Article contributed by LUCRO AUDITING AND CONSULTING
Individuals may donate up to R 100,000 per annum tax free, to their Trust or dependents. The benefit of this donation is to reduce the personal estate value for Estate Duty purposes.
Generally this is done through a trust structure – the donor donates an amount to the trust in cash or as an asset of value. The trust then has legal ownership of the asset (thus it no longer forms part of the personal estate) and the income accruing on this asset is for the trust.
It is important to be advised by a professional when making this donation as there are changes to interest free loans on Trusts coming in March 2017
However, It can also be advantageous for individuals who do not utilise the trust structure to also use this opportunity to create investments in their children’s names. This may be an opportunity to save for future education or a mechanism to divest ones estate of the asset, thereby avoiding estate duty.
If your child is a minor you will be taxed on the income generated from the donation until they are of age. If that investment was a unit trust for example, and left to grow, the tax would only be payable in the future when cashed in.
It is important to note that this donation must be registered with SARS before the end of February each year.
Should you wish to make a donation please follow this procedure:
Make the donation (of up to R 100,000) before the end of February. The tax exemption is R 100,000 per person, per annum.
Email us proof of payment of R 100,000 and the details of who it was paid to.
We will then complete the necessary Income Tax forms and forward to you for signing and returning to us.
We will then lodge the forms on your behalf.
