Our newsletter has a new look and feel and strives to keep you updated on news and innovation in the worlds of trusts, Wills and estates.

In this edition, we meet the newly appointed man at the top - CEO of FNB Trust Services, Amarnath Kesarbhai Morarjee, commonly known as Vijay. He tells us of his plans and priorities and the changes he wants to effect.

We look into the implications of new proposed legislation surrounding trusts. There's no doubt that changes are a' coming, but by all accounts they will not be exceedingly punitive.

Just what happens when one fails to make a Will? We examine one family's dilemma following the death of the major breadwinner.

And in keeping with a greener world, the banking industry explores a paperless system. It's all about sustainability, but is it sustainable?

We hope you enjoy our revamped communique. Drop us a line and let us know what you think.

There's an unfamiliar face at FNB Trust Services who sits in the most influential chair in the company. Meet new CEO of FNB Trust Services, Amarnath Kesarbhai Morarjee, more commonly known as Vijay.

Born and bred in Durban, Vijay is a family man. He has an LLB degree and is an accredited financial planner. His vast sales and legal experience in the financial services industry includes positions at Southern Life, Momentum and Old Mutual. While he has been with FNB Trust Services for the past 5 years as Regional Head for KZN, he is a newcomer to Johannesburg.

His plans as CEO include driving the strategic intent of the broader FNB Wealth business, and focusing on improving efficiency. In fact, it seems as if he's on a bit of a mission. 'My aim is to ensure that we provide a better level of service to clients, making sure that our customers have ease of access and execution of our products and services.'

Morarjee speaks of finding innovation and creativity amidst the execution of business in this highly regulated industry. 'Creativity and innovation must be continual and not merely a once-off occurrence,' he states, adding that the goal should never be a fixed target, but rather a direction. 'We are fortunate to be in the position of being able to leverage the strength and capability of the FNB brand together with the culture of innovation and client centricity it brings.'

He is very bullish about both FNB and South Africa. 'A lot of work and investment has gone into developing our country and I'm confident that we have a bright future ahead of us.'

But the message he most wants clients to be cognisant of is that FNB Trust Services Management team is always accessible to them, and staff are accountable. His priority is to continually raise the bar on customer experience and service, as he says it is the hallmark by which performance is measured. 'I believe that we cannot afford to stand in our own shoes regarding our product and services, but rather get the insights that an empathetic view offers in order for us to build quality relationships with our clients.'

We welcome Vijay Morarjee to Johannesburg, and as our new CEO. And we are behind him 100%.

During his Budget Speech in February this year, Minister of Finance, Pravin Gordan, stated that taxation of trusts would come under review.

This in itself is not new. The National Treasury had previously indicated such an intention.

There is also no cause for alarm. The budget review documents distinctly affirm that the government is not seeking to outlaw trusts. The proposed legislation is applicable only to some trusts, and only in terms of closing taxation loopholes.

It is important to note that there will be no amendments to the so-called special trusts. These are the trusts that have been established to attend to the needs of people with disabilities and those set up for minor children.

However, revisions will be introduced to discretionary and trading trusts as well as to offshore foundations. There are concerns that such vehicles are being used to avoid paying taxes on estate duty, capital gains and income both locally and abroad.

A discretionary trust is a trust whereby the trustees have discretion to make distributions to the beneficiaries. Such a trust has traditionally operated as a conduit, where funds flow through the trust to the beneficiary with no taxation in the trust and either no or a very low tax liability by the beneficiaries.

The new proposition intends to tax income and capital gains at the trust level. Under such conditions, beneficiaries will continue to receive tax-free distributions. If, however, trusts are given tax deductions, then the beneficiary's distribution will be regarded as taxable income.

The same principles apply to the trading trust. A trading trust is a business that is operated through a trust structure rather than by way of a company, or when the beneficiaries' ownership is freely transferable. Trading trusts, like discretionary trusts, will be taxable at the trust level. Although not spelled out in the budget review documents, it is assumed that should trading trusts be given tax deductions, the beneficiary distribution would then become taxable.

In other words, distributions will now be taxed at one end or the other.

The government may also clamp down on offshore foundations, which could include offshore trusts. However not enough is known at this point to say definitively.

It is clear that the government's intent in the proposed legislation is simply to avoid avenues of abuse on the part of the taxpayer. The trust remains a valuable vehicle in estate planning when used legitimately.

If you are in any doubt as to how this legislation could affect your discretionary, trading or offshore trusts, please contact FNB Trust Services for guidance.

John Barrett* was a 43 year old male, a husband and father to 3 minor children. Very tragically, Mr. Barrett became ill and died quite recently.

He had a house in his name, which he bought eight years ago for R2m. It is worth R2.8m in today's market although it had not been paid off. In all, his estate was worth a gross value of about R3m. He thought he was leaving his family relatively well off. What he had not accounted for was the cost of dying.

There's an old adage that the only certainties in life are death and taxes, but most of us don't realise that dying incurs more of them, as well as a number of other expenses. According to the Fiduciary Institute of Southern Africa (FISA), it's a sad reality that very few of us understand the financial implications of dying. In fact, more than 30% of people who die don't have enough cash in their estates to pay for them.

So what are these costs? As Mr. Barrett's family found out, they are many and varied. With any estate in excess of a gross value of R125,000, the Administration of Estates Act sets several requirements that have to be met by the Executor of the estate.

Firstly, there are the advertising costs: Two advertisements announcing the death must be placed - one in a local newspaper, another in the Government Gazette. The costs vary between R1 000 and R1 500, depending on the publication.

