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Newsletter 39

Newsletter 39

Dear Colleague
All our offices are still closed until further notice from President Ramaphosa after announcing the National lockdown which came into effect at midnight on 26 March 2020.
It is business as usual at Legatus Trust, except for certain aspects which are affected due to dependence on the Master’s office, deeds office and other businesses that are not operational. Personnel who can, are operating remotely, but some have limited or no access to e-mails. Please keep in mind that access to physical files in our offices are also not possible during this time.
We can be contacted on the following numbers:
 JHB: 010 210 5200 / 086 172 2626
CPT:  021 914 4924/5
Please be assured of our total dedication during these unusual circumstances.  We will always try our best to be of service to you.
Stay home. Stay safe. Stay healthy. #FlattenTheCurve
A Will should be duly signed by the testator and two independent witnesses. However, in extraordinary circumstances like the national lockdown due to COVID-19, it will depend on a court to declare the Will valid or not, should it not meet the normal requirements. During this time, keep the signed Will in safe custody until our offices are open again and then ensure that the original is couriered or delivered for safe keeping.
FISA submitted a request to the Department of Justice to consider having the drafting and execution of a Will declared as an essential service under the lockdown regulations.  Outcome still pending.
Should you need funds for a funeral, contact the deceased’s bank and request them to release funds for the funeral in terms of section 7(b)(1) and 11(1)(b) of the Estates Administration Act 66 of 1966. Should they refuse, contact your nearest Master’s office.
Amidst this national lockdown due to the prevalent Covid-19 pandemic, the invisible enemy that brought the whole world to its knees, it is a good time to re-evaluate priorities. This situation just emphasizes that we are not masters of our own tomorrow. But we can choose to make wise and good decisions to plan for the unknown future.  Life is short, plan if you will live forever, but be ready to depart this world any day.
The responsibility to capture one’s thoughts, channel them in a positive direction and work hard at making a dream a reality, lies within oneself.
Your choices decide your fate. Take the time to make the right ones. If you make a mistake, that’s fine; learn from it and don’t make it again.

Robert Kiyosaki
Read more about this in the next edition

The South African Revenue Service (SARS) recognises the use of trusts for purposes other than wealth transfer.  These trusts are called special trusts and are specifically intended for persons with disabilities who are not able to produce enough income to take care of themselves, or unable to take care for themselves and minor heirs who are related to a deceased person.  SARS introduced the concept of special trusts to bring about more favourable tax treatment for such trusts.
Setting up a special trust during one’s lifetime or on one’s death for a mentally disabled or incapacitated person, will allow for the safe custody of assets, while at the same time benefiting from lenient tax treatment from an income tax and capital gains tax (CGT) perspective.  Unlike conventional trusts, which are taxed at a flat rate, special trusts are taxed on the sliding scale applicable to natural persons.
The two special trusts recognised by SARS for tax purposes, are the following:
SPECIAL TRUST TYPE A – Mentally or physically disabled persons
Section 6B(1) of the Income Tax Act defines that this trust is created solely for the benefit of a person(s) with a mental or physical “disability”, where the disability makes it impossible for the person(s) to earn enough money to care for themselves or to manage their financial affairs.  This requirement must be met before the trust will qualify as a special trust type A.
This trust can be testamentary and created upon death in terms of the Will or inter-vivos, which is created while still alive.  Sometimes it is created as a result of a court order in favour of a specified natural person with a disability to assist in management of their affairs.  
Tax concessions for special trust type A
  • The sliding scale for normal income tax purposes, for natural persons ranging from 18% - 45% is applicable, and not the fixed rate of 45% as applicable to other trusts.
  • The annual exclusion for capital gains tax (CGT) purposes at R40,000 per year.
  • The primary residence exclusion of R2 million of the capital gain on disposal for CGT purposes.
  • On disposal of personal-use assets by special trusts, capital gains or losses thereon may be disregarded.
  • Disregard capital gains or losses on compensation for personal injury, illness or defamation of the beneficiary.
  • Exclusion of the application of Section 7C - taxation on loans to trusts.
 SPECIAL TRUST TYPE B – Minors in an estate
This type of trust cannot be set up during a lifetime as minors are then still cared for, but only after a person passes away.  It is set up in terms of a person’s Will as a testamentary trust for minor children who are relatives of the deceased, who are alive on the date of death of the benefactor (including those conceived but not yet born) and the youngest of the beneficiaries is younger than 18 years on the last day of the year of assessment.  This type of trust will cease to be a special trust type B as from the beginning of the year of assessment in which the youngest of its beneficiaries turn 18.  These trusts are taxed on the normal individual person income tax scale, but do not offer benefits as far as CGT is concerned.
Tax concessions for special trust type B
  • The sliding scale for normal income tax purposes, for natural persons ranging from 18% - 45% is applicable, and not the fixed rate of 45% as applicable to other trusts.
  • Exclusion of the application of Section 7C - taxation on loans to trusts. 
Trusts can be quite complicated.  It is best to seek advice to ensure that the right structure is put in place to meet the clients’ needs. Legatus Trust specialized in testamentary trusts.
Sources: Phia van der Spuy, Elmarie de Vos

Australian socialite and Lady Mayoress, Valme Roche, left each of her three daughters and ex-husband 30 pieces of silver in her Will. 
According to her Will, Roche stated that her daughters and her ex-husband would each receive “30 pieces of silver of the lowest denomination of currency”, “blood money due to Judas”.  The 30 pieces amounted to a total of $1,50 each. She died in 2009 at the age of 81, leaving an estate to the value of $3,5 million. Almost the whole amount was bequeathed to a Catholic charity organization for men called Knights of the Southern Cross.
The reason for this strange inheritance was that Roche was convinced that her three daughter and ex-husband plotted to kill Roche’s mother, Dorothy Maud Harber, for financial gain.  She left each of her three daughters equal shares in her jewelry as well, but with a stipulation:  The daughters had to study her personal diaries from January 1974 up to October 1981 and correctly answer questions before they could claim their inheritance.
The daughters contested the Will on the grounds that their mother was “delusional” which made her incapable of “making a reasonable and proper disposition of her estate”.  After a three-year court case, they finally managed to gain control of the estate in late 2012, by order of the Australian Supreme Court.
Until next time.
“The Legatus Times” Team

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