Independant trustee

[CLIVE-TRIANGLE]

Sorry, I put that poorly and I do agree with you.

What I mean is that officialdom have come to regard them with a lot of suspicion and they regard them as "toxic", because of the frequency with which "they are set up for the wrong reasons and not run properly".

[Basment Dweller]

This info is very helpful thanks...this pretty much confirms the research I've done on trusts.

FYI I am currently setting up a company which we will be transferring 5 properties into as a result of a property development. I've set up the trust to be an 85% shareholder in the company of which I will personally hold the other 15%. My brother and I are trustees in the trust along with a third independent trustee. The whole objective was to provide a pension income for my parent as beneficiaries and avoid estate duty when my mother dies (my mother was the owner of the original property upon which we developed and extracted 5 new apartment units.) My brother and I are also beneficiaries of the trust.

As you can see its all very inbred which is why I wanted the independent trustee to avoid being accused of a sham trust or alter ego.

[CLIVE-TRIANGLE]

Hi BD
With that setup you would have issues getting it registered without an independent trustee, so you have approached it right.

[Justloadit]

I would suggest a Trust for each property, of course it all depends on the value of the properties. In this way if there is a catastrophe on any one property, especially if in a commercial sense, rental, building, shopping centre, etc it would not affect all the other properties. Again I would not let the Trust own 85%, all or nothing, as you place the Trust at risk if something goes wrong with you as a share holder or one of the properties. But as I have said before get advice from a Trust attorney, who can look at your complete portfolio and then advise.

[Basment Dweller]

I would suggest a Trust for each property, of course it all depends on the value of the properties. In this way if there is a catastrophe on any one property, especially if in a commercial sense, rental, building, shopping centre, etc it would not affect all the other properties.

This doesn't make sense to me, do you mean set up a different trust for each individual property? This would not be very efficient to run and manage, also the trust is controlling the shares of a property holding company, not the properties themselves.

[Dave A]

I have to say I'm a bit twitchy about SARS and their current attitude towards trusts. If the conduit principle gets blocked somewhere down the line, things could get rather painful.

[Richard S]

I have been led that to believe that all the high ranked government officials (of all parties, including the likes of JuJu) have their assets in trusts, so they are unlikely to change anything that is not in their favour.

[Justloadit]

The whole point of a trust is to protect the assets. Bundling many assets in one trust, places all assets at risk in case of an attack on the trust for what ever reason. The fact that there is a trust setup does not mean that creditors will not attack the trust, and they will, especially if you are also a beneficiary.

As previously suggested, go visit a trust attorney, and get the advice, and ask your questions, your circumstances decide the advice. I have simply stated what was advised to me with my circumstances, and to date the advice has paid dividends.

[Houses4Rent]

A trust for each property is a bit of an overkill, even my trust adviser said so. A lot of properties in one trust is no good either. So why not use the middle? I have three entry level units in my trust and would probably consider a new trust from the 4th unit onwards.

[Justloadit]

Different strokes for different folks.
What if one of the properties must be registered for VAT? Then all properties in that trust must invoice with VAT on top of normal rent. Unhappy tenants, as their rent just went up by 14%.

What if you want to sell one of the properties in the Trust? More difficult when there is more than one property in the Trust.

We have no idea here of the OP portfolio, therefor any information provided here is merely for discussion purposes. As I have suggested before, go see a trust attorney, it will be for the best on your behalf.

[Basment Dweller]

Thanks for all the input, I was initially just inquiring about the independent trustee, which seems like the only way to make the trust impartial. I did consult with an attorney on the matter as a well as a specialist in trusts. The advise was to transfer all five properties into a COMPANY, then transfer the SHARES to the trust. All properties are residential units which do not incur VAT, and the rental income will be passed through as dividends and taxed in the hands of the beneficiaries. The whole objective was to avoid estate duty and set up a living pension for my parents and have the trust pass to me and my brother when the old folks die. Since my parents have no medical aid, no life insurance and no pension, the property trust company was the solution we came up with.

[CLIVE-TRIANGLE]

Received this from SAIT yesterday:

In terms of the 2012-2017 SARS Compliance Programme high net worth individuals and trusts remain high on the list of specific areas of focus for SARS. The increased information gathering capacity that SARS has in terms of the Tax Administration Act and the poor administration of trusts has left taxpayers at risk as trust transactions thought to be tax efficient can be set aside by SARS and new tax liabilities determined, with all the commensurate penalties and interest.

Following on from the 2013 Budget speech Treasury indicated that it will at a future stage being reviewing the use of Trusts in all forms of tax planning.

Join us as we discuss the current legislation, the greatest areas of risk and what taxpayers can do to prepare for an investigation by SARS.

In this seminar we will inter alia address the following topics as they commonly arise in practice in respect of Trusts

[Houses4Rent]

As far as I know it never went any further than those mutterings. Trusts are around for hundreds of years, they are not going to disappear any time soon.

[reuphk]

An independent trustee is needed for a trust. Min trustees is 2. Look at this like a Board with Exec and non-exec members.
I think the issue you are missing here is the duties (and obligation/ liabilities) of the Trustees.
Beneficiaries should be the ones you are doing this for. Trustees just make sure that the decisions are made in an informed and responsible manner.
Very similar to having auditors (one difference is the auditors only look at your company post the events, a Trustee is involved during), this is a professional service. Some will decide to go with, some without. I suppose when you have a dispute (legal or otherwise) you will know why you pay the (small) retainer for the independent trustee.
For info: the requirement is that the independent trustee is not related to the other trustees (either family or friendships). This means it could be anyone, not only an attorney, but I would suggest that attorney, tax advisor or accountants should be considered as preference.

[Houses4Rent]

I agree. My independent trustee is the very same specialist trust attorney who set up my trusts.