The right REIT


A real estate investment trust (REIT) is a company that finances, operates or owns real estate that produces an income, and is a way for investors to have a liquid stake in the real estate market.

According to Nareit, which is the representative voice for REITs, more than 225 REITs were trading on an American stock exchange earlier this year. At the start of 2018, a quick look at diversified REITs suggested that 23 were yielding 5% or more, with market capitalisations of greater than US$1 billion. And that was only when reviewing one sub-sector of the industry — if you took into consideration other areas, such as retail and office, the number increased to 60 REITs.

Given the vast array of REITs available, it can be hard for investors to know which one to choose. However, while the attraction to REITs can be strong — especially as they are required by law to distribute at least 90% of their annual taxable income to shareholders — not every REIT is worth its salt. Even if one has a dividend yield of 5%+, it doesn’t necessarily mean you should want to own it.

To hedge or not to hedge?

Cross-border real estate investment is becoming more popular as more people develop their understanding of the role that real estate can play in a multi-asset class portfolio. Many investors have also become aware of the potential diversification benefits that can be gained from international real estate exposure.

However, it’s important to appreciate the complexity that currency can bring to the table when it comes to investing in property. Returns can be hugely impacted by currency movements, and performance can look very different when measured in different currencies. For example, over the course of 17 years, one global property index’s annualised total return was 7.4% in its local currency, but if measured in South African Rand, the total return would have been 11.2%, and in Swiss Francs, it would only have been 4.9%.

If you do have a foreign currency exposure, it is, therefore, important to carefully consider how you intend to manage your exposure. Certain risks can potentially be mitigated through currency hedging. According to an article published by the Pension Real Estate Association (PREA) “forwards, swaps, and options are some of the commonly used instruments for hedging currency risk in a real estate portfolio. Some investors may also borrow in foreign capital markets to reduce their foreign exchange exposure. However, the latter approach may simply substitute financial risk for currency risk, and the cost of borrowing offshore may be higher. Certain large global investors may also see their portfolios as sufficiently diversified to provide a natural hedge and not actively hedge at all.”

You may also wish to consider other factors, such as when is the right time to hedge and what should be hedged. And it’s also worth considering the cost and regulatory hurdles when it comes to managing currency risk. Many decisions are not always straightforward, but it’s important to be aware that currency volatility could become a source of investment risk as real estate becomes more global in nature.

Although many investors appreciate the unique nature of REITs, it’s important to only invest in REITs that you’ve thoroughly researched. In order to protect your principal, try to find a REIT that comes at a price that allows for a safety margin against market risk. It’s also advisable to not consider a REIT that could potentially cut its dividend, and be sure to pay attention to underlying cash flows.

If you’re interested in REITs that can serve you in good times and bad, you may wish to look for stocks that provide an income while minimising risk — for example, stable business operations that have good balance sheets. Although the yields from certain REITs may not make you super rich, they can still reliably contribute to your financial goals and wealth portfolio. Don’t hesitate to arrange a meeting if you wish to discuss the value of real estate as an income-generating investment and how to best manage your cash flow.

(Information gathered from Forbes and InvestorPlace)

Why is travel insurance so important


According to recent statistics, 5.5 million South Africans travelled abroad in 2016, showing that travel has become a part of many people’s lives — be that for business or leisure. A vacation can be an enriching experience that allows us to step away from our daily lives to relax and, enjoying it with added peace-of-mind is an added bonus!

Remember, just because you’re on holiday doesn’t mean that you can’t avoid events that are outside of your control, and can occur anywhere in the world at any time. Travel insurance gives you the peace-of-mind that you are covered in the event of disaster so that you won’t be burdened with the extra stress of expenses you can’t meet.

Travel insurance will offer options to cover common travel issues, such as lost luggage, cancellations that are out of your control and, most importantly, medical emergencies. Think of it in the same way as car insurance, and protect yourself and your family when you travel in case things go wrong.

