Using a Trust for Estate Duty purposes

A3Trusts are popular mechanisms through which individuals often structure their affairs to ensure efficient administration of their estates when they should one day die. One of the many advantages of using a trust is of course that it continues to ‘live on’ despite the fact that any one individual may have died. This in itself is a great benefit, especially when seen against the scenario where a person’s dependents are left in a state of financial limbo, and quite often financially distressed, but in anticipation of an estate being dealt with and divided in accordance with the law of succession by the appointed executor. This process can often take months, if not years.

Another factor rendering trusts so popular for estate planning purposes, is that it can also potentially be utilised as an effective estate duty planning tool. Bearing in mind that the first R3.5 million of one’s estate is exempt from estate duty (levied at 20%), an individual may be well advised to sell his/her estate to a trust when it is still relatively small.

For example, if Mr A has an estate of R1 million and he were to sell this on loan account to a trust of which his dependents and family members (and even he himself) are the beneficiaries, he will still own an asset of R1 million (being the loan claim) in his own hands in 20 years’ time when he dies. However, his erstwhile estate, consisting of property and share investments, are by now worth R5 million, albeit owned by the trust. Besides therefore that Mr A’s family is able to still access the investments through the trustees of the trust being mandated and obliged to care for their financial needs, Mr A has also saved on estate duty of R300,000 (being 20% of the amount in excess of R3.5 million).

The law of trusts is not open to abuse though, and it is important that appointed trustees of a trust act in the interests of the beneficiaries, as well as exhibit a degree of independence. Trustees who do not act independently and in the interest of the trust beneficiaries (and who are merely ‘puppets’ of an individual) will lead thereto that the trust in itself be disregarded and seen as a sham. The trust must therefore operate as a distinctly separate estate.

For estate planning purposes, as well as the proper administration of a trust (which can be fraught of potential pitfalls) it is best to seek the help of an advisor before embarking on any such exercise. One should further be mindful of the deliberations of the Davis Tax Committee, which is considering sweeping changes to the use of the trust instrument in specifically the estate duty context.

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).




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IC Marais

Professional experience:

IC Marais is a certified CA (SA) with public sector and private sector technical knowledge based on 5 years’ Public Sector accounting, auditing and financial management experience and 5 years audit, tax and accounting experience. Detailed knowledge of private and public sector accounting and auditing standards (GRAP, IPSAS, IFRS, IAS, ISA) and public sector financial legislation (MFMA, etc.)

He enjoys the outdoors, hunting and fishing.


Professional experience:

In 1995, Schalk started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and then Mazars Moores Rowland in 2007) in Bloemfontein. In 1998, Schalk was appointed as manager at Moores Rowland, where he became a partner in 2003. Schalk received his Postgraduate Certificate in Advanced Taxation in 2006 and in 2009 he received his Certificate in the Administration of Estates.


Professional experience:

Cedric started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and Mazars Moores Rowland in 2007), Bloemfontein, in 1986. After completion of his articles, he joined the Special Investigations Division of the Department of Finance (SA Revenue Services) as a senior inspector from 1990 to 1991.


Professional experience:

Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand. After this she worked in commerce in Canada, Mexico and the United States.

On her return to South Africa, she completed her CA training contract with us and has been with Newtons ever since. She became a Partner in 2012.

Apart from her CA(SA) qualification she also holds a postgraduate certificate in Advanced Taxation (2005) and has the overall responsibility for training as our Training Officer.