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GEORGE BUSINESS NEWS - Since the increases in the income and capital gains tax rates for trusts the past few years as well as the requirement to charge interest on loan accounts, more and more people decide that their family trust no longer meets their needs. 

The process to terminate the trust is however not as simple as one may think.

The legislation applicable to trusts does not stipulate when and how a trust can be terminated. However, if the trust deed contains stipulations regarding the time and manner of termination of the trust, such provisions must be adhered to by the trustees. Some trust deeds stipulate that the trust may not be terminated prior to the happening of a certain event or that the trust shall terminate upon the death of a specific person or after a specific time period.

There is no legal limitation on the duration of a trust in South Africa and it is recommended that the trust deed should allow the trustees to decide, at their discretion, when the trust should terminate.

Circumstances may require that the trust either continues for a longer period or terminates sooner than what is stated in the trust deed.

To link the termination of the trust to the happening of a specific event, such as death or the reaching of a specific age, can cause the protective qualities of the trust to be lost when the beneficiaries need it most.

Before the trust can be terminated, it has to be divested of all its assets, in other words, the entire trust fund has to be distributed to the beneficiaries of the trust in accordance with the provisions of the trust deed.

Such distribution may result in certain taxes being payable, for example capital gains tax.

Any loan accounts payable by or to the trust will also first have to be settled before the trust can be terminated.

Furthermore, it is important to take note that all documentation which serves as proof of the investment, safe custody, control, administration, alienation or distribution of trust property may not be destroyed before the expiry of a period of five years from the termination of a trust.

Should you wish to terminate your trust, kindly contact our Trust Department for assistance on 044 874 1140. For more about Millers, visit www.millers.co.za.

Article by Corné Nunns, member of FISA, FPSA - Associate, Millers Inc.

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