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The Trade Me sale is old news now – but for anyone who may have been in outer space recently the online trading website sold to Fairfax Group for a whopping $700 million.
The founder Sam Morgan’s share was a mere $227 million with the rest being split amongst the various shareholders.
There were 194,730 Trade Me shares on issue, each one worth $3,597 at the time of the sale.
The real interesting bit to me however was the amount of shares held by Family Trusts, which accounted for $252 million or roughly 36% of the total shareholding.
This was savvy investing from an asset protection perspective. When you have publicly come into vast sums of money, you can guarantee that someone out there will be angling to get a share of it. It could be an old forgotten (and probably imaginary) debt or perhaps something that happened in boarding school that has suddenly returned in a shattering life altering revelation.
Sam Morgan didn’t ring me up and ask me for some venture capital, sadly. Or perhaps fortunately as I would probably have turned him down. If he had, however, asked me for say, $50,000 and I had in fact (even more unlikely) said yes, here’s how I would have structured it and undoubtedly very close to how the Family Trusts on record actually did it:
- I would have written him a cheque in the name of the Family Trust. If the Trust didn’t have enough money in the bank I would have lent it $50,000 and entered into a formal deed acknowledging that debt to the Trust.
- When the shares were sold for $180 million that money would have totally belonged to the Trust.
So anyone who had a sudden revelation of debt or grievance could do their worst – if I had been extremely lethargic I may have neglected to forgive the debt of $50,000 to the Trustees which would have to be included in any evaluation of my assets, but I really wouldn’t lose a lot of sleep.
The Trustees of my Family Trust, however now have considerable sums of money with which to benefit the Trust beneficiaries, which, naturally, includes me.
This is just one topical example of the use of Family Trusts in asset protection. Some people even ensure their Lotto tickets are purchased in the name of the Trust.
Trusts however have many more uses than merely protecting windfalls. Some time ago we identified one of the main reasons for clients failing to protect their lifetime assets through Family Trusts as simply not having a clear understanding of how they worked.
To remedy this we have put together a 40 minute presentation which de-mystifies Trusts and clearly explains their inner workings, advantages and disadvantages.
As we have seen so many personal and financial tragedies which could have been averted by the use of Family Trusts, we offer this presentation completely free of charge.
If you would like to know more, simply contact any one of us here at Your Business Team.
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