Ownership Facts

If you’re investigating your home loan options, you may need to know what your status is as a home owner. Here is a brief outline of the advantages, disadvantages, tax and legal implications of different terms of ownership, so you can discern the implications on your bond application.

Own or Joint Names

• Advantages – Easy registration, less transfer duty than other terms of ownership
• Disadvantages – The property is exposed to legal action
• Legal Implications – Forms part of the personal estate
• Taxation - When the owner of an estate worth over R1 million dies, the estate duty is 25%

Closed Corporations (cc)

• Advantages – Formed and operated relatively easy. Not personally responsible for creditors
• Disadvantages – Fairly complex legal operation. Caution to be exercised when buying (look for hidden liabilities)
• Legal Implications – A cc eliminates the transfer of property to heirs on death or resignation
• Taxation - As the property is expected to generate income, the tax is higher than that of individuals

Trusts

• Advantages – Two types: family or business. Both are operated relatively easy. Property bought into a trust does not form part of the personal estate. No tax is payable on death of individual. Creditors cannot take legal action against individuals
• Disadvantages – No strict control over trustees and accountability of individual partners. Costly to set up and administer
• Legal Implications – A trust remains an entity even after the founder dies
• Taxation - Taxation on a trust is lower than a cc or a company

Partnerships

• Advantages – Partnership is easily formed
• Disadvantages – Exposed to legal action by creditors of individual partners. Possible administrative burden
• Legal Implications – Forms part of the personal estate
• Taxation - Transfer duty is levied at a rate applicable to individuals. Consult an attorney