Posts Tagged :

estate administration

Family together and laughing
640 417 Maysure Financial Services

TRUSTS: EFFECTIVE ESTATE PLANNING & TAX-SAVING MECHANISMS

In order to effectively organise your financial security and legacy, you need to start by establishing your estate planning questions. These questions often touch on the complex topic of tax and trusts. To bring these concepts together takes a certain skill and expert understanding. This is where estate planning professionals are crucial.

We’ve put together a guide of some of the fundamentals when it comes to the relationship between trusts, estate planning, and tax considerations. Keep reading to find out if trusts are the right vehicle for you and your family. 

WHAT ARE TRUSTS?

Lady holding pen

A trust can be defined as a tripartite legal relationship that exists between a founder, a beneficiary, and a trustee.

The trust is created by the founder, who places his or her assets in the trust, and then administrative control is given to the trustee. This is often done for the benefit of the beneficiary.

Trusts can provide advantages in several areas, such as:

  • Estate planning and management
  • Asset protection and preservation
  • Maximisation of tax-saving
  • Flexibility and confidentiality

Trusts can also operate independently or form part of a broader financial strategy. They are often used as an instrument to allow for the preservation and transfer of assets between generations. They can also be used as a means to manage and protect your assets, after or during your lifetime.

WHAT ARE THE TYPES, USES, & BENEFITS OF TRUSTS?

Two people discussing finances

In South Africa, there are many different types of trusts available. For our purposes, we will be discussing living (inter vivos) trusts and testamentary trusts. Each type has specific uses and benefits.

A living trust, or family trust:

  • Is established by the founder, or family, during their lifetime
  • Becomes effective at the time of its registration
  • Carries with it the benefit of enabling the wealth-building of its beneficiaries during the lifetime of the founder
  • May be used as a means to protect assets

A testamentary trust:

  • Is created by the terms stipulated within the will of its founder
  • Only comes into effect after the death of its founder
  • Offers the benefit of protecting both minors and vulnerable family members
  • It does not safeguard assets during the founder’s lifetime

There are several questions you can ask yourself to assist you with choosing a trust type.

Do you want peace of mind about the management of your children’s inheritance, and what may be left behind when you are gone?

Or, do you want to protect your current assets and build a lasting stream of growth for your family?

Contact us so we can help you find the right trust for you and your family.

TRUSTS FOR ESTATE PLANNING

Woman in discussion with couple

Setting up a trust, as opposed to a will, is an effective estate planning measure. It can result in faster transfer processes, lower administrative costs, and tax reliefs.

Because the growth of the trust does not directly form part of the estate, and instead belongs to the trust itself, the trust is afforded protection against estate duties (unlike with a will). This will also effectively protect the assets from creditors in the event that your estate goes insolvent.

In addition, it can also be used as a means to specify the type of wealth accumulation that you envisioned for your family assets.

For example, instead of providing a lump sum of capital, or splitting up the funds amongst the beneficiaries, the fund can remain unified, continue to grow, and subsequently be used as a source of consistent income.

ENDOWMENTS AS A TAX SOLUTION

Man putting money in a jar

Trusts are not without their drawbacks though. Two of the major pitfalls in establishing a trust in South Africa include:

  1. Heavy tax burdens on income that is kept at the trust-level (between 36-45%)
  2. The inability of the trust, as an entity, to directly invest off-shore

However, there are effective tax-saving mechanisms that can exist within a trust to counter these disadvantages.

For example: if a trust were to invest in an endowment fund, it would reduce its income tax to a flat rate of 30% and their capital gains tax (CGT) to as low as 12%.

An endowment fund also allows for the creation of offshore investment opportunities. This can not only diversify your investment portfolio, but also act as an effective tax-saving mechanism.

IS A TRUST THE RIGHT MOVE FOR YOU?

There are conditions under which it would be beneficial to set up a trust:

  • If your assets exceed 3.5m
  • When you have minor children or vulnerable family members
  • If you want to retain your family’s wealth well into the future

Before you make your decision, it is vital to know that the creation and management of a trust comes with more administrative requirements than that of a standard investment account.

It is a good idea to make yourself aware of these processes and costs before you make your decision. If your top priority is to save on taxes, then a tax-free investment might be a better option for you.

Start planning your future, today. Contact us on the details below.

+27 11 839 2302

info@maysure.za.com

Estate administration
640 400 Maysure Financial Services

Estate Administration: Inheritance & Wills In South Africa

South Africa has an inclusive justice system. This can be seen from its acknowledgment of rights for foreigners and people in customary marriages.

