Is it better to purchase property in a company or a trust, or in your personal name?
This depends on your individual financial planning needs and what your medium- and long-term intentions are.
But there are some important issues that need to be considered, such as capital gains tax, income tax and estate duty implications, before a decision can be made.
It is normally best to buy your private dwelling in your own name, to take advantage of capital gains tax (CGT) exemption. If your primary residence is registered in your own name, when you sell, you will qualify for a R1.5m CGT rebate where the proceeds on the disposal of the property exceed R2m.
If your primary residence in not in your name, when you sell as a company, CC or Trust, the sale will attract a combination of capital gains tax, transfer duties, secondary tax on companies or the new dividends tax on companies.
If your primary residence is in a trust, company or CC, you have until 31 December 2012 to take advantage of new tax laws to transfer the property out of companies and trusts into your own name, free of transfer duty, and avoid the hefty tax charges.
Of course, I haven’t addressed the issue of protecting the property from creditors (if your business goes belly up) or the advantages or disadvantages of registering the property in the name of your spouse. That’s an issue for you to discuss with your attorney when devising a well thought out estate plan.
From an estate planning approach it would be advisable to buy the property in the name of a company. Your trust would own the shares. In this way, any growth in the company is in the hands of the trust and not in yours. The growth is excluded from your estate for estate duty purposes.
There is no transfer duty penalty: trusts and companies now pay the same as individuals.
Based on this, it is advisable to use this structure when purchasing leisure properties.