Tax on withdrawal from a trust | Fin24
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Tax on withdrawal from a trust

Jan 13 2015 16:31

A Fin24 user wants to know if money she had withdrawn from a trust created by her and her husband, would be taxable. She writes:

My husband created a small trust we have the beneficiary of a life insurance policy. The beneficiaries of the trust are my children.

When my husband passed away, the beneficiaries agreed that I could withdraw the money - as a loan.

Is this money taxable in my hands?

READ: Donations tax explained

Pieter Faber, technical executive: tax law & policy at the SA Institute of Tax Professionals (Sait), responds:

The trust, as juristic person for tax purposes, is capable of making loans to other persons.

A loan is by nature is a capital amount for tax purposes and will not be included in the gross income of the borrower and, therefore, is not subject to income tax.

We have also noted that you obtained the approval of the beneficiaries of the trust. Though outside the scope of tax, you may have to take advice on this aspect as usually you require the approval and consent of the trustees of the trust not the beneficiaries.

ALSO READ: Taxes and trusts

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trusts  |  tax  |  money  |  money clinic


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