Discover effective strategies for managing estate duty, investing wisely, and saving for significant life goals. This article offers expert insights from financial advisers on simplifying estate administration, navigating equities for beginners, and ensuring you stick to your savings goals.
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How should I structure my assets to make the estate administration process simpler for my family one day when I pass away? Elke Brink, Wealth Adviser, PSG Wealth, R21 Wealth Management
There are several effective ways to manage estate duty exposure, while also structuring your investments to provide income during retirement and long-term value for your beneficiaries. Currently, the first R3.5 million of a deceased estate is exempt from duty. The remainder is taxed at:
Any assets left to a surviving spouse are not subject to estate duty. However, it will then become dutiable in the survivor’s estate.
One of the most underutilised estate planning tools is a retirement annuity (RA) and later, a living annuity. Both are excluded from your dutiable estate.
Endowment/sinking fund vehicles: By nominating a beneficiary, wealth can be transferred seamlessly. Investment policies can be a deemed asset in your estate, so duties will need to be planned for, but it doesn’t have to be wound up by the executor – ensuring your loved ones receive the funds immediately.
Trusts and companies for asset protection and control: For those with significant property holdings or complex family needs, trusts and companies can offer long-term benefits. A testamentary trust allows you to transfer assets out of your estate and into a separate legal structure, where trustees manage them for the benefit of your heirs. This is useful when your heirs are minors, have special needs or require ongoing financial support.
A trust set up during your lifetime can protect your assets against estate duty, creditors and delays caused by estate administration. An expert adviser will be able to guide you on the most efficient way to transfer your assets to a trust.
The art of strategic donations: Another way to reduce your estate size is to donate assets during your lifetime. You’re allowed to gift up to R100 000 per year tax-free, per individual.
Winding up an estate in South Africa can be a time-consuming process. If your estate is made up primarily of illiquid assets like property or shares, your beneficiaries could face delays accessing funds. This can cause financial strain at a very sensitive time. Proper planning can help reduce the burden on your loved ones.
I have not previously invested in equities. What guidance can you offer a beginner investor with a low-risk appetite? Patrick Duggan, Wealth Manager, PSG Wealth, Melrose Arch
When you buy a share (equity), you’re buying a small part of a company - you become a part-owner. The value of shares changes every day based on how well a company is doing (earnings) and what people think will happen next (valuation). Thus, people buy shares to make money by selling them later at a higher price and/or getting dividends (a share of the profit), ideally under the guidance of a financial adviser. It’s a way to invest money and help it grow over time.
The rising capital values and rising dividend income of the great companies of the world make it the perfect antidote to the destructive force of inflation. However, while equities have historically been the best asset class for delivering real (inflation beating) returns, the ‘price of admission’ for owning equities is the acceptance of the higher variability of returns (volatility) that share ownership entails relative to owning other asset classes such as bonds (‘I Owe You’s’) and cash.
To mitigate the variability of returns of shares (and even worse, the permanent loss of capital – think Steinhoff) an investor, especially an inexperienced one, should consider buying a basket of shares. You can do this via funds which passively track the performance of the market and/or via an actively managed unit trust fund where a money manager will be responsible for picking the underlying shares based on his/her fundamental research in an attempt to outperform the market.
Aside from the above recommendation to diversify your exposure via either of the above avenues, the most important piece of advice I can give you is that because share ownership is a long-term game you need to ‘set and forget’ about your investment for a very long time. Ideally, first speak to a qualified financial adviser to tailor your risk appetite to your investment options.
At the beginning of every year, I set up a budget and start saving towards a deposit for my first home but end up spending most of my savings during the year. What is the most effective way to ensure that I stick to my savings goal? Franske Neiteler, Wealth Manager, PSG Wealth, Pretoria East
Well done on making the commitment to save — that is the first and most important step toward achieving any financial goal, whether you are building a deposit for your first home or setting aside money for retirement. While discipline and willpower are important, long-term success depends on putting practical, tangible systems in place that make saving easier and more consistent.
The first step is to budget realistically. Many budgets fail because they are overly restrictive and fail to reflect real-life spending patterns. Take time to review your actual monthly expenses and rank them according to priority. This process often highlights areas where spending can be adjusted and helps you identify a sustainable monthly amount that can be allocated toward savings without feeling deprived.
Discipline comes into play only once a realistic and achievable savings target has been set. A practical way to enforce this discipline is to automate your savings by setting up a monthly debit order shortly after your salary is paid. This ensures that saving becomes a habit rather than an afterthought. Having a defined monthly contribution also allows you to map out your savings journey and track your progress over time, which can be highly motivating.
Finally, choosing the right savings vehicle is essential. Whether you are saving for a property deposit or longer-term retirement goals, the timeframe and target amount should determine the type of investment you use. Selecting the appropriate asset class can significantly improve outcomes by allowing returns to compound over time and potentially shorten the path to your goal. A qualified financial adviser can provide guidance tailored to your circumstances and help keep your plan on track.
I am a 32-year-old single mother, and I want to start saving for my three-year-old son’s tertiary education. Should I opt for an education policy, invest in unit trusts or use a tax-free savings account for long term growth? Paul Fourie, Wealth Adviser, PSG Wealth, Pietermaritzburg Town Bush Cascades Financial Planning
Having a savings goal is the first step, but it is also important to understand the level of volatility you are prepared to take on to reach that goal.
A financial adviser is best suited to conduct a thorough assessment of your circumstances. The general rule of thumb is the shorter a timeline to a goal, the relatively less volatile the investment should be – a more conservative approach.
The longer the time frame, in this case 15 years to age 18, allows you to consider investing more aggressively. Aggressive funds could be equity funds either in South Africa, globally or a combination of the two. Below is a list of some investment vehicles that could help with your investment goal:
Given all of the above information, there are various options for you to consider. Partnering with a financial adviser on your financial journey can help to set you up for success.
As a business owner in the events industry, please can you explain why event cancellation insurance has become a necessity? Ryno de Kock, Head: Distribution at PSG Insure
With external risks like adverse weather becoming harder to predict, event organisers can no longer rely on contingency planning alone as the financial, logistical and reputational consequences of a cancelled event can be severe.
Event cancellation insurance, or specialised event liability cover, has becomes an essential risk-management tool designed to protect organisers against financial losses arising from circumstances beyond their control. Depending on the policy, cover may include cancellation, reputational damage, abandonment, postponement or relocation of an event due to insured causes such as extreme weather, natural disasters, public-authority intervention, or the non-appearance of key individuals.
This type of cover can also extend to lost revenue, unrecoverable expenses and contractual obligations to third parties. For vendors, sponsors or service providers, specialist event liability cover may offer protection if an organiser is unable to meet contractual commitments following a cancellation.
By engaging an adviser early in the planning process, organisers and stakeholders can structure cover that reflects today’s realities and help safeguard the long-term sustainability of South Africa’s events industry.
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