Tax free annual donations: To your Trust or your dependents

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January 27, 2017
PROVISIONAL TAX FOR INDIVIDUALS: DID YOU KNOW?
February 28, 2017

 

Individuals may donate up to R 100,000 per annum tax free, to their Trust or dependents.  The benefit of this donation is to reduce the personal estate value for Estate Duty purposes.

Generally this is done through a trust structure –  the donor donates  an amount to the trust in cash or as an asset of value. The trust then has legal ownership of the asset (thus it no longer forms part of the personal estate) and the income accruing on this asset is for the trust.

However, It can also be advantageous for individuals who do not utilise the trust structure to also use this opportunity to create investments in their children’s names. This may be an opportunity to save for future education or a mechanism to divest ones estate of the asset, thereby avoiding estate duty.

If your child is a minor you will be taxed on the income generated from the donation until they are of age. If that investment was a unit trust for example, and left to grow, the tax would only be payable in the future when cashed in.

It is important to note that this donation must be registered with SARS before the end of February each year.

Should you wish to make a donation please follow this procedure:

  1. Make the donation (of up to R 100,000) before the end of February. The tax exemption is R 100,000 per person, per annum.
  1. Email us proof of payment of R 100,000 and the details of who it was paid to.
  1. We will then complete the necessary Income Tax forms and forward to you for signing and returning to us.
  1. We will then lodge the forms on your behalf.

You can also contact us should you wish to discuss this or need additional advice.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)