Putting property in a trust or not

(Shutterstock)
(Shutterstock)
A Fin24 user wants to know if it is better to register a property in his own name or in a trust. He writes:

I am buying a holiday home from a family trust, using the cash part of the dissolution.

We have a dormant trust with no assets. Is it better to register the property in my name or in the trust?

Tony Davey of Tony Davey Associates responds.

There are pros and cons to each type of ownership.

From a capital gains tax (CGT) perspective, the following should be considered:

The R2m CGT exemption upon disposal of a property only applies if, in essence, both the following criteria are satisfied:

Firstly, the property must be lived in as your primary ordinary residence and secondly, it must be owned by natural persons.

It follows that a holiday home does not qualify for the CGT exemption, even if it is held in a natural person’s name, as it is not a primary residence.

Therefore, any gain upon its disposal is subject to CGT, whether held by a trust or in one’s own name.

Although a trust has a higher CGT effective rate (26.6%) instead of a natural person’s effective rate (6.5 to 13.3%), a gain can be attributed by a trust resolution to a natural person beneficiary.

The result will be that the trust is merely a conduit and the lower natural person rate applies.

Viewed from an estate planning perspective, trust property does not attract the 20% estate duty imposed upon a natural deceased person’s estate.

Thus, to the extent the property appreciates above the loan value - being the sale value - (which can be interest free in this domestic context), a saving of estate duty will result.

Further to this, assets in a trust cannot be seized to settle a natural person’s debts and thus asset protection exists to the extent of the value above any loan claim.

- Fin24

Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.

Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
ZAR/USD
16.22
(-0.34)
ZAR/GBP
21.19
(+0.00)
ZAR/EUR
19.15
(-0.01)
ZAR/AUD
11.53
(+0.12)
ZAR/JPY
0.15
(-0.32)
Gold
1905.44
(+0.04)
Silver
24.60
(-0.32)
Platinum
887.00
(+0.74)
Brent Crude
42.50
(+1.69)
Palladium
2391.50
(+1.03)
All Share
54796.42
(-0.99)
Top 40
50276.84
(-1.23)
Financial 15
10376.28
(+2.34)
Industrial 25
74130.97
(-0.60)
Resource 10
52819.20
(-2.99)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
Yes, and I've gotten it.
23% - 51 votes
No, I did not.
50% - 110 votes
My landlord refused
26% - 58 votes
Vote