A trust should do a job a simpler structure cannot. When loan accounts drift and laws change but the structure stays the same, a review, starting with purpose rather than tax, keeps it working.
Trusts are set up for a job: managing family wealth, succession, control or protection. Laws change. Loan accounts drift. Family needs shift. But the trust structure often stays the same. That gap creates risk. A trust review starts with purpose, not tax.
A trust only makes sense if it does something a simpler structure cannot. The deed, trustees, assets, loan accounts, tax and distributions must all point to that job. If the purpose is unclear, it is time for a review. Major life events trigger a rethink: marriage, divorce, children, grandchildren, death, or a change in health. Legal or financial changes matter too. New laws, asset sales, or shifts in beneficiaries' lives all call for a closer look. Noticing these moments helps families keep the trust aligned.
Section 7C can create a deemed donation where a connected natural person, or a connected company in certain circumstances, lends money to a trust at less than the official rate of interest. The deemed donation is broadly the shortfall between interest charged and interest calculated at the official rate, currently the repo rate plus one percentage point. This rate changes periodically and should be checked against the current SARS table at the time of a review, rather than assumed. Donations tax is generally 20%* on aggregated taxable donations up to R30 million* and 25%* above that threshold, after applicable exemptions.
A trust review checks if income and capital are vested or retained. It confirms trustee decisions are on record. It makes sure beneficial ownership and tax filings are current. Deals with connected parties must stand up to scrutiny. A trust set up ten years ago can still work, but only if its administration matches today's law and the family's real needs.
Not every family needs a trust. Some trusts outlive their purpose. If the original reason was tax optimisation and a cost-effective transfer of intergenerational ownership, that may no longer hold up, especially for legacy trusts where loan accounts were not managed in line with current legislation, and sometimes the costs outweigh the benefits. Sometimes, the right move is to simplify or wind up the trust. This needs careful modelling, since transferring assets can trigger tax, transfer duty and changes in control. If the trust no longer fits, work with your advisers to map the options and compare the impact of keeping, changing or ending it. The goal is a structure that matches your family's needs today.
A family looked at a trust set up fifteen years ago. It still worked for succession planning on a family property. But the loan account had not been checked for Section 7C. The annual deemed donation risk was left open. The review updated funding terms, trustee records and restated the trust's purpose.
A proper trust review needs input from a financial adviser, tax practitioner and fiduciary or legal specialist. Looking only at the investment portfolio misses the point, the deed, trustee powers, loan accounts, tax filings and distribution history all matter. The deed needs to reflect current legislation and case law, and should be checked against both sham-trust and alter-ego risk. Current goals need to be tested against what the deed actually says, since even a well-drafted deed can drift out of step with your tax adviser's view, your family's needs or your financial adviser's recommendations over time. The team should work towards a single, agreed purpose for the trust.
These steps help you and your advisers keep the trust working for your family.
When selecting advisers, look for real trust experience and relevant qualifications, such as CFP or a fiduciary designation. Ask for references or examples of past trust reviews. This gives you confidence that your distributions and loan accounts are being tested properly against current law and your family's needs.
*Rates, thresholds and legislation cited were current at the last-reviewed date above and may have changed since.
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