With the interplay between different laws and stipulations, estate planning and administration may seem a daunting task. Fortunately, writing a Will and the inheritance process do not have to fill you with dread.

Here is our guide to understanding estate administration, inheritance, and Wills in South Africa.

What Is Estate Administration

An estate is the total of money, assets, and property owned by an individual, especially at death.

Estate administration is the process of:

  • managing the estate,
  • paying any taxes or debts due on the estate, and
  • distributing the property and assets to the heirs and beneficiaries.

Estate administration ensures the deceased’s final wishes are carried out correctly. However, it’s important to note that it is a highly technical process.

Each individual’s estate and circumstances differ. Let’s draw a comparison.

A 65-year-old parent with five dependents, two businesses, numerous properties, foreign assets, and a large investment portfolio

vs

A 33-year-old young professional with life cover, a spouse, no property, and a trust.

Both individuals have different family situations and are in different life stages. Yet, both would benefit from professional expertise to help them plan out their estates in the most tax-efficient and timely manner.

Avoid the pitfalls

The estate administration process is littered with pitfalls and red tape. The estate needs to be dealt with properly in order to give your family peace of mind after you’re gone.

The greatest tool to protect your final wishes is the Will. Drafting a valid Will simplifies the entire estate administration process by setting out your intentions in writing.

Drafting, Amending, And Revoking Wills

Drafting, Amending, And Revoking Wills

Most people in South Africa can draft their own Will. Drawing up your own valid Will requires you to have two people sign as witnesses (read more about the Will-making process here).

It is a simple process if you have a simple estate. However, taxes and know-how of the law are useful, especially if you have a large family, several assets, or policy payouts to manage.

At this point, it is always best to consult your financial advisor who will be able to help you with your financial needs. In this way, the process is smoother when it comes to dividing your assets.

As your life changes, so will your financial circumstances. This is why it’s important to regularly update your Will in the face of new life events like the birth of a child or purchase of a business.

Amending A Will

You can amend your current Will through a codicil. This is also known as an update to the Will.

All changes must comply with the requirements of a valid Will. Fortunately, the process does not require the two original witnesses to sign the Will again.

Revoking A Will

Asides from amending your Will, you can also completely revoke it. You can create a new one. The latest Will must state that the previous one has been revoked, or the old Will has been destroyed.

Revoking and/or destroying previous versions prevents future confusion and potential feuds between your beneficiaries and heirs. It helps all interested parties and loved ones stay on the same page.

Inheritance Law In South Africa

Inheritance Law In South Africa

Inheritance law applies to South Africans who own property in the country. The inheritance legislation generally respects the wishes of the deceased.

However, there is one exception to this law. If the spouse is left out of the Will, he or she can petition to claim a part of the estate to support themselves. This is called the Maintenance of Surviving Spouse Act.

Grant Of Probate

Grant Of Probate

A grant of probate is a document that affords a person the legal authority to act as executor. This executor can then administer the estate on behalf of the deceased.

After the subject’s passing, the family has two weeks to notify the Master of the High Court. This begins the process of settling the estate, including officially recognising the executor.

Within the Will, the deceased makes known the executor of their estate. This person will collect the deceased assets, pay any debts and estate taxes, and distribute the estate among beneficiaries.

Because of the sensitivity around death and finances, many people prefer to appoint estate administrators with both an excellent knowledge of the estate planning environment and a good relationship with the family.

Inheritance Tax In South Africa

South African inheritance tax (estate duty) applies to all estates that are valued below and above a certain amount. These estates may be subjected to capital gains and donations tax too.

  • For an estate under R30 million, the estate duty is 20% of the estate’s dutiable amount.
  • For an estate over R30 million, the estate duty is 25% of the estate’s dutiable amount.

Feel free to get in touch if you need help with navigating estate duty taxes and the small print of estate transfer.

Maysure Financial Services Estate Administration

Maysure Financial Services Estate Administration

Estate administration requires a professional and personal perspective. At Maysure Financial Services, our services are tailored to your circumstances.

Our offerings are inspired by your life and we do all we can to help you achieve financial freedom in this lifetime and for your family in the next.

We offer estate administration services that are fully committed to your needs. At all times, we provide you with the best support possible.

If you’re not sure where to turn, contact us today with your estate administration queries.

+27 11 839 2302

info@maysure.za.com

Maysure Financial Services is a registered financial services provider. FSP 15173