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WHAT IS A TRUST?
The basics of a trust
A trust is an entity that will “outwit, outplay & outlast’” an individual. It will not terminate (unless decided by the trustees), therefore it can own properties and assets for generations, and pass the portfolio of assets to the next generation tax-free. A trust is the only vehicle which allows the accumulation of wealth and the transfer of assets from one generation to another without incurring costs and taxes. The growth in the estate is “pegged” upon the creation of the trust and the value will increase in the trust and not in the hands of the individual. A trust creates a separate legal entity that owns the assets outside of the individual’s personal estate, and therefore the trust assets do not form part of your personal estate for the calculation of Estate Duty. The type of trust we refer to is an inter vivos discretionary trust, a living trust that is set up while you are alive, not a testamentary trust, which is created after death.
MYTHS ABOUT TRUSTS
1. Trusts do not serve a purpose until you have created wealth
The truth is that the wealthy have set up their trusts before they become wealthy. The vehicle you choose to create and protect your wealth in, is an indespensable way for you to achieve your financial freedom goals. It has to be put in place before any wealth is created, as subsequent changes in the structure will cause major tax and other consequenses and you will be exposed to risk until such time as you move your assets into a trust. You will be compromised should anything happen before you have put the structures in place (death or attack from creditors) or wealth have already accumulated in your own hands by the time you believe you should transfer it into a trust.
WHY A TRUST IS THE MOST COMPREHENSIVE ESTATE PLANNING VEHICLE IN THE WORLD
1. A trust provides total continuity
If individuals have not structured and properly planned their assets, cash, property portfolio, insurance portfolio, business interests correctly, all their assets may have to be liquidated to compensate for all taxes and outstanding debt upon death. This could be potentially detrimental to your family and their financial well being. This could be avoided through proper planning and structuring.
IS YOUR LIFE COVER STRUCTURED IN YOUR FAMILY TRUST?
A strange fact is that more than 95% of clients have their Life Cover in their private capacity (individual names). They do not enjoy any tax benefits and have very little protection (in many cases none whatsoever!). Spouses are usually nominated as the beneficiary.