Subscribe & Follow
Jobs
- Bookkeeper Witbank
- Bookkeeper and Sales Administrator Cape Town
- Sales Manager Cape Town
- Junior Insurance Contracts Administrator George
- Domain Architect Johannesburg
- Manager: Channel Support Frontline Johannesburg
- Enterprise Architect Johannesburg
- Enterprise Architect Johannesburg, Cape Town
- Product Owner Johannesburg
- SAIPA Trainee Accountant Cape Town
7 reasons to get your trust in order
![Sumesh Somaroo](https://biz-file.com/c/1509/312097.jpg)
So says Sumesh Somaroo, a partner at the Durban office of audit, advisory and tax firm, BDO South Africa, who warned that the verification of trust tax returns by SARS was on the increase and that it was important for people to get their trusts in order.
Somaroo explained the most common mistake made: "Trusts are generally established by donors who donate their personal assets to the trust or sell their assets to the trust to reduce the value of their estate, thus reducing their estate duty liability upon death. Once this transaction is completed, the assets then belong to the trust and are under the control of the trustees. The mistake that we see in practice is that the donor continues to control the asset with no input by the trustees. The donor continues to decide what each beneficiary receives as a distribution from the trust, as well as how and where to invest the trust assets. This casts doubt on the validity of the trust."
Somaroo identified four other common mistakes:
Somaroo went on to explain that many trusts were discretionary trusts, meaning that the trustees controlled the assets and income accruing to the trust.
"In a discretionary trust the beneficiaries are only entitled to the assets and income of the trust once the trustees have distributed these assets and any income to the beneficiaries. Prior to the distribution, the assets and income remain in the trust, under the control of the trustees."
"It should also be noted that all decisions taken by the trustees must be in the best interests of the beneficiaries," he said.
Somaroo said that not only was SARS focusing more on trust tax returns but the tax return itself had become more detailed.
He offered seven tips for people to fix their trusts:
Somaroo said that by following these basic steps, people would be able to demonstrate that they have a valid trust and that the trust was not merely an extension of their personal self nor estate. This would also help secure assets from creditors.
He added that the benefit of tax savings could in future be nullified pending some recommendations from the Davis Tax Committee which might affect trusts.
About Sumesh Somaroo
Sumesh Somaroo, audit and assurance partner, BDO Durban![](/res/img/s.gif)