Trusts and its cost - do you have a Trust setup?

[ant101]

I'm 32 , single for now, and wondering if this a viable thing to do? As I do plan to own more than one property.
Is it worth setting up a trust and how much does it cost?


Where is best to get assistance on this -the banks, building societies or a private consultant ?

 

[bwana]

I've got a property trust and another one for my business. My lawyer set them up for me for a few hundred rand at the time.

 

[Mars]

I have 3 trusts:

Family Trust - for all the fully paid assets
Property trust - for all the properties that earn income and have bonds.
Business trust - for the business.

They cost about 5k a go, except for the property one, cost something like 1.5% of value to transfer + 5k.

The main reason for the trusts is that is the business goes belly up, they cant touch the properties, the same with the properties. and if both of them go, nothing can touch the assets in the family trust.

Also if I die, I technically don't own anything, so nothing is locked until the estate is tied up. Also no death tax, and you legally pay less tax by moving money between the trusts.

If the property and the business where in my name, I would have to draw money as a salary, paying 35% odd on it and then pay the bond. If the business trust transfers money to the property trust I only pay 15% tax.

 

[ant101]

Ah interesting. +-5K a pop is quite steep.

Why not just have 1 or 2 trusts to limit things, or was there some technicality with "members belonging to each trust" that decided this ?

 

[bwana]

I have 3 trusts:

Family Trust - for all the fully paid assets
Property trust - for all the properties that earn income and have bonds.
Business trust - for the business.

They cost about 5k a go, except for the property one, cost something like 1.5% of value to transfer + 5k.

The main reason for the trusts is that is the business goes belly up, they cant touch the properties, the same with the properties. and if both of them go, nothing can touch the assets in the family trust.

Also if I die, I technically don't own anything, so nothing is locked until the estate is tied up. Also no death tax, and you legally pay less tax by moving money between the trusts.

If the property and the business where in my name, I would have to draw money as a salary, paying 35% odd on it and then pay the bond. If the business trust transfers money to the property trust I only pay 15% tax.

Rk5

I just looked at the statement from my recent business trust and I paid R1k to my lawyer and r400 to their correspondent in the area where it was registered. Granted it's more than the few hundred I mentioned but well under the R5k you got stuck paying.

 

[nfbs]

Two reason trusts make sense is to not pay estate duties on your death and you can offset income against expenditure bond vs rent if you put property in a trust.
One problem I found when I wanted to do the same (i don't have one so am not that clued up on it) is the trust needs to be in two people's names and not of the same family.
If you get your lawyer/friend to be the other person it is a bit risky.

Some thing you have to think of. Remember trusts are long term
- You are single so you haven't settled.
- Will you ever emigrate
- Trusts are taxed at a much higher rate.
- initial fee and annual fees to accountant
- you cannot be the only trustee.

 

[nfbs]

Rk5

I just looked at the statement from my recent business trust and I paid R1k to my lawyer and r400 to their correspondent in the area where it was registered. Granted it's more than the few hundred I mentioned but well under the R5k you got stuck paying.

There were a bunch of law changes a couple years back by the tax man to try deter so many people from opening trusts as I recall so R5000 sounds about right.
When did you open your trust?

 

[bwana]

There were a bunch of law changes a couple years back by the tax man to try deter so many people from opening trusts as I recall so R5000 sounds about right.
When did you open your trust?

Less than two years ago.

Perhaps the cost is proportionately higher for those of you 'lucky' enough to live in Jnb?

 

[Mars]

The reasoning is this:

The property market is quite volatile right now. I wouldn't want the bottom to fall out of the property market and loose my business as a result..
(Not that the bottom falling out of the market would definitely mean that, I have plans in place, but you never know). So having the property in their own trust is just safer.
It also means the rent gets paid into that trusts account and the bonds come off there also, so no mixing money and wondering what happened.

