Once a year, usually in February, a very special event takes place in George in the Southern Cape. The Outeniqua Wheel Chair Challenge or commonly known as the OCC*,   over a period of just over ten years grew from less than thirty participants to more than a thousand wheel chair challengers racing the streets of George. All these participants with some form of disability, apart from the fact that they are all very special, also become champions in their own right and for at least one day a year they pass like Olympians the thousands of cheering spectators, lining the city’s streets. These special persons and others like them are part of many people’s and families’ lives but also of their care and concerns. These concerns, especially of parents and relatives, are mostly about how and by whom the special persons in their lives will be cared for if the latter would survive them. It is however often unknown that specific legislation is provided for circumstances like these so much so that even the tax man takes care of them in the form of a special trust for the special person or persons in the same family

The Income Tax Act contains the definition of a “special trust” of which there are two different kinds, namely one for certain “special persons” described in the (a) part of the definition and the other kind refers to a testamentary trust for minor persons. The tax rate of both differs from an ordinary trust where the tax rate is a fixed 40% while the rate for the special trust is on a sliding scale similar to the more beneficial rate of natural persons. The primary and secondary rebates do not apply to special trusts but the special person trust also possesses certain important capital gains tax benefits.

Basically a special person trust in terms of the (a) part of the definition is a trust created by means of a contract or by means of a will solely for the benefit of one or more persons who is or are persons with a disability as defined in section 6B(1) of the Income Tax Act to mean "a moderate to severe limitation of any person’s ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment, if the limitation has lasted or has a prognosis of lasting more than a year and is diagnosed by a duly registered medical practitioner in accordance with criteria prescribed by the Commissioner".

Since 2012 the benefits in the Act is extended to include more than one special person of the same family in a single trust and does not necessarily mean that such person/s should have a vested right to the income or capital of the trust.. A trust can now therefore be “created” for the benefit of one or more special persons provided they must be relatives in relation to each other with the provision that upon the demise of the last of such a special person/s, the benefits will go to, for instance, the brothers/sisters (who do not qualify as special persons) of that special person/s while they (the special persons) qualify as beneficiaries of the trust. After the demise of the last special person beneficiary such a trust will then become an ordinary family trust for the protection of the rest of the family

 The other important part of the definition of a “special trust” has nothing to do with disability but allows for any testamentary trust to qualify as a special trust where at least one of the beneficiaries is under the age of eighteen years of age on the last day of the year of assessment.. In practical terms it mean that all testamentary trusts where the beneficiaries are relatives (such as a surviving spouse and all descendants), and if only one of them is still a minor, then that testamentary trust will qualify as a special trust in terms of the (b) part of the definition. The term “spouse” is defined in rather wide terms in the act and includes cohabitation. For these purposes a proper testamentary trust can sometimes have more benefits than a trust created during a person’s lifetime but as with all these different estate planning tools, it has to be done as part of a proper holistic estate plan for which advice need to be sought. (*Millers Attorneys has sponsored all the medals and a water point of the OCC for the past twelve years)