• 10 tips to find bargains

    Susan Erasmus gives advice on how bargain hunters can get the most bang for their buck.

  • Inside Labour

    Labour's bitter breaches need to be seen in historical context, says Terry Bell.

  • Rich getting richer

    Economists differ on how to tackle the chasm between rich and poor, says Leopold Scholtz.

Loading...
See More

Putting a primary residence in a trust

Jan 08 2014 18:29
null


Related Articles

Investors can set rental property price - expert

Buying a business or investing elsewhere

Putting property in a trust or not

Flats, townhouses best sellers in 2013

7 tips to land a property winner

Who inherits what?

 
A Fin24 user wants to know if it is a good idea to put his home in a trust. He writes:

We are a professional couple in our early fifties. We have three teenage children.

We have a bond-free personal residence worth about R4m. We also have a trust, which has purchased properties for rental income. These properties are worth about R3m with bonds of about R2m.

We would like to know which is the better of these two options:

Option 1:

Leave the personal residence out of a trust, and use our donations allowance to reduce the value of the properties in the rental trust.

Option 2:

Transfer our personal residence into a new trust (with the associated transfer duty costs) and use our donations allowance to reduce the value of our personal residence in the trust.

Elzahne Henn, associate director at Mazars, responds:

For the purposes of the response, we have assumed that the property in question qualifies as a “primary residence” as defined in the Income Tax Act.

From a capital gains tax point of view, we would not suggest that you transfer your primary residence to the existing or a new trust.

Where a natural person disposes of a primary residence, up to R2m of the capital gain determined on disposal must be disregarded and is therefore not subject to capital gains tax.

This exclusion is not available to a trust, unless it qualifies as a “special trust”.

Moreover, the remaining portion of the capital gain (after applying the exclusion) would be subject to a maximum effective tax rate of 13.32% in your own hands, compared to an effective rate of 26.64% payable by the trust if the gain is not distributed.

Please note that we have based this response on the information received from you and the assumptions made, so Mazars cannot take responsibility for its accuracy.

It should be emphasised that the above is only a general outline of very complex provisions, to help you decide whether you need further detailed advice. The best option is always to consult a qualified impartial adviser.

 - Fin24

Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

Follow Fin24 on Twitter, Facebook, Google+ and Pinterest.

property  |  money  |  money clinic

NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Company Snapshot

Brought to you by BizNews

More from BizNews

We're talking about:

SMALL BUSINESS

Johannesburg has been selected to host the Global Entrepreneurship Congress in 2017. "[The congress] will ensure that small business development remains firmly on the national agenda and the radar screen of all stakeholders, the Small Business Development minister said.
 
 

Business tips from the world’s billionaires

We share some of the world's most successful people's greatest tips and who knows, this might just lead you to your first million!

 
 

Luxury living

5 millionaires turned murderers
The youngest billionaires in the world and how they made it
Watch: Flying first class has never been this luxurious!
What to expect inside a royal nursery

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

How do you see your boss? He/sheis:

Previous results · Suggest a vote

Loading...