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Here's why Trusts are the ultimate solution to estate planning

by , 15 May 2013

Estate planning is the process of anticipating and arranging for the disposal of assets in an estate. The goal is to eliminate uncertainties over the administration of an estate, for example by using a valid Will and maximising the value of the estate by reducing taxes and other expenses. Here's why you a Trust should be an essential part of your estate planning.

A Trust is a legal arrangement, where a person transfers his legal title of assets to another person or body to hold for the benefit of the beneficiaries of the Trust.

So when looking at estate planning, it’s important to understand that it’s divided into two distinct sections.

The first is designed to look after your estate or assets while you’re alive. The second is designed to look after your assets on or after your death. You can do this through the two main types of Trusts at your disposal. A Testamentary Trust (a trust set up after your death) and an Inter-Vivos Trust (a trust set up while you’re still alive).

Taking this important step towards protecting your wealth has many benefits.

The three essential aspects estate planning will help you achieve

  1. You’ll protect your assets from creditors in the event of your insolvency, disability or divorce. Through “effective estate planning, you’ll create an environment that would protect your assets from creditors while you’re alive and after your death,” says Gavin Fourie in The Trust Report.
  2. Estate planning allows you to make provision for your estate to be passed on to your beneficiaries in the smoothest possible manner. It provides an environment that’ll allow the smooth transfer of your assets to your beneficiaries. And an environment that they can continue to benefit from these tax saving opportunities.
  3. A Trust is the best way to legally minimise taxes and other deathbed expenses. This is because a Trust separates you from your assets. “If your assets were sitting in a Trust, or a number of Trusts that are linked together, your personal estate would be worth very little so your deathbed expenses would be minimal,” Fourie Explains.

Remember, it’s almost impossible to achieve all three of these when you run your financial affairs in your personal name. If you run your financial affairs in your personal name, you’ll have to arrange the disposal of your estate on your death via a Will.

So, “it’s of utmost importance for you to have an up to date Will as this will allow you to bequeath assets in your estate to the correct beneficiaries in the manner you intend,” warns Fourie. If you don’t have a Will, your estate (assets) will be transferred according to the laws of intestate succession.

Here's why Trusts are the ultimate solution to estate planning
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