Entries Tagged 'Personal Finance' ↓

How many times have you made payments/investments for promised results which never happened?

Well, I have made that mistake a few times over the last 2 decades, and each time, the learning has improved.  And the success rate of deals has also improved.

There are professionals of all types – who will ask for upfront money – and then you are stuck. It happens in every possible industry. It is very common and we see many cases regularly. And hence this post.

Whether it is a simple project, or a real estate, or a business, or anything else – if you are planning to spend money on it – please make sure that there is a payment schedule that is tied to milestones, mutually agreed between you and the other party.

Here’s an example of Milestone Based Payments – it ensures that the other party will continue to work for the results.

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Novartis buys drug firm Protez for $400m 

ZURICH, 5 June 2008: Novartis has bought US-based Protez Pharmaceuticals in a deal worth up to $400 million, giving it rights to an antibiotic which could be used to fight superbugs such as MRSA, the Swiss drugmaker said.

“The acquisition of Protez Pharmaceuticals provides rights to PZ-601 and further strengthens specialty medicines development portfolio in hospital infections,” Novartis said. Z-601 is a novel broad-spectrum antibiotic in Phase II development against potentially deadly drug-resistant infections, including MRSA and ESBL strains, Novartis said.

Novartis will initially pay $100 million for privately held Protez, with a potential for up to $300 million of additional payments depending on the success of PZ-601, the company said. The emergence of hospital superbugs such as MRSA, which are resistant to existing medicines, has increased the need for alternative treatments and re-focused attention on antibiotics.

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A point to note is that milestone based payments will result in a larger number for the total project cost/ business valuation – compared to upfront payment – but in my experience that extra is well worth the reduced risk, especially in transactions with strangers or new business partners.

Despite best effort, there are unknowns in the business environment which will come into play as time progresses – and Milestone Based Payments give you the ability to adapt better.

Best Wishes,
Shankar/ Director, Alpha Neuron

If you have real estate and you have crossed 50 years, then chances are that you are thinking what to do once you are gone. And rightly so, that’s a very important topic, and you would most probably be thinking of drafting a will, so that there is no misunderstanding or acrimony after you are gone.

A lot has been written about the use of “living trusts” (also known as a “revocable trust” or “inter vivos trust”) as a solution for problems associated with real estate planning through your Will.

Here’s a brief framework regarding “living trusts” in general, so that you can determine whether you should discuss this method with your attorney licensed to practice in the state where your estate would be administered.

A “living trust” describes a trust that you can:
(1) create during your lifetime, and
(2) revoke or amend whenever you wish to do so.

You can also create an “irrevocable” living trust, but that is permanent and unchangeable and is almost always done to gain certain tax results – and this topic is beyond the scope of this briefing.

The choice of a living trust should be made after consideration of a number of factors. A “living trust” is legally in existence during your life, has a trustee who is currently serving, and owns property which you have transferred to it during your life.

Consider the two possible scenarios:

(1) While you are alive, the trustee (could be you) is responsible for managing the property as you direct.

(2) Upon your death, the trustee (based on your nomination) is directed to either distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of your nominees. Like a Will, a Living Trust can provide for the distribution of property upon your death. Unlike a Will, it can also provide you with a vehicle for managing your property during your life, and authorize the trustee to manage the property and use it for your benefit if you should become incapacitated, thereby avoiding the appointment of a guardian for that purpose.

It should be noted that there is no consensus on the best use of Living Trust. While some attorneys recommend the use of such trusts, others believe that their value has been over hyped up. So you have to apply it case-by-case.