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Trusts and Estate Planning

I guess we all want to leave a decent legacy. It’s probably the only thing that we will be remembered for in a few generations’ time. D’you remember your grandparents? Sure you do. But what do you know of their parents? And their parents’ parents?

Of course, you will not be aware of those people who have left a legacy to their descendants, because that’s a different family, but I’m sure you’ve heard of a guy called Nobel? He invented dynamite and left a legacy that we are all aware of. He was born in 1833, so, by my calculations, based on a generation every 25 years, that would make him somebody’s great great great great great grandfather, and he is still remembered.

Why is the legacy still going strong? Because the capital outpaces inflation, that is, the line is above horizontal, and sufficiently so that chunks of it can be dished out annually as Nobel prizes.

Looking at it from your perspective, you need to have enough income producing investments on retirement that you don’t have to draw down on capital to survive, like this –



Your capital must produce your retirement income and also outpace inflation, like this –



Then, when you die, your retirement income can either help to support your descendants, or it can be ploughed back to grow your legacy until the income is needed.

Back in Nobel’s day, they probably didn’t have Estate Duty and certainly CGT was unheard of. But times have changed and now you have to grow wealth in a trust to avoid these two taxes hitting your estate with about 35% tax when you die. If you don’t use a trust, you’ll need R1,5m for every R1m that you want to form your legacy. SARS will take the rest!

Surely, it’s a no-brainer?


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