form of a loan account) is retained in his estate.
■ The loan account is usually gradually reduced during the founder’s lifetime by
loan repayments, further reducing estate duty liability.
■ Any growth in the asset(s) will take place in the trust and not in the founder’s
hands. The increase in value will not be included in the founder’s estate and
the value of his estate (and therefore estate duty) is reduced accordingly.
These benefits are only applicable to a discretionary inter vivos trust and not
vested or bewind trusts.
In addition, the provisions of Section 3(3)(d) of the Estate Duty Act and
Section 7C of the Income Tax Act should be borne in mind by the estate planner.
Methods of transferring assets into a trust
Assets can be transferred into a trust by sale (via a loan granted to the trust), a
donation or on death in terms of a Last Will and Testament.
By donation: The founder will pay donations tax on the value of the assets
donated to the trust. The first R100,000 per annum per natural person is exempt
from donations tax.
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.

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