South Africans are experiencing the economic crunch in a real way. While the majority of citizens are increasingly struggling to put food on the table, more affluent individuals are re-evaluating financial plans and looking at different ways to secure savings and accumulated wealth.
In this challenging and uncertain economic and political climate that the country is undergoing currently, the first thing we should remind ourselves of is to remain calm. It is reason based on the right knowledge, and not emotion that should be our guide in decision-making. It is therefore important to examine financial options and make wise decisions to ensure that your financial plan stays on track. Being strategic in our planning for the future is increasingly important.
In this article, Ultima Financial Planners’ looks at TRUSTS as one of the options, and where it is still highly effective in long-term financial planning.
For many years trusts have been effectively used as wealth management and estate planning vehicles. Recent regulatory changes have threatened the existence of the trust as an independent legal entity due to the increased scrutiny into trusts from SARS and the onerous effect of the new legislation imposed.
Hugo van Zyl, chartered accountant and master tax practitioner at Breytenbachs Cross Border Advisory, says there is a real possibility that the number of trusts will drop considerably. This is not only the case for so-called active trusts but also for smaller trusts holding a single (for family use only) property, which may be regarded as inactive.
While one tax commentator at the recent 2016 Tax Indaba, suggested that up to 50% of all trusts might disappear as a result of clean-up efforts, Hanneke Farrand, director in ENSafrica’s Tax Department, says she does not necessarily agree with this view. Farrand says regulatory changes will improve compliance and create an awareness to keep proper records and pay attention to trust administration. However, Van Zyl says that taxpayers with low value trusts, serving no real commercial purpose “should probably get rid of it”.