Quora Answer: How Do Trust Funds Work?

The following is my answer to a Quora question: “How exactly do trust funds work?” 

A trust is merely a fiduciary relationship where one party, the settlor, grants another party, the trustee, the right to manage assets on his behalf for the benefit of a third party, which is the beneficiary.  The assets put into the trust constitute the trust fund. 

Aside from the distinct nomenclature, and the fiduciary relationship, trust funds are managed like any fund run through other legal entities, such as limited companies.  Depending on the size of the fund, and the nature of the assets, there will be some form of an investment committee, and a management team constituting the trustees and others that are hired by the trust. 

The assets are put in trust until specific conditions are fulfilled, whereby they are distributed to the beneficiaries according to the letter of wishes, which is the trust document, or the trust may be dissolved, and the grantor takes back ownership of assets, which is a complicated process, or something in between.

Quora Answer: Are Political Leaders Corrupt if They Hide Assets Using Offshore Shell Companies in Tax Havens

The following is my answer to a Quora question: “Are leaders of countries corrupt if they hide assets using offshore shell companies located in tax havens?” 

There is corruption in the ethical sense, and there is corruption in the legal sense; they are not necessarily the same.  An act may be ethically corrupt, but legal.  In this case, political leaders hiding assets overseas may be operating within the confines of the law, but the intent of the act is ethically corrupt.  We need to consider why they feel the need to hide assets overseas. 

In many cases, political leaders were business leaders before running for office.  In such a case, having assets overseas would make business sense, from access to markets to ease of doing business, to spreading risk, especially if the home country is unstable.  That being said, when they run for office, it is expected that they declare these assets overseas.  The only plausibly legitimate reason why they need not declare their assets is because there is an unstable political environment, where a legitimately installed government may be overthrown.  This is not something anyone in developed economies consider, but it is a real concern in places where the change of government is neither peaceful, nor strictly legal. 

In many cases, political leaders sequester funds overseas to avoid taxes, or to hide their gain from office, which is often illegal.  Any such disclosure of how they have benefited from their time in office would be politically embarrassing.  In such a case, it is both legally and ethically corrupt.  In all cases, it would make sense that they would put these assets under legal entities in low tax jurisdictions.  In addition to the tax advantages, these places also promise privacy, and a compliance regime that does not require public disclosure.

Quora Answer: How Do I Ensure I Never Go Bankrupt after Being Wealthy?

The following is my answer to a Quora question: “How do I ensure I never go bankrupt after being wealthy?” 

To be bankrupt is the state of being insolvent when debts are in excess of revenue, with no hope of actually paying, or a claim to that effect.  Being bankrupt is not the same as being poor.  It is a legal status where the bankrupt is barred from certain activities, has limited access to financial services, and constraints on legal ownership.  In return, they get legal protection from creditors.  Some bankrupts live quite well. 

There are several ways to ensure that you do not become personally bankrupt.  They range from good financial practices, to risk mitigation, to creating legal vehicles to shield yourself in the course of doing business.  The first involves good financial practices.  One of the rules is to limit personal debt, and spend within your means.  It seems like the most obvious thing, but too many people take risks in their personal finance on the assumption of a best case scenario for everything.  Any promised form of income and revenue that is not in your bank account is not yours, and there is some exposure.  This means do not borrow against future personal income, or some anticipated bonus.  The easiest way people fall into this trap is with credit card debt. 

Another part of good financial practice is to treat investment as a science, not a lottery.  This means no playing the market on the basis of rumours and assumptions, staying away from any business that offers gain well in excess of the amount invested, and studying risk exposure.  Risk exposure includes the standing of the businesses you invest in, such as their compliance and practices.  This includes the currency exposure if you invest in other countries.  This means political risk if you have investments and business in places that are less developed. 

The second part of protection is risk mitigation.  This includes practices to limit some of the risk, as mentioned in passing above.  Most of all, however, this is about having insurance.  Well managed insurance coverage ensures that untoward events such as accident, natural disaster, employee misbehaviour, and personal critical illness does not immediately impact the cashflow of the business or its revenue stream without some form of cushion.  A well-managed personal insurance portfolio is the surest protection against personal bankruptcy due to unforeseen events. 

