“If a man empties his purse into his head, no man can take it away from him. An investment in knowledge always pays the best interest”Benjamin Franklin
It is estimated that the average person spends 76 800 hours to build his/her estate, yet very few people spend any time ensuring that their estates are not diluted by more than 30% upon death, through death taxes. More emphasis is usually placed on investment strategies and the creation of wealth than on estate planning, despite the fact that estate planning forms one of the key supporting pillars of a sound financial plan.
It is understandable that people generally avoid discussing issues around death. It is therefore not surprising that many people die without wills and proper financial plans. The result is that often loved ones are left destitute, after substantial portions of wealth are lost to death taxes. If only some of the 76 800 hours have been spent on protecting the wealth built during their lives, a legacy of love could have been left, instead of chaos and anxiety.
The secret of a successful estate plan is to engage the services of aligned professionals, otherwise a conflict or gap may easily develop in your estate plan. So beware, do your own homework, educate yourself, listen to all advise and then make your own, informed decisions. It is your hard earned money and assets that you need to protect. It appears if people sometimes give “advise” that may suite their own pockets, rather than yours, and this has given trusts such a bad name, unnecessarily.
Maybe the following definition of estate planning by Meyerowitz can be your guide when you make your assessment:
“….The arrangement, management and securement and disposition of a person’s estate so that he, his family and other beneficiaries may enjoy and continue to enjoy the maximum from his estate and his assets during his lifetime and after his death, no matter when death may occur.”
The word trust is often used quite loosely and in a variety of contexts. The type of trusts that Trusteeze clients usually own, are typically discretionary trusts. In such a trust the trustees are the owners of the trust assets, and manage the assets on behalf of the beneficiaries, and can, in their discretion, decide whether beneficiaries should receive benefits or not. Most family trusts are discretionary trusts.
Where does one start with the decision of whether a trust or even a further trust should be included in your estate planning? Answer these selfhelp questions and decide for yourself whether you are ready for a trust or not. The first step to good planning is to decide whether a mindshift might be required or not.
1. Are you a “control freak”?
If you use a trust in your estate planning structure, you must be prepared to forget about exclusive control of your trust’s assets. A trust within such a structure is an entity where the trustees exercise joint control of the trust assets because they are joint owners thereof. You will thus have to trust your co-trustees. If you want to run the show without co-trustees, a trust may not be appropriate for you.
2. Are you clever and miserly?
The law of trusts is interesting but also complicated. Read literature on trusts and you will quickly notice how easily people burn their fingers because they did not obtain the best advice. You should at least use the services of a knowledgeable and experienced attorney or auditor. Be careful in being so brave as to take shortcuts and save money by doing it yourself. Someone that gropes around in the engine of his new car on Saturdays to save money without the specialist help of a trained mechanic is not really that clever! The same principle applies to trusts. Excellent trust advisers are available but you should be prepared to pay for their services. The team at Trusteeze provide a cost-effective professional service.
3. Are you impulsive and undisciplined with your estate planning?
A trust must always seamlessly fit into the rest of your long-term plans. This requires discipline and attention to year-in and year-out maintain a proper structure. Trusteeze assists you to seamlessly integrate your bank account with the platform to automatically do your administration for you. A trust usually does not work if it is decided on without taking account of the bigger and long-term picture. A trust is not a magic wand that will magically take care of all your tax problems!
If you answered “no” to the above three questions, or if you are prepared to make a mindshift, a trust can be useful to you as a part of your future planning and be of benefit to yourself and your people. You can even save money. Think for example of the following:
A trust cannot die. If you or one of your family members who is a beneficiary of a trust, pass away, the trust continues forward in accordance with the basic planning put in place by you, which hopefully was done properly. In this way the family of the deceased can avoid many difficulties such as estate duty, executor’s fees and the administrative burden of a deceased estate. Even if the unfortunate situation should arise that a beneficiary can no longer look after his or her own finances, the need for a curator is avoided as the trustees fulfill this role. Again, proper planning is of utmost importance.
The assets of a trust is protected against risk. If the basic trust planning was properly done and the structure is properly maintained, financial risks (such as unforeseen claims against trustees or beneficiaries) can be managed in such a way that creditors cannot touch the assets of the trust.
Who then requires a trust as part of his or her estate planning? If you are working hard to build up assets and are concerned about protecting those assets for your successors, then talk to a knowledgeable trust adviser, Trusteeze. We will analyse your future planning picture and take you on the interesting journey of our trust law.