Again, the main reason for the family trust is protection. But here the trust is secure in that nothing in the trust has any outside influence. There are no creditors that can come and lay claim to anything in the trust. This trust would only contain properties (if there are ever any) that are completely paid and that generate no rent. Such as our own house or a (dreaming) holiday house by the coast. This also contains our fully paid cars and all our household contents.

 

[blunomore]

It is a field in which I did not specialise, but from what I heard, trusts have lost a lot of its benefits in terms of estate planning.

Would be nice to have a *real expert* here to tell us if there are any actual benefits left in using this vehicle.

 

[Mars]

Less than two years ago.

Perhaps the cost is proportionately higher for those of you 'lucky' enough to live in Jnb?

Well, there is more to it than just the trust. Who is administering your trust? Do you have a un-involved person as a member of your trust? Who does the accounting for the trust? Even if the trust generates no money, tax forms still need to be submitted. If the paperwork is not in order, or if the trust can be declared a dummy trust, the contents of the trust can be attacked, making the trust pointless.

 

[xrapidx]

*subscribe to thread post (to lazy to scroll up)

 

[undesign]

Well, there is more to it than just the trust. Who is administering your trust? Do you have a un-involved person as a member of your trust? Who does the accounting for the trust? Even if the trust generates no money, tax forms still need to be submitted. If the paperwork is not in order, or if the trust can be declared a dummy trust, the contents of the trust can be attacked, making the trust pointless.

+1

Best to speak to an auditor/attorney. A trust used to be an effective in minimizing income tax (via beneficiaries, multiple tax thresholds etc), but it is becoming more difficult. It is still a very valid tool in estate planning - e.g. transferring your assets to the trust so that future growth happens in the trust and not your estate, safe-guarding against creditors etc. But it can get complicated. It doesn't make sense, for instance, to transfer your primary residence into a trust any more, because you will lose your CGT rebate.

The whole planning aspects has a number of variables to take into account - your marriage status, age, estate value etc. etc.

Costs fluctuate wildly - there is no real cost in drawing up the Deed of Trust - it's a question of changing names, addresses. So you are charged either a ad hoc fixed price or per hour spent on doing real estate planning or a combination. If you don't need planning, shop around for the cheapest - although I would recommend using a reputable auditor/attorney/consultant.

 

[etwylite]

remember assets in trust can be attacked, especially if negligence, or deliberate fraud in business is involved. there are ongoing admin costs 8%duty on properties sold etc, and the taxman has and will look to restrict the benfits in future..what applies today is not guaranteed. still think an intervivos is a good idea to protect the family. Also the sooner you start with transferring assets into the trust, the less the cost long run, as they grow value within the trust structure.

 

[bwana]

Well, there is more to it than just the trust. Who is administering your trust? Do you have a un-involved person as a member of your trust? Who does the accounting for the trust? Even if the trust generates no money, tax forms still need to be submitted. If the paperwork is not in order, or if the trust can be declared a dummy trust, the contents of the trust can be attacked, making the trust pointless.

Yes, there is more to managing a trust than just the deed. Does your R5000 cover all the reporting, accounting, submissions, etc in perpetuity?

 

[JennieT]

I have 3 trusts:

Family Trust - for all the fully paid assets
Property trust - for all the properties that earn income and have bonds.
Business trust - for the business.

They cost about 5k a go, except for the property one, cost something like 1.5% of value to transfer + 5k.

The main reason for the trusts is that is the business goes belly up, they cant touch the properties, the same with the properties. and if both of them go, nothing can touch the assets in the family trust.

Also if I die, I technically don't own anything, so nothing is locked until the estate is tied up. Also no death tax, and you legally pay less tax by moving money between the trusts.

If the property and the business where in my name, I would have to draw money as a salary, paying 35% odd on it and then pay the bond. If the business trust transfers money to the property trust I only pay 15% tax.

If I would postpone setting up a property trust, to save the initial cost for NOW, and I buy a small property in my own name, will it be more expensive to move that property over to the trust after a few months?