The cost of a small medical procedure abroad could easily deplete an entire holiday budget. Bearing in mind that hospital bills can easily run into (hundreds of) thousands of Rands if you are visiting countries without public healthcare, such as the United States. Travel insurance also provides a certain degree of protection against currency fluctuations, as any claims incurred will be paid in the currency of your destination, even though you pay for your policy in South African Rand.

What does it cover?

You may find that basic travel insurance is provided by your bank if you buy your flight on your credit card. However, this type of cover tends to come with some restrictions, so may not be sufficient depending on certain factors, such as your age or travel destination.

Most comprehensive travel insurance policies provide emergency medical cover; death and disability cover; legal assistance and personal liability cover; luggage cover; and losses incurred as a result of unpreventable cancellation.
However, do be aware that not all policies are cut from the same cloth, and a specific type of travel insurance — such as for business purposes, senior citizens, or groups — could better cater to your needs.

It is, therefore, important to do your research when looking for cost-effective cover, and to examine your insurance policy (and the small print) carefully to determine exactly what is included. Do also be sure to check how much excess you would have to pay if you did need to cancel your trip.

When comparing policies, it’s advisable to first decide exactly what level of cover you will need, and make sure that you won’t be left under-insured for the things that count. It may be tempting to opt for the cheapest insurance, but a few extra Rands could potentially save you a lot of money in the long run.

Depending on where you are going, you may also want to purchase extra cover to ensure that you are covered if, for example, an act of terrorism occurs that puts you at risk or changes your plans. However, do note that some travel insurance providers will refuse to cover you if you are travelling to a disaster-prone area, or a country where there is political unrest or a health epidemic.

Adventure activities, such as skiing, mountain biking and scuba diving, come with an element of risk so, if you intend to hit the slopes or the sea, it’s important to be insured for any accidents and injuries that may occur. Having the maximum amount of emergency medical cover is worth the investment if you are planning to do anything that could be dangerous. You may also have expensive sports equipment that is worth insuring too.

Domestic travel insurance

Don’t be complacent when it comes to travelling domestically, as accidents can still occur on home ground. South Africa is a big country (the Kruger National Park alone is the size of Israel!) and you can still end up in trouble when you’re a long way from your usual comforts and contacts.

It’s a good idea to tailor your insurance package to meet your needs, so that you can be protected and save money in the case of any unfortunate events. Residents travelling around the country stand to greatly benefit from a policy that is specifically designed to address the concerns of South African travellers, such as car rental excess waivers, and cancellation and curtailment cover.

Plan for the unexpected this holiday season, and purchase your chosen policy as soon as you have paid for your trip. This won’t cost you a Rand more, but, so long as cancellation cover is included, it will mean that you’ll be protected from the minute you’ve bought it. That said, if you still haven’t purchased travel insurance for your December leave, it’s not too late — as long as you arrange it before you step onto the plane! Don’t hesitate to arrange a meeting if you need more advice on the matter or information on your financial situation.

(Information gathered from and

Rent out your home this holiday season


Many South Africans choose to take advantage of the public holidays and the warm weather by visiting loved ones or going on an adventure over December and January. However, expenditure over this festive season can quickly add up if you’ve planned a well-deserved break.

It, therefore, can be worth renting out your house for the season, so you can supplement your spending while you are away. Nowadays, short-term rental websites, such as Airbnb, make it relatively easy to rent out your home to holidaymakers, and receive an extra income for little extra effort. It’s a superb idea — however, take a look at these considerations before you open up your home.

Although ‘tis the season to be jolly, this period does, however, come with a few less-merry considerations to bear in mind.

For example, during these summer months, there tends to be higher risk of break-ins. Although there are numerous benefits to renting out your home while you’re away — such as earning an extra income and not leaving the property unoccupied so that it is vulnerable to a break-in — there are also other potential risks that you need to protect yourself against as a homeowner. For example, you could well come back to find items missing or damaged, or to see that part of your property has been vandalised.

