Are Trusts a Secret to Generational Wealth?

Are Trusts a Secret to Generational Wealth? Written by: Amalia Lui Written on: 7 November 2021 As a lawyer, I witness families torn apart over the wealth left behind by their deceased loved one. Children and wives left penniless as they fight off vultures who want to take anything and everything. I have seen estates of formerly prominent individuals ran to the ground because the brain behind the businesses is no longer there. Even in instances where the true beneficiaries of the deceased take over the estate, it does not survive past the 1 st or 2 nd generation. Why the estates and legacies of our black brothers and sisters end up to the ground few years after their demise? On a high level note, I see the following being the main causes: (a)Unprepared takeover/unwillingness to step down – we start projects and sweat blood to accumulate wealth in our own names, for our families.

We do not know when to step down and neither are we willing to let go. When mortality catches up, we leave no one prepared to do what we did best. Recently we have seen the billionaires of the West stepping down from the companies they built from the ground up. They know young talent can help to make their legacies remain. It’s no longer about them, it’s about the legacy they leave behind. (b)Overreliance on family – for businesses to thrive, we need talented, daring and vigorous business minds. It’s no secret, all of us do not have a knack for business. Forcing a son or daughter to take over an empire and carry on your vision might not always be a good and profitable exit plan. It is worth looking outside for people who have the will and thirst to ran a business for your family/generation. (c)Personal wealth in our individual names – we accumulate wealth in our individual names.

The personal ownership of assets is our weak link. When we pass on, we leave havoc behind. The vultures aren’t eager to take over the estate and grow the wealth. The vultures want to pick the cars, houses, money etc.to satisfy their unquenchable thirst of luxurious spending and reaping what they did not plant. They fight to have a portion of what was once yours and they will stop at nothing until they have stripped your entire estate to nothing. In few months or years, all you built is nothing but ashes. Nothing is productive anymore. (d)No plan for generational wealth – we strive to build empires to meet our needs and those of our immediate offspring. We leave Wills naming who will inherit a portion of

our properties without interest of creating generational brands/businesses. We do not envisage or focus on our wealth going through generations. Accordingly, we do not build structures to allow continuation of our legacy. Whilst we might be very wealthy and our children enjoy the fruits of our labor, our grandchildren and/or great-grandchildren will likely have to start from scratch. The most prominent families in the world have managed to stay wealthy past their predecessors and diversified their wealth into almost every sector globally through Trusts. It’s time to step away from our traditional way of passing off singular assets on our deaths in a manner which kill our businesses.

Maybe we too need Trusts.  Trust is an entity which is incorporated specifically for holding assets/properties for the benefit of a specified group of persons.  A wealthy Tanzanian can and should put his/her assets in an incorporated Trust.  Any movable and immovable, tangible and intangible properties can be put in a Trust.  The Trust names the beneficiaries of those properties be it spouse(s), children, parents etc.  The Trust is managed by the Trustee who answers to the Board. The Board is composed by members who are elected for specified term. It should competent beneficiaries and persons with impeccable business minds and expertise.  The Board decides where and how to invest the funds of the wealthy individual.

This leaves the wealthy individual with time to continue engaging in other ventures whilst the very competent Board focuses on how to expand the individual’s wealth.  The aim of the Trust is to expand and diversify the wealth initially created by the wealthy person. Every asset of the wealthy person will be managed by the Trust with the sole of intention of investing way beyond the area of business that the wealthy individual operates in.  On death of the wealthy individual, his money generating assets remain within the Trust and the Trust will continue to operate commercially and profitably for the named beneficiaries. The assets of the Trust do not fall within the estate of the wealthy individual. The vultures cannot put their hands on such properties because they belong to the Trust.  Trusts are managed by professionals for the benefit of the beneficiaries.

Beneficiaries are already included in the Trust Deed so on passing of the wealthy individual, your loved ones will continue to be taken care of by the Trust.  Trusts enable perpetuity of wealth and creates generational wealth beyond 1st or 2nd generations. Disclaimer: The views expressed in this paper are those of the author only and should not be considered as an official interpretation, defamatory or interference of any legislation, laws or policies of any country including Tanzania. The contents of this paper should not under any circumstances be

reproduced or used without our express written consent. It should not be considered as a legal advice to any of its recipient(s) and should not be relied upon without obtaining further legal advice. We accept no liability for any loss occasioned or suffered due to the contents of this paper.