Know Your Money with Bronwyn Waner and Craig Finch
Know Your Money with Bronwyn Waner and Craig Finch
118. Crafting Your Family's Financial Charter - Legacy Beyond Money:
Navigating the complex world of South African trusts has become increasingly challenging with recent tax legislation changes. Marteen Michau, founder of Fidelis Vox, brings clarity to these murky waters with expertise that could save families from costly mistakes.
The conversation reveals how South African trust structures are facing new hurdles, particularly for families with international connections. When South African trusts distribute funds to non-resident beneficiaries, they now face punitive double taxation scenarios. The recent extension of tax legislation means all taxable income (not just capital gains) distributed to non-residents will be taxed in the trust at higher rates, while still being taxable in the beneficiary's country of residence. With two different taxpayers involved, double tax agreements provide no relief.
Similarly significant is how distributions between South African trusts are now handled. The Thistle court case confirmed that capital gains distributed from one SA trust to another remain trapped at higher trust tax rates, even when subsequently passed to individual beneficiaries in the same tax year. This doubles the effective tax burden compared to distributing directly to individuals.
For those looking to internationalize their wealth, there's some positive news. SARS and the Reserve Bank now accept applications for direct distributions from SA trusts to offshore trusts (provided the offshore trust is a named beneficiary), streamlining a previously complex process requiring individual intermediaries and triggering transfer pricing complications.
Perhaps most compelling is Marteen's approach to preserving family wealth across generations through "family charter workshops." Gathering three generations around a metaphorical campfire to share the wealth creator's journey helps establish shared values and objectives that guide future financial decisions. As Marteen wisely notes: "Don't pass money on, pass a legacy on" – especially critical when research shows inherited wealth is now typically squandered by the second rather than third generation.
Have you considered how these tax changes might impact your family's wealth preservation strategy? Proper planning has never been more important.
Please subscribe to our podcast or have a look at our website
www.growthfp.co.za