Master of Money Management

In money we trust

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No one wants to spend too much time mulling over their ultimate demise, there are certainly more pleasant ways to spent contemplative moments. But unless one of us stumbles on a magic elixir to prolong life, we have to face up to the fact that as members of the human race, we are mortal.

So we put contingency plans in place in the hope that to our loved ones and our assets are protected in the event of our death. However, Will Rogers, an American actor, philosopher and author was quoted as saying, “Anyone who dies with a Will ought to come back and see how much trouble he has caused”. This statement seems to fly in the face of convention; any good lawyer will tell you that a Will is absolutely necessary to make sure your assets get distributed the way you want them to.

Well Imagine that you’re sitting quietly at your desk, dreaming about fishing in Dullstroom, when your bank manager calls and tells you not to write any more cheques until further notice. The next day you find a registered letter in your mail- box informing you that your worldly assets are about to be listed and advertised so that creditors, claimants and the receiver can see what’s up for grabs. At the same time you are then informed that in the event of your assets being auctioned, there will be various costs and commissions for your account. Finally, you find out that the fees for this assault on the senses and pocket will amount to a minimum of 3.5% of the total value of your assets.

This is Executorship and you asked for it by writing a will and leaving it in the hands of your bank manager or lawyer to handle. Of course you had no idea that you’d asked for this but when you sat down with your spouse to draw up your wills, you unwittingly condemned each other to between one and two years of added grief, lawsuits, paperwork and frustration. The fact that your advisors did not point this out might have something to do with their potential for personal gain. Most advisors neglect to tell you about the time delays, privacy-invasion, fees, forced estate sales, auction fees and family feuding that can happen during the execution of a will.

So why would anyone willingly allow this to happen to his or her family? The answer is simple, they did not know what was coming or they did not know that there were much better alternatives. Avoiding the trauma and complications of executing your will is extremely easy, the answer is a Living Trust.

A Living Trust (also known as an Inter Vivos Trust) is one of the most significant achievements in Anglo-Dutch law. Like a corporation, a trust is a kind of ‘legal fiction’ which takes on many of the rights and attributes of a person. The most basic definition of a trust is the holding of real or personal property for the benefit of the persons for whom the trust was created. It is a legal structure that’s been designed to accomplish several desirable goals, one of which is avoiding executorship. Today, the Living Trust is the only legal tool available to devise a family master plan in private, with hand selected trustees.

“The main objective of a trust is to acquire protection for personal or business assets. A properly drawn up trust will protect individuals and business owners from creditors should they face liquidation.

How it works.

A Living Trust is a legal entity you create to take ownership of money or property. As its creator, you are the grantor. You appoint trustees; which should be two other people and yourself, or a financial institution.

As grantor, you decide who will be the manager. You can either appoint someone you trust or do it yourself. The choice is entirely up to you, because the key issue of a trust is control.

The advantages of a trust are numerous, and include:

*A Living Trust separates your major assets from the executor-ship process.

*All your liquid funds are available to the trustees and therefore your family.

*Instead of needing to change your Will each time your assets change, you can use a ‘pour-over’ Will to pour your remaining assets into the trust – assets which were not owned by the trust at the time of your death.

*Your trustees (usually you, your spouse and a close friend) retain complete control throughout the whole process.

*A trust avoids contested Wills. If any one makes claims upon your estate the control remains in the hands of the other trustees and your heirs.

*Due to the continuity of assets and property management, your heirs enjoy uninterrupted income.

*Your spouse and heirs avoid the emotional trauma, aggravation and frustration that serves no useful purpose.

*Privacy: Your assets are not advertised at the City Hall or elsewhere.

*If you become incapacitated, the trust continues to handle your assets, avoiding conservatorship.

*A trust protects your children, and ensures your wishes are carried out after your death without being subject to outside attack. It lets you control your wealth while you are alive and after you’re gone, through written instructions to your successor trustees.

*A trust offers lawsuit protection in some circumstances.

*It is also a perfect tool to let someone else become involved in the management of your investments if you wish to delegate those duties to someone.

There are many other benefits, especially if you are a small business owner. It is imperative that you take the time to explore the host of benefits available to you.

Who needs a trust?

There are a number of good reasons why almost anyone earning a decent income could benefit from a trust.

If you think that your assets may be worth more than R1,000,000 at the time of your death. If you simply own a house and have accumulated a liveable pension, you could easily be over the million mark.

*          If you are a business owner or a professional in private practice you and you family are at much greater than average risk of having your personal assets attacked. You could be doing your part for capitalism, while one of your trusted accounts is going insolvent. If one of your main sources of income dries up you could receive a letter from the liquidator, listing you as a (secondary) creditor. If the banks gets wind of this and they see that your overdraft is looking unhealthy they can cancel it, just before pay-day. What happens next is known as the domino effect and you are left with your shirt and shoes (if they feel generous that day).

By establishing a Living Trust, and transferring all your major assets into it, you could have avoided the loss of your worldly possessions and your dignity.

You may be thinking that you could never get into that situation. Well statistics show that 75% of new businesses fail in the first 5 years of operation and 95% in 10 years.

How do you set up a Trust?

You set it up by asking an attorney to draft a Trust Deed and registering it at the Supreme Court. You become a Trustee and have control over everything the Trust owns. Each trust has Beneficiaries their ‘interest’ in the Trust is not yet their asset and the sheriff can’t take it away.

A trust can open Bank accounts and Investment accounts. It can own shares in companies, titles to buildings, cars, furniture, computers and jewellery and anything else you can think of. There are only two things that your Trust can’t own – a gun or a cc.

The first step is to donate your assets to the Trust. Although you can donate any amount at any time, the government wants a 25% tax on any amount over R25,000 you donate in any year. Your spouse can also donate R25,000 per year – tax free. This means that (if you’re married) you are able to donate R50,000 per year tax free.

You can also sell your assets to the Trust. A loan account will be set up in your name and it can be reduced each year via your donations and other methods.

The initial goal is to have enough assets safeguarded that you cannot lose everything if things go wrong in your business. You should at least retain enough to start a new venture without going into indentured slavery.

The ultimate goal is to have all your assets in the Trust – so that upon your death you only need a pour over will because – although you control the assets, you are not burdened with ownership.

A minimum of six months must pass, after you have placed the assets in the care of your Trust, before it will afford you protection. If it can be proven that you were insolvent at the time of placing your assets then that period increases to twenty-four months.

So now there is no excuse to put this off any longer. If you require more information you can contact me at FFC 883-6683

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