You’ve worked long and hard in the salt (or gold or platinum) mines of Gauteng. Your directorships enabled you to put away more than enough for a comfortable retirement. But where to retire to?

Plettenberg Bay beckons. It would be lovely to put your feet up on the deck of an ‘absolute beachfront’ property, there to contemplate your share portfolio, and sometimes – but not too often – to pat the head of a grandchild.

And you won’t name the property something obvious, such as ‘Mon Repos’ or ‘Kanniklarni’. No, it’s to be ‘For Ever and Aye’ because while your tenure will one day end the beachfront property will thereafter be a family asset to be enjoyed by children and grandchildren.

If this is your dream, and you have the means to accomplish it, you would have a good case for buying the property through a trust.

A trust is a prime vehicle for holding wealth, and valuable assets, over several generations. A prime vehicle, in part, because the trust deed, if properly drafted, can offer considerable immunity from the vicissitudes that might befall your descendants by way of claims by disaffected spouses and rapacious creditors. A trust is also a prime storehouse for substantial assets, because the future growth in the value of the property will not be subject to estate duty, and may equally be excluded from the estates of your children and grandchildren for as long as the property continues to be held in trust, and has not yet been allocated to specific beneficiaries.

I was careful to say that it’s the future growth in value of the property that will be excluded from your dutiable estate, because something turns on how the trust is to fund the acquisition of the property. You can’t simply donate the property, or the purchase price, to a trust. If you did, you would have to pay donations tax (at 20%) on the donation. So what is usually done is you lend the purchase price to the trust free of interest. Unless this loan is reduced or settled before your death, the loan amount will form part of your dutiable estate – but the future growth in value of the property is effectively put beyond the reach of SARS, until such time as the property is sold, or allocated to beneficiaries of the trust.

One is usually reluctant to hold residential properties through trusts, because they don’t qualify for the partial exclusion of capital gains ordinarily obtainable on the sale of private residential properties. But if the property is to be held as a family asset for one or two following generations, the loss of this partial exclusion (of up to R1.5 million) is not a significant consideration.

What is more significant is that if you were to hold the property personally it would, for capital gains tax purposes, be deemed to have been sold at its market value when it passes to the next generation. Holding the property in a trust accordingly secures both estate duty and CGT savings.

You will no doubt already have established a family discretionary trust, in part to hold your extensive portfolio of shares. Notwithstanding this, there may be merit in holding the retirement home in a new and separate trust, which is to hold only that asset.

The reasons for suggesting this turn around costs. The extensive share portfolio held by the existing trust may have to be managed by expert professional trustees after your death. Professional trustees’ fees may be determined by reference to the total value of the assets administered by them. If the retirement home were to be added to these assets, this would increase the value of the assets under administration by professional trustees, with a corresponding increase in their fees.

Given that the ‘administration’ of the beachfront property does not call for professional expertise, it would make good sense to hold that property in a trust dedicated to that purpose, with the trustees to be chosen from among trusted friends and family.

There is another option. If you would prefer to appoint an impartial trustee, whose regular and diligent property inspections would necessitate periodic stays in the house, I would be pleased to oblige.

Wouter Scholtz is a director at Mazars Moores Rowland.