Transferring Hereditary Assets into a Trust | Legal Articles


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Transferring Hereditary Assets into a Trust

The transfer of assets into trusts has been a subject of much controversy for some years. This was due to the realisation that trusts have been used and/or abused to achieve favourable tax outcomes.

The tax authorities have in some instances put some measures in place to decelerate and discourage such activity. For example, Income Tax for gains earned in a trust has had to be pegged at 45%, while the Capital Gains Tax would be 36%.

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How to Transfer Assets into a Trust South Africa

A way to moderate this could be found in distributing trust income to the beneficiaries, who will then pay tax at their marginal tax rate, which would be favourable if it is low.

At present, estates less than R3 500 000 qualify for a rebate on Estate Duty, whilst 20% is applicable for those estates which are above the threshold. Be that as it may, one would be interested to know how they can transfer assets that would have accrued, into a trust. Basically, these are the ways which can be used to achieve this:

Sale of the Assets to the Trust

The sale of the assets is one of the most prominent ways of distributing assets. However such sale needs to be at market value, which can be achieved by getting two different valuations and declaring the average. However, the sale of assets such as property and company shares will invite Transfer Duty and Capital Gains Tax. 

The below Transfer Duty rates apply currently:

Value of Property in Rands Rate   
1-1 000 000 0%
1 000 001 – 1 375 000 3% of the value above R1 000 000
1 375 001 – 1 925 000 R11 250 + 6% of the value above R 1 375 000
1 925 001 – 2 475 000 R44 250 + 8% of the value above R 1 925 000
2 475 001 – 11 000 000

R88 250 +11% of the value above R2 475 000

11 000 001 and above R1 026 000 + 13% of the value exceeding R11 000 000


This option can also be considered, but it may not be a favourable way to go because only donations of up to R100 000 per annum will not attract Donations Tax. A donation of more than R100 000 per annum will be subject to 20% tax.

Testamentary Trust

This option involves setting up a trust as directed through a Will, which also prescribes that assets be transferred into such Trust. Estate duties and other such costs can then be covered by setting up an insurance policy against the Trust.

Lending to the Trust

The other option would be to sell the asset and then, after paying the Capital Gains Tax from the proceeds, lend the money to the Trust to purchase a new investment vehicle or asset. Transfer Duty would be avoided in this way because there is no transfer being executed as it is a loan advanced to the Trust.

Van Deventer & Van Deventer Incorporated – Estates, Wills and Trust Attorneys

We at Van Deventer & Van Deventer welcome you to consult with us for comprehensive Estate planning to suit your needs.

Contact us to find out more.

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