How not to leave a legacy
Derek Springett
Chief Executive Officer at Harbour and Associates Management Services (Pty) Ltd
So many of the people that I speak to express a desire to leave a legacy.
Many of them have formed a trust in the belief that it will achieve just that.
But it won't.
Why? Because the trust that they formed is a discretionary trust. That means that the Trustees have absolute discretion as to what they do with the trust income and trust assets as long as they benefit one or some of the beneficiaries.
When the founder of the trust dies, she/he appoints a trustee or trustees to succeed her/him. Almost invariably they appoint their children.
When those children die, they appoint their children and so on through the generations.
Let's say that after four generations the beneficiaries of the trust are 23 Great Grandchildren of the founder and that three of them are the trustees of the trust.
And let's say that the trust assets are worth R90m, because they grew over the years thanks to good management of successive generations of trustees.
Now, we've got 3 trustees who can distribute that R90m worth of assets however they like. "R30m for you, R30m for you and R30m for me". Thank you very much. End of legacy!
Can this be avoided? Yes. You need a legacy trust, which you won't get from just anybody. In fact, I only know one place where you can get one and that's from me, because nobody else seems to have woken up yet.