Delving into the asset protection mechanisms employed by some high-net-worth individuals in the USA has made for some interesting reading.
The late Sam Walton, co-founder of Walton Enterprises, established Walmart in 1962. Apparently, Walmart is valued at around $224 billion. The Walton Family Holdings Trust was established in 2015 and in 2020, approximately 14% of Walmart’s outstanding shares were transferred into the trust. It is worth noting that a trust was the preferred choice, the pros and cons must have been very carefully considered.
Other high-net-worth individuals, like Elon Musk and Bill Gates, have what is termed ‘a family office’. These offices are generally set up and remain exclusive to the founder and function as a private asset management service run by a dedicated team of specialists with needle-sharp focus and expertise across a range of management disciplines. Educating the next generation to handle and manage their wealth is part of the service. Musk’s family office is called Excession, and Gates’s is called Cascade Investments. Never a dull day at either family office!
The level of professionalism as a trust specialist company, the reputation of Mervin Messias & Associates remains unrivalled. We look at how trusts may be employed to complement an estate plan. The purpose is to protect clients’ assets, secure a succession plan and protect the founder from curatorship in the event of a disability.
Curatorship may not ideal. When a person loses his or her mental faculties and is no longer mentally competent to manage their affairs, by South African law a curator should be appointed. The thought of losing control of one’s assets to a court-appointed curator with whom you may not have any shared history should concern you.
Let us imagine that Mr. Sam Smith loses his mental acuity, and a curator is appointed by the High Court. The court costs will be the first dent in Mr. Smith’s nest egg. Once appointed, the curator is given full access and control over all Mr. Smith’s affairs, including his finances. If the curator deems it necessary, he or she has the power to move Mr. Smith from his current care facility into a less expensive one to save costs. The fact that mentally compromised patients respond badly to a change in environment may not have much bearing.
While the court aims to appoint responsible curators, there is no absolute protection against temptation. Mr. Smith might be none the wiser but should his family suspect something untoward and want to have the curator removed, further court costs will be incurred. Seeking relief through the courts will further reduce Mr. Smith’s nest egg and possibly dent the inheritance he had saved for his heirs.
Assets held in a discretionary living trust are owned by the trustees (ownership without enjoyment). Unlike curatorship, the founder gets to choose who will look after him (or her), both during his lifetime and in the event of mental or physical incapacitation.
Who would not want to live each day with that peace of mind and continue working with a secure back-up plan that not only sidesteps curatorship, but secures assets for future generations?
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