Thirdly, if you are engaged in business or investment , you always run them through distinct legal vehicles, such as companies and trusts.  This means you load the risks and loans on these entities, and not yourself personally.  This ensures that should there be a catastrophic loss, such that debts exceed the value of collateral, it is a matter of declaring the entity bankrupt, while sandboxing your loss.  This is not as easy as it sounds because some forms of credit make directors and trustees personally liable.  You need to have a compliance and legal team to run this through. 

Finally, if you are wealthy enough to need these measures and vehicles, you are also wealthy enough to have financial consultants, accountants, lawyers, tax consultants, and relationship managers.  You should have them, and use them.

Quora Answer: Is Epistrophe a Rhetorical Strategy?

The following is my answer to a Quora question: “Is epistrophe a rhetorical strategy?”

An epistrophe is a rhetorical device.  It is the repetition of the same word or words at the end of successive clauses or sentences.  It is also known as an epiphora, and is the opposite of an anaphora, which is the repetition of the same word or words at the beginning of successive clauses or sentences. 

An epistrophe is an emphatic device where the emphasis placed on the last word in a clause or sentence.  The intent is to emphasise a particular idea, by arousing an emotive response from the audience.  This is an example of the use of pathos in rhetoric.  Epistrophes are particularly effective because the audience tends to fixate on the last word or words said, and it becomes embedded in the psyche.  When used properly, it makes the passage memorable.  This is particularly important in campaign speeches, or political speeches. 

A famous example of epistrophe in speech would be last part of Abraham Lincoln’s Gettysburg Address, delivered during the American Civil War at the dedication of the Soldiers’ National Cemetery, on the 09^th November 1863: “ … and that government of the people, by the people, for the people, shall not perish from the Earth.”

Quora Answer: Where Can I Learn to be Eloquent?

The following is my answer to a Quora question: “How can I be eloquent?  How and where can I learn?”

Eloquence requires mastery of the art of rhetoric.  Rhetoric is the ability to move an audience for or against a position through a coherent, cogent argument, utilising logic, emotions, and other inclinations.  An eloquent speaker has some mastery of rhetorical devices such as alliterations, anaphoras and epiphoras.  He understands the power of similes, metaphors and analogies.  He puts his contentions in the form of a clear narrative. 

In terms of delivery, there has to be consideration of the tone, the embrace of the uncomfortable silence and a avoidance of pause fillers, which detract from the message.  A good speaker understands that he needs to slow down his speech, the value of timing, and the cadence of the words.  This means avoiding long sentences, and conflicting points.  There is also the consideration of narrative pacing, and other ways to engage the audience through non-verbal cues.  It is a skill that takes time and effort to master. 

There are many programmes that address public speaking.  The best known, and one of the most established is the Toastmasters programme.  Once you have mastered the basics of a speech, there are advanced projects specific to mastering rhetoric and eloquence.  This is where you should start.

Quora Answer: Why Do We Need Financial Services Consultants?

The following is my answer to a Quora question: “Why do we need financial services consultants?” 

Financial services consultants are crucial for financial planning.  This is not something the average person can actually do by themselves because it is a lot more complicated than they realise.  There are a few reasons for this financial planning, and they all have different considerations.  People plan to mitigate risk, they plan for wealth accumulation, and they plan for wealth preservation.  Under these principles, they have investment products, insurance products, and everything in between for the purposes of endowment, protection, and asset growth. 

Without services consultants, the average person has to navigate the system to have their coverage incepted, or choose the most appropriate investment product.  They need to deal with underwriting and compliance concerns which can be onerous.  The larger the amounts involved, the more complicated it is.  Then, they have to manage what they pay for, which is the servicing process.  Finally, there are the claims, and the exits, which have to be managed.  Even trained finance professionals have financial services consultants to manage their risk and assets.  The wealthier the individual, the greater the number of such people he would have, all specialised in some aspect of the business.  Financial services consultants represent you to the principal, whether an insurer, a bank or a fund; in the same manner that a lawyer represents you to the court or other parties.

Losing Control of Your Vowels

Comedian Adam Burke said, “I always preferred the English spelling of ‘diarrhea’, which is ‘diarrhoea’, because it really looks like you have lost control of your vowels.”