The advantages of a Living Trust

Protect your assets and take care of your family with a Living Trust. It makes good financial sense.

The advantages of a Living Trust

Source: http://mymoney.iafrica.comThe advantages of a trust are numerous, and include:

  • A Living Trust separates your major assets from the executorship 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 eliminates 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 are often associated with a normal will.
  • 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-million 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 five years of operation and 95% in ten 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 and their “interest” in the Trust is not yet their asset and nobody can take it away from them.
A trust can open bank accounts and investment accounts. It can own shares in companies, titles to buildings, cars, furniture, computers, 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 R50 000 you donate in any year. Your spouse can also donate R50 000 per year – tax free. This means that (if you’re married) you are able to donate R100 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 so 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 24 months.

So, protect your assets and take care of your family with a Living Trust. It makes good financial sense.

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