Should I close my Trust?
Enough of the bat-shittery. You have our permission to slap the next armchair accountant or wannabe expert stupidly telling you to close your Trust. These types typically suffer from the Dunning-Kruger effect, where they lack the knowledge to recognize their own incompetence. What these idiots don’t realise is that closing a strong Trust is like ripping down a perfectly good fence just because a neighbour happened to get burgled, despite having a fence. Yes, the Trust tax rate is now 39% but there are still mega loads of reasons to have a Trust. Here’s a few real-life scenario’s where we’ve seen the Trust playing the hero.
First up, it’s about contesting Wills. Wills are easy to contest but a Trust is harder. If everything sits in your Trust, there’s little hope for a person hell bent on getting a chunk of your estate if they aren’t a Trust beneficiary. This also works the other way around, if you’re an aggrieved child who’s been left peanuts in your parents Will. Typically, contesting the Will means sharing the entire nitty gritty of your personal finances with the Court. However, if all your personal wealth has been properly gifted to a Trust, you technically own very little personally (yay) and have a much stronger case for receiving financial support under the Will.
Next up, it’s about government support entitlements. You’ll see this in old folks homes where the nice old guy in bed number one worked his entire life, in mundane jobs saving hard, only to have his savings taken off him at $1,000+ each week to pay for his care. There’s nothing wrong with this until you see the old-timer in bed number two is paying nothing for the exact same care and he has money safely in Trust for his children to inherit. (Currently gifts are counted if they’re less than five years ago or more than $27,000 for years prior to that.)
Another common one is when hubby dies, and the wife remarries a bit of a deadbeat. The Trust is the hero here, protecting the family home, life insurance, and investments so the children have a lovely nest egg later in life. But without a Trust, we’ve seen new spouses recklessly spending the dead husband’s money and tragically leaving nothing for the original children. Another bitter one is when the second marriage fails and the new spouse hits the jackpot taking half of everything because there’s no Trust.
If you’re an overachiever, chances are you have a business Trust, separate from your family Trust. This works when you’re in business with other independent owners. Your business Trust potentially moves the risk that bit further away from your personal wealth. It can also help in a divorce because one of the worst we’ve seen was a wife having to pay millions to her ex-husband for the value of his share in her business (she didn’t have a business Trust). This crippled her mentally and financially, but the absolute kicker came when she actually sold out of the business herself, and the real value came in at $203,862 causing real harm and ultimately bankruptcy.
We could go on and on but we know you’re keener on the wannabe accountant stories because every single of them, somewhat unrealistically, has a “happy happy joy joy” ending.