According to a recent report published by Statistics South Africa on Labour Market Dynamics, it was estimated that the South African workforce is working an average of 40 to 44 hours a week. The average South African will spend the equivalent of over 94 days a year, working to build up their estate and provide for their loved ones but will often overlook a very important principle of growing and building one’s estate. Underpinning the investment philosophy of one of the World’s most successful investors, Warren Buffet, is what has become known as a golden rule of investment and wealth preservation. Buffet famously said, “Rule No.1 is never losing money. Rule No.2 is never forgotten Rule No. 1.” The number one wealth preservation rule is to protect your assets.
What is a Trust?
A Trust is one of the best ways to protect and preserve your assets and an excellent estate planning tool. A Trust is not owned by any one individual and is an entity that is quite distinct from the individuals who benefit from it. This unique position allows for the separation of assets from individuals who benefit from or use the assets owned by the Trust. A Trust will help you separate your assets from any risk that your personal estate may be exposed to such as property investment debt, sureties, business interests, or any other risk that you may be exposed to. Once all one’s assets have been legitimately transferred to a properly constituted Trust, the individual will have divested themselves of the ownership of the assets yet will benefit from and enjoy the use of the assets held by the Trust subject to certain conditions.
Why should you register a Trust?
A Trust will also ensure continuity for your loved ones should anything happen to you. A Trust will continue to pay benefits to your dependants after you die and any assets and bank accounts of the Trust will not be frozen during the winding up and administration of your estate. This means that should you die, a Trust will ensure that your dependents continue to have access to capital and income after your death which would not be the case if these assets remain in your personal estate as they are frozen during the winding-up process leaving your dependants cash strapped and unable to receive an income or benefit until your estate has been finalized which tends to be a lengthy process.
Another reason to seriously consider a Trust as part of your estate plan is the tax savings upon your death. Although tax incentives should not be the primary motivation to register a Trust, it is worth noting the benefits a Trust will provide upon the death of its founder. Upon the death of an individual, there are certain tax implications. Estate duty is payable on the life assets of an individual at a rate of 20%. Further, death is a capital gains event that triggers a capital gains tax levied at a rate of up to 18%. Moreover, Executor’s fees are calculated at 3.5% plus VAT of the gross value of your estate which will be payable to your executor who assists in winding up your estate. Not to mention the possible transfer and bond cancellation costs that may be payable on immovable property or other assets that are registered in your personal estate when it is transferred out of your estate to your heirs. All told, your personal estate may be exposed to a significant amount of tax and costs.
Let us help you ensure the future of yourself and your loved ones.
It would be unfortunate to spend a lifetime of work building up your assets and growing your estate and overlook the ‘golden rule’ of wealth preservation. If you are working hard to build up assets and you are concerned about preserving those assets for yourself and your loved ones then talk to a knowledgeable trust adviser at TLi Global. Feel free to get in touch with us for assistance with your Estate Planning.
We will be presenting a webinar titled “Why should you register a Trust” which will be held on the 8th of June 2022 and will provide an overview of what a Trust is, how a Trust works and what the benefits of registering a Trust are.
Check out our webinar
If you would like to attend our webinar please register at the following link:
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https://TLIGroupTrusts.gr8.com/
Panashe Chifamba – Director at TLi Global
Set up a meeting with me
Book a meeting today to secure your Trust by clicking the link below
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