Renovations Bond

Polymathic said:
Not forgetting the family drama.

What my grandfather sold his house to my uncle is have clause in the contract which I guess like a lifetime lease for the granny flat which would prevented them from being kicked out on the street if things went sour and it eventually did with the daughter in-law.
Click to expand...

I've learnt that if you own a pin someone will fight for it once you're dead
 
I.am.Sam said:
i have a flat
wife has a flat

so the parents house cause im going to be inheriting it can i just pay the transfer fees ?
Click to expand...

Yep, and then register the bond in your name. Assuming SARS is not going to knock on your door and ask you how you acquired a multi mil asset.

The messier option is take out a bond in your dad's name, and then you sign surety for it using your income.

What I would do (Im not a tax expert though):

1. Register a trust, make yourself and your kids (if you have any) the beneficiaries.
2. Sell the property to the trust. Same transfer fees will apply. No transfer of money will happen, but a loan account will be created. The loan will be the value of the transfer and will be owed to your father, and interest will be at 7% annually (SARS rule). Given that your father is retired, the 7% is essentially tax free. When he passes, the loan account will be cancelled, asssuming it is under R3,5m.
3. When the property is in the trust, take out a bond and stand surety for it.

Its complicated, but it future proofs your assets. Benefits:

- Property is in a trust. When you die, it goes to the beneficiaries without incurring estate tax of tax. There is no property transfer etc.
- You can donate 100k per person into it per year, building up a nice base.
- You can add the next property into it.
- The loan account interest is tax deductible, as it the bond interest. So it can be deducted as an expense on any income into the trust.

Drawbacks:

- Takes a bit of effort to set up the above. Easier to have it in a personal name.
- You'll need to do an annual tax return. Prob cost R1k if not less.
- If you sell the property at a profit in future, the CGT is higher than individual. But there are ways to reduce.
- Income tax is 40% in a trust, but they are ways to reduce.


Hope it helps and good luck.
 
I.am.Sam said:
i have a flat
wife has a flat

so the parents house cause im going to be inheriting it can i just pay the transfer fees ?
Click to expand...

Yep, and then register the bond in your name. Assuming SARS is not going to knock on your door and ask you how you acquired a multi mil asset.

The messier option is take out a bond in your dad's name, and then you sign surety for it using your income.

What I would do (Im not a tax expert though):

1. Register a trust, make yourself and your kids (if you have any) the beneficiaries.
2. Sell the property to the trust. Same transfer fees will apply. No transfer of money will happen, but a loan account will be created. The loan will be the value of the transfer and will be owed to your father, and interest will be at 7% annually (SARS rule). Given that your father is retired, the 7% is essentially tax free. When he passes, the loan account will be cancelled, asssuming it is under R3,5m.
3. When the property is in the trust, take out a bond and stand surety for it.

Its complicated, but it future proofs your assets. Benefits:

- Property is in a trust. When you die, it goes to the beneficiaries without incurring estate tax of tax. There is no property transfer etc.
- You can donate 100k per person into it per year, building up a nice base.
- You can add the next property into it.
- The loan account interest is tax deductible, as it the bond interest. So it can be deducted as an expense on any income into the trust.

Drawbacks:

- Takes a bit of effort to set up the above. Easier to have it in a personal name.
- You'll need to do an annual tax return. Prob cost R1k if not less.
- If you sell the property at a profit in future, the CGT is higher than individual. But there are ways to reduce.
- Income tax is 40% in a trust, but they are ways to reduce.


Hope it helps and good luck.
 
I have multiple properties. All in my own name. I like to keep things simple and easy.

People at my work converted trust’s to their own name lately. Trusts might have the perk when you die, but thats it
 
zerocool2009 said:
I have multiple properties. All in my own name. I like to keep things simple and easy.

People at my work converted trust’s to their own name lately. Trusts might have the perk when you die, but thats it
Click to expand...

Debatable. Trusts can give you all of the benefits of owning in your personal capacity. The only extra bit is the admin.

I prefer it from an estate planning perspective. Means my will is simplistic. But each to their own.
 
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