Wealthy hoping to aid SA from beyond the grave

An increasing number of wealthy South Africans are looking to help the work of national upliftment from beyond the grave.

BJM Private Client Services – a leading wealth adviser focused on the needs of high net worth individuals – reports rising interest in legacy structures to assist educational and charitable work and other efforts to tackle national backlogs.

Tony Barrett, head of wealth management at BJM PCS, says: "Recent years have witnessed significant wealth build-up following the upturn in the equity and property markets, higher corporate earnings and sustained GDP growth.

"An increasing number of highly successful people are taking up the challenge of leaving a legacy that gives continuing relevance to one’s life and worldly success.

"As a result, clear, tax-efficient, practical and workable legacy structures have become a focus area for a wealth manager and estate planner like BJM Private Client Services."

One critical issue was to ensure that the legacy structure did not expose the donor to potential tax or estate duty liability.

Heightened interest in ‘living legacies’ follows the international trend for benefactors to establish foundations or trusts to hold, grow and invest the bequest, thereby creating an income stream for the organisations concerned.

South Africa’s Income Tax Act exempts from donations tax all gifts to SARS-approved ecclesiastical, charitable, educational and some other non-profit organisations.

However, the Estate Duty Act brings all assets over which the deceased had control into the ambit of any estate.

Barrett adds: “This means it is crucial that the structure is created in such a way that there is no doubt or ambiguity over the effective ownership of the assets placed in the trust.

“Another factor that the donor needs to thoroughly clarify is who will act as trustees, both current and future. The Master’s Office, which regulates and registers trusts in South Africa, is increasingly comfortable with trusts that have independent trustees who bring a variety of professional skills to the trust.

“Trustees comprising the donor and close family members are frowned upon by the Master and in these cases the legitimacy of the trust can be questioned.”

Barrett says professional advice is becoming essential to ensure the legacy goes to work in the manner intended by the donor.

He adds: “We believe that ecclesiastical, charitable and educational legacies will become increasingly prevalent as a means of addressing the needs of our country.

“Objective, independent advice is crucial for effective implementation. Being part of the solution to the nation’s problems by leaving and living a legacy is a responsibility that South Africans should neither shirk nor take lightly.”