Is a trust still effective?

Recent changes to the income tax act have important consequences for anyone who transferred assets into a trust and may require some reconsideration.

In many instances a trust has been an effective estate planning vehicle to reduce an investor’s personal estate and the estate duty by transferring assets to a trust. It was also an attractive vehicle to peg the value of an asset in a trust, on date of transfer, with all future growth accumulating in the trust outside of the estate, minimising the estate duty on any growth of the asset. There are also other benefits such as protection of assets from creditors and beneficiaries, ease of administration upon death and estate planning for future generations.

However recent law changes announced last year in the Taxation Laws Amendment act, 2016 could have important consequences for anyone who transferred assets to a trust without being paid for the asset.