In the material I have, “lump sums in a trust” is dealt with mainly in the *specific* context where a trust is the owner of a living annuity and the trust is being terminated.
## 1) Income Tax Act: living annuity lump sum when a trust terminates
The definition of “living annuity” in the Income Tax Act provides that “in anticipation of the termination of a trust” the value of the living annuity assets must be paid to the trust as a lump sum pursuant to that termination .
## 2) SARS administration: directive process for a trust-owned living annuity (termination)
SARS’ tax directive guidance explains how this works in practice:
- The directive reason “Par (eA) Living Annuity Commutation Termination of a Trust” is only available on SARS eFiling .
- It can only be used if the trust is terminating; it cannot be used merely to obtain a nil directive where beneficiaries have vesting rights .
- From 1 March 2021, the Long-term Insurer may submit the tax directive application to commute the remaining assets where the trust is the owner and the trustees are terminating the trust .
- The insurer must obtain and submit a signed and dated trustee resolution clearly indicating the trust will no longer exist .
- SARS indicates a case is created and the directive is verified (including the resolution) within 21 working days .
- The insurer must issue an IRP5/IT3(a) in the name of the terminating trust; the gross amount is reflected under source code 3915 and the tax under 4115 (or reason code 04 if no tax is deducted) .
- When completing Form E for this scenario, the insurer must capture the trust’s details (trust tax reference number, trust name, date of registration, trust deed number) .
## 3) Trust tax rate (general context)
A general point reflected in the Budget tax guide is that trusts (other than special trusts) are taxed at 45% .
## What I cannot confirm from the current knowledge base
If you mean other kinds of “lump sums” received by a trust (for example, a once-off settlement, sale proceeds, insurance proceeds, or beneficiary distributions described as a “lump sum”), that treatment is not specifically covered. This is not in may knowledge. Please send the question to mark@accfin.co.za for consideration in order to add to knowledge.
12 May 2026
