The South African Revenue Services are conducting audits and is zooming in in the administration and taxation of trusts. It is a known fact that the validity of trusts is merely determined by valid resolutions rather than updated annual financial statements. Many rulings in court cases in the past are only a proof of this where trust assets were treated as personal assets and all trust advantages forfeited.
What happens in practice is that financial statement is completed on an annual basis and all the transactions of the trusts are not clearly backed by proper resolutions by the trustees. Just to mention a few, auditors and accountants do their resolutions based on financial statements, lawyers does theirs based on property transactions, etc. Furthermore, assets are bought in trusts, maintenance are done on trust properties, bills are paid by the trusts, and 95% of the time no resolutions are recorded, saved, and archived.
The main purpose of trusts is to protect assets, reduce estate-, transfer-, capital gains- and income tax, but without the proper administration and maintenance of the asset register and the resolutions, your trust may be found a scam and assets unprotected.
It is the duty of all trustees to administer trusts properly or they can be held personally liable for improper actions and very often for neglecting their responsibility.
We at Paarl African Trust / Paarl African Advisory (Paarl African Group) propose the following solutions to overcome these administrative requirements:
1. Every trust must have an auditor / accountant. All trust financial statements do not need to be audited financial statements.
2. Every trust needs an independent trustee.
3. Every trust must have a bank account, and to do proper administration, all transactions of trusts need to flow through the trust bank account.
Our proposed solution:
1. We must make sure that each trust of our clients serves its purpose and are up to date with the most recent legislation.
2. We require that the bank statements are send to us monthly, firstly to keep the asset register up to date, secondly to prepare resolutions (even if it was done by other parties, like accountants, banks, lawyers, etc) and thirdly to update the resolution register and to file and archive all the signed resolutions.
3. Meetings (if the trust instrument allows for it) can be conducted electronically and resolutions will be sent to trustees via electronic signing software which is quick and convenient.
4. We will also see to the completion of the annual financial statements and the filing thereof.
To fulfil our duty as independent trustee of your trust we have no other option as to require that all trusts where we are involved as trustee must abide to these requirements as it is the
only way to ensure that our clients trust’s meets all the requirements to be valid and properly administered.
Please refer to our rates for these services and you are welcome to contact us should you have any questions in this regard.