Four benefits that could make trusts your perfect investment solution

by , 05 May 2016

The best legal way to make sure you don't lose your money is to distance yourself from it.

Let me explain...

Putting your assets into a trust means that you don't personally own them anymore. The assets are held in trust for the benefit of the beneficiaries. The trustees simply manage these assets. When everyone involved signs this contract the Mater of the High Court registers the trust.

If you, as the founder of a trust, create this trust while you're alive, it becomes an Inter Vivos Trust. That means when you die, all your assets outlined in your Will goes into a Testamentary Trust for your beneficiaries (children).

Let's take a closer look at four benefits of having a trust...

1. Asset Protection – Separate your assets from your business rights
 
If you have your own business or property investments then need to pay attention.
 
One of the most important reasons why you should consider a trust is because separates your assets from your property investment debt and your business interests.
 
2. Don’t let your disgruntled spouse bleed your children’s fortunes dry
 
Unfortunately, the reality of the situation in South Africa is that one in three marriages in South Africa is doomed to end in divorce. That’s a scary statistic.
 
Placing your wealth into a trust will protect it from potential ‘gold-diggers’ because these assets will fall outside of your marital estate which means your spouse can’t touch it.
 
3. Nothing is certain but death and taxes – Unless you have a trust…
 
Capital Gains Tax (CGT) is paid when you sell one of your assets and make a profit. When you die, you are technically disposing your total estate at market value.
 
CGT could place the estate under financial pressure. In many instances, CGT on death could be an even worse tax/duty than estate duty! By securing your assets in a trust assets will not form part of your personal estate on death. That means, no CGT.
 
4. Don’t let fees reduce your childrens’ generational wealth
 
On your death, your estate is lodged with the Master of the High Court and an executor administers your estate. If the size of your estate is larger than R125,000, a professional person or organisation is appointed as your executor. They can charge fees to a maximum of 3.5%. The executor is also entitled to a maximum administration fee of 6% on any income made after your death.
 
Yes, the percentage the executor earns results in a large amount being paid out of the estate. The fee can be negotiated lower when drafting your Will. Very few professionals will accept the lower fees though.
 
You can avoid all these fees by putting your assets into a trust before you die.

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