Special trusts hold a unique position, serving a specific and crucial purpose in the lives of individuals with disabilities and minors. While conventional trusts are taxed at a flat rate, special trusts enjoy a more favourable tax treatment, mirroring the sliding scale applicable to natural persons. This distinction reflects the recognition of the special needs and circumstances of their beneficiaries.
Types of Special Trusts
The South African Revenue Service (SARS) recognises two types of special trusts:
Special Trust Type A
This type of trust is established for the sole benefit of individuals with disabilities, as defined under Section 6B(1) of the Income Tax Act. The disability must be of such a nature that it renders the individual incapable of earning sufficient income for self-care or managing their financial affairs. Special trust type A trusts are taxed on a sliding scale from 18% to 45%, the same as natural persons.
Special Trust Type B
This type of trust is created upon the death of the testator and is solely for the benefit of minor relatives who were alive on the date of death, including those conceived but not yet born. The youngest beneficiary must be under the age of 18 at the end of the year of assessment.
Establishing a Special Trust
The process of establishing a special trust involves several steps:
Consultation with an Attorney
An experienced attorney can guide you through the legal aspects of creating a special trust, ensuring that it is properly drafted and complies with applicable laws and regulations.
Funding the Trust
Assets can be contributed to the (inter vivos) trust during the grantor’s lifetime or through a will or other estate planning documents.
Appointment of a Trustee
The trust document (inter vivos trust) and Will (testamentary Trust) should designate a trustee who will be responsible for managing the trust assets and ensuring the proper distribution of income for the beneficiary’s care and needs.
Purpose and Benefits of Special Trusts
Special trusts serve several essential purposes:
Providing Financial Security
These trusts ensure that individuals with disabilities and minor relatives have access to the financial resources they need for their ongoing care, education, and well-being.
Protecting Assets
Special trusts safeguard the assets held within them, preventing them from being dissipated or mismanaged.
Tax Advantages
The favourable tax treatment accorded to special trusts reduces the financial burden on beneficiaries and trustees alike.
Flexibility in Management
Special trusts can be structured to suit the specific needs and circumstances of their beneficiaries, allowing for tailored management of assets and income distribution.
How to Register a Trust with SARS
Registering a special trust with SARS involves a few steps and requires certain documentation. Here is a detailed guide on how to register a special trust with SARS:
Gather the Required Documentation
Copy of the Letter of Authority: This document is issued by the Master of the High Court and grants the trustees the authority to manage the trust.
Copy of the Trust Deed: The trust deed (for an inter vivos trust) and Will (for a testamentary trust) outline the purpose of the trust, the beneficiaries, the trustees, and the asset allocation.
Copy of the Identity Documents: Provide copies of the identity documents of the trustees, including their South African ID numbers or passports.
Proof of Residential Address: Provide proof of residence for the trustees, such as utility bills or a lease agreement.
Proof of Business Address (if applicable): If the trust has a business address, provide proof of that address, such as a utility bill or business registration certificate.
Choose the Registration Method:
SARS offers two methods for registering a special trust
Online Registration: You can register the trust online through the SARS eFiling platform. This method requires creating an eFiling account and having a digital signature.
In-Person Registration: You can also register the trust in person at a SARS branch. Make an appointment beforehand to avoid waiting times.
Complete the IT77TR Form
The IT77TR form is the application for registration as a taxpayer or changing of registered particulars for a trust. You can download this form from the SARS website or collect it at a SARS branch.
Submit the Required Documents and Form
Once you have gathered all the required documentation and completed the IT77TR form, you can submit them to SARS. For online registration, upload the documents and form through the eFiling platform. For in-person registration, take the documents to the SARS branch.
SARS Review and Processing
SARS will review the submitted documents and forms to ensure they are complete and accurate. Once approved, your special trust will be registered with SARS, and you will receive a registration number.
Conclusion
Special trusts play a vital role in supporting individuals with disabilities and minor relatives in South Africa. If you are considering establishing a special trust or have questions regarding their operation, seeking guidance from qualified legal professionals like those at Crest Trust is highly recommended.
Safeguard the future of your loved ones with disabilities or minor relatives by trusting Crest Trust to help you navigate the intricacies involved in special trusts. Their team of experts will guide you through the process of establishing and managing a trust that meets your unique needs, ensuring that your loved ones receive the financial support they deserve.