Tax Q - unit trusts

[SAdata]

Hi there

When I was a minor child, my mom took out 2 once off payment unit trusts with Stanlib. When she did this they told her to put the account in her name and list me as a beneficiary. I now wish to transact on them and get them into my name. Stanlib said that I just need to submit a change of details form and thats it, there won't be any tax consequences. I don't see how this can be though? Surely if they are in her name, then post the switch in my name there will be donations tax and a deemed CGT disposal?

If there is I will be quite upset as these were clearly taken out for myself but Stanlib suggested this method at the time.. Although as I say they are insistent there will be no tax consequences. Any advice?

 

[Vleis12]

Your right if she is the legal owner of the unit trust she will have to transfer the unit trusts to you. That will be subject to Donations Tax and CGT, but the CGT is limited to donations tax paid. She can donate R 100,000 free of Donations Tax per year. For CGT deemed capital gains of only R 30,000 per year will be exempt.

One way would be for her to sell gains of not more than R 30,000 worth (assuming she doesn't have any other capital gains) in this tax year and to donate the proceeds (cost plus profits made, say R 50,000) to you. In the next tax year, she can do the rest.

 

[borga]

The problem with investment such as over the year it increase the value so that you could end up in a situation where the base cost is only a small portion of the portfolio value.

My mother did the same for me, however it was a continues payment and not once off, yet when I took control of it the base cost was still less than 33% of the portfolio value, so I had to pay capital gains on the rest.

Fortunately the investment was in my name so no transfer from her to me.

P.S. when you have such an investment, dispose of them while you are still a student (before earning a salary) so that even with the capital gains you are below the threshold for paying tax, otherwise it will cost you more if your salary already push you above the threshold.

If the investment is in your mothers name she will have a taxable disposal when transfering to you.