So what about the tax impact if the shareholders are trusts? There were no plans to look at the effects of income tax, but a comment would be appropriate. The income from the policy has no normal tax consequences for the deceased – at the time of death. In accordance with paragraph 55, paragraph 1, point c), the capital gain resulting from death is ignored on the basis of the same requirements as the requirements for the exclusion of assets from the estate discussed above. To fully understand the strategy presented, it is important to first consider the nature and purpose of a trust. A trust is defined as “a relationship created on the instruction of an individual, in which one or more persons own the property of the individual, but are subject to certain obligations to use and protect it for the good of others.” 1 At the time of the deceased`s death, they held shares in both companies (the companies). The tax consequences of a purchase and sale contract entered into by the co-owners of a business have complex tax consequences. However, it is not the value of the policy that will have inheritance tax consequences, but the value of the businesses themselves that will be included in the net worth of assets in the estate. So what is the impact of purchase and sale contracts and key man insurance on the situation when shareholders are trusts? Income tax generates a capital gain when the amount of the policy exceeds the valuation of commercial interests. However, if a policy on the life of a partner or shareholder who owns the shares in a personal capacity is withdrawn, the exemption should apply. For the purposes of Article 5, paragraph 1, point f), up to the value of the shares of a company that is not listed on the stock exchange, the value of those shares is in the hands of the deceased at the time of his death, subject to the following provisions, namely – The value of the shares and the two companies at the time of the death of the deceased by an independent expert , were R6 million and R2 million respectively, these values are used for inheritance tax purposes.

The contracting parties` own assessment for the purposes of the contract or the amount of revenue to be paid under the policy should not be taken into account. For the purposes of section 5, paragraph 1, point f), bis bis, the term “shares” covers all members` interests … or the right to acquire the interests of members … and the term “company” encompasses any company or nearby company headquartered in the Republic or elsewhere. Confidence Ownership of insurance policies can have tax advantages and flexibility. As part of this agreement, a trust becomes the owner of the insurance policy. In the case of a PBSE, the insurer would pay the proceeds of the insurance to the trust (as the owner), the directors being able to transfer the shares and distribute the funds if necessary. Have you discussed with your clients the impact of their sales and sales contracts on the inheritance and life insurance that finance these contracts? It is important to conduct this discussion to clarify any uncertainties your client may have, to ensure that the agreement is valid and meets the needs of your customers. These insurance funds have the advantage of being able to streamline insurance by reducing the number of policies required. The trust rules can be used for estate and estate purposes, which may reduce the need for separate policies for the resolution of business and personal affairs. Another potential benefit of Trust Ownership is flexibility in adapting ownership or ultimate political benefits when circumstances change. If the agreement is not the transfer of the transaction on this event, the buyback agreement is clearly a failure, and the estate could end with the proceeds of insurance and business interests can trigger the capital gains tax (CGT).