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.
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:
the personal residence out of a trust, and use our donations allowance
to reduce the value of the properties in the rental trust.
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:
the purposes of the response, we have assumed that the property in
question qualifies as a “primary residence” as defined in the Income Tax
From a capital gains tax point of view, we would not
suggest that you transfer your primary residence to the existing or a
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”.
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.
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.
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