Wealth Preservation Rule - Protect One’s Assets

Protecting One’s Assets

How many times has your financial advisor told you that you need to increase your life cover? The problem is that they are selling a product and not a solution. Would you like to know how to minimize your tax legally, reduce the need for life cover and protect your assets?

As a business owner one normally spends the majority of their time and efforts creating wealth. I meet people every day that are so busy creating their wealth yet neglect the necessity of protecting it. How often are there auctions in the paper where business owners lose everything? When business was booming these people were saying, “That will never happen to me.” These people never planned to fail but they failed to plan.

Surely anyone whom has worked so hard to create this wealth would surely work as hard to protect it?

There are a few options one could consider:

  • Put ones assets into your spouse’s name.
  • Secure your assets in a close corporation or limited company.
  • Establish a trust.

There are several reasons why not to use the first two options but I will only touch on them briefly. Most people get married with an ante-nuptial contract. If you were to divorce you could lose the assets you worked so hard for. If your spouse signs surety your assts can be attached. Companies offer limited protection and upon liquidation your shares can be attached. However if a trust owns your company a divide is created between yourself and ownership of assets.

There are many benefits associated with trusts besides protecting ones business interests. If you’ve had a financial analysis drawn up for you, you would have noticed that a healthy portion of your life cover would be allocated to covering expenses on your death. These expenses would include estate duty, capital gains tax and executor’s fees. These taxes or fees normally constitute a third of your estate. If the trust owned everything there would be no need for an executor to wind up your estate. Estate duty currently sits at 20%. The government will take 20% of your estate above the R3,5million abatement. Any life policy owned by a trust can claim 6% of premiums paid plus compounded interest as a duty deduction. Your property can be pegged at a set value by use a “bare dominium” and “usufruct” rights. This will limit the future value for estate duty and capital gains tax purposes.

These are just some of the benefits one can enjoy from their trusts. For more information or to book an appointment please contact:

Warren Mc Allister – Author & Senior Financial Planner
Hereford Coastal Financial Services (Pty) Ltd.
Office: +27 (31) 502 2099
Mobile: +27 (82) 881 4069

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