Before a property can be transferred to the beneficiary, a clearance certificate must be obtained from the city council or municipality (at a cost of about R350). Such a certificate will only be issued if the rates and taxes are paid up front, normally about six months in advance. John Barrett's estate had to pay out more than R4 000.

The Masters Office of the High Court, which is the authority that handles deceased estates, also institutes a fee. The maximum amount is R600.

And then there are the Executor's fees. In terms of current regulations the rate is 3.99%, including VAT, on the gross value of the estate assets and 6.84% including VAT on income earned by the estate after date of death. For the estate of John Barrett, 3.99% on R3m is R119,700.

Although there is no transfer duty (which is a type of tax) payable when a property is transferred from an estate to the beneficiary, the conveyancer still has to be paid for executing the transfer. The fee depends on the value of the property, and on R2.8 million, the recommended conveyancing fee on immovable property (land and buildings) is R21,500 plus VAT of R3,010. Let's not forget the deeds office levy, which is another R900.

What many people don't realise is that the bond must be settled BEFORE the Executor can distribute the assets, and in this case the bond stood at R1.7m.

Capital Gains Tax is payable even after death. Generally there is a tax exemption for the first R30,000 but in the case of a deceased estate that exemption rises to R300,000 in the year of death.

Mr. Barrett made frequent use of his credit card, paying it off in full on the due date but during the last few months of his life these details had not been attended to. At the time of his death the credit card was maxed out and his overdraft facility was also close to the limit. Credit card bills and overdraft facility came to a total of R104,000. Other bills to the tune of R16,000 trickled in over the next month, all of which had to be paid out of the estate. But because the estate had not been finalised these debts could not be paid off for several months, and interest was incurred at a rate of 18% per annum charged monthly and compounded. After six months the amount payable had escalated to over R130,000.

Even though there were two insurance policies, one was short-term. Mrs. Barrett discovered that her late husband's life policy was for accidental death only, and didn't pay out for illness.

In many instances, as was the case in the death of John Barrett, medical costs were incurred prior to dying. He had invested in good medical insurance but there are always expenses that are not covered. By the time Mr. Barrett died he had incurred R37,500 worth of medical bills, which his family had to honour.

Because Mr. Barrett fathered a child from a previous marriage he had been paying maintenance to the tune of R3,000 per month. These kinds of obligations don't fall away after death, and the executor normally pays a lump sum to the claimant. An amount of R100,000 was agreed upon.

Lastly there is the cost of the funeral. John Barrett was a popular and esteemed member of his community and many people wished to pay their respects. His funeral ended up costing close to R30,000 which was not outrageous as some funerals come with a price tag as high as a few hundred thousand rand.

From an estate with a gross value of R3m, John Barrett's family ended up receiving around R700,000. As if their emotional grief were not enough, they have also lost their primary breadwinner. They now live in greatly reduced circumstances.

Forewarned is forearmed, so don't let this happen to you. By making provisions for your death you are protecting your family's future. Talk to an FNB Trust Services advisor about your estate to consider these costs. Call us at 087 736 3555 or email trustservices@fnb.co.za

* not his real name

Did you know that banking as a concept developed as far back as the 1 800 years BC, which is when, best as we can figure out, the system of bartering began. According to historyworld.net, there is evidence that loans were made in the temples, which were the safest of places in those days.

The Romans elevated the banking system to a fairly sophisticated level wherein a deposit made in one city could be withdrawn in another.

After the birth of Christ, there was a certain amount of hostility about 'usury' or the practice of charging interest by one Christian to another. The Jews, who at that time were denied so many forms of employment, became the moneylenders.

But that changed with the growth and expansion of Europe and the Crusades. Groups of men in northern Italy, collectively known of as 'Lombards', creatively worked around the usury laws and became modern day bankers as we know them. The capital of the financial industry was Florence due to the gold coin minted there known as the 'florin', which became the currency of the day. One of the most famous banks of that time was the Medici Bank, founded in 1397.

There is some controversy about the origin of the word, some tracing it to Middle French, others to Old High German, yet most sources accredit the Italians for its genesis. 'Banco' in Italian is a desk or a bench and when covered in green cloth became the place upon which financial transactions were performed.

Editor of the Mail & Guardian online, Chris Roper, has a complaint about the business industry. He feels that Richard Quest, CNN's on air bobbing head who gleefully discusses the financial indices, has deluded business people into believing that they, too, can be quirky and creative:

'You remember those sad cartoon ties that losers used to wear with their business suits? That had Daffy Duck, or Homer Simpson, or in extreme cases Jessica Rabbit, emblazoned on them? Business people now think they are the tie, the living embodiment of zany originality.'

His point is that this is not what inspires confidence in a market that desperately requires it. And I have to confess that I agree with him. Truthfully - do we want artists and 'characters' running our financial world? Or would the sober blue and white shirt brigade be more comforting? Is that nonconformist celebrity the person with whom you would want to invest your hard earned bucks? Or would you rather your financial interests be taken care of by someone who dots the 'i's and crosses the 't's?

To all the businessmen and women out there, take heart. We know that grey is only a colour and not necessarily a state of mind. We're also aware that the person on display during the week may not be the freethinking iconoclast that friends and family interact with on the weekend. But for the sake of a public that is warily looking over their collective shoulder at Spain, Greece and Cyprus, please know that charisma and magnetism does not assure us. Routine and predictability does.

Tel: 087 736 3555
Email: trustservices@fnb.co.za