If you do not have sufficient insurance to cover you, renting out your house could end up costing you dearly and setting you back for the new year. Be aware that typical home insurance may not provide cover for any damage or theft that could occur while your home is being rented to strangers. As theft cover on a standard personal policy requires forcible entry, it is unlikely that you would be able to claim for anything that is stolen by a guest. If you are planning to let out your home this holiday season, it is, therefore, crucial to carefully read the terms and conditions of your insurance policies to ensure that you understand the extent of your cover.

As short-term letting will generate a revenue, it is also technically considered to be a commercial venture, which means that you may require more comprehensive insurance for the associated risks. As well as protecting your physical possessions, you should ensure that you have liability cover in case a guest injures themselves on your property during their stay. Otherwise, you could be held liable as the owner, which may have some serious cost implications.

If you do decide to rent out your home while you’re away, bear in mind that you may be hosting travellers who have different habits to you. This could result in a nasty surprise when you return from vacation, so you should consider various ‘worst-case’ scenarios for insurance purposes.

Don’t hesitate to arrange a meeting to discuss how you can make this holiday season as financially viable as possible. Furthermore, be sure to have sufficient cover in place so that you can enjoy peace of mind, as well as a potentially greater income stream this holiday season.

(Info from

Holiday Home Considerations


Although the demand for holiday homes in South Africa lost some momentum at the start of last year, according to the FNB Holiday Town House Price Index for February 2018, a renewed year-on-year growth acceleration was demonstrated in the results of the last half of 2017.

In fact, the demand for holiday homes in South Africa has remained reasonably buoyant since 2013, and many property investors purchase a holiday home as a way of diversifying their wealth portfolio and creating an alternative source of income.

Or, for some, a holiday home is quite simply just that — a holiday home. A precious escape away from the hustle and bustle of city life; a safe haven where your only responsibility is not burning the tjops on the braai.

Whatever your reasoning, buying a holiday home does come with its own unique set of considerations that don’t always apply to other types of properties. For the sake of your finances and sanity, it’s worth considering a few important factors before you make your purchase.

1. Maintenance
As idyllic a location may be, and as much as you may fall in love with the thatched roof of a fisherman’s cottage in Paternoster or the rounded gables of a Cape Dutch house in Stellenbosch, don’t forget to factor in maintenance and the costs involved, especially when it comes to older houses.

If you’re only going to be using the home for holidays, it may well remain vacant for periods of time, so it’s important that you either buy something in a good state of repair or set to work to fix any issues. Otherwise, you could be greeted by a crumbling building when you finally do get the chance to unwind, and will spend precious days of vacation time honing your DIY skills.

And if you do plan to let out the property while you’re not using it, then bear in mind that it will need to meet tenant requirements and maintain a competitive edge in the market.

2. Rental income
If you are planning to buy a holiday home to create an income stream, it is important to be aware that short-term rental earnings may be seasonal rather than steady, depending on the location. If you buy a holiday house in Camps Bay, for example, you may well enjoy full occupancy from December to April, but should be prepared for quieter winter months when the cold Atlantic waters aren’t quite as appealing.

Your rental income may also be influenced by public holidays, school holidays or religious festivities. It is, therefore, worth preparing in advance and planning your own use of the house around these peak periods, so that you can maximise your rental income and make up for losses whenever it is vacant.

If you are planning to use the property for your own leisure then it’s important to communicate with a rental agent in advance when the home won’t be available to let.

3. Location
Although the thought of hiding away from the world may appeal to you after being stuck in the office and in traffic, bear in mind that a house in the middle of nowhere may attract a narrower pool of tenants or holidaymakers. The location may also affect your home’s re-sell value. So, while that farm off the beaten track near Loeriesfontein may seem like a great idea when you’re feeling worn out by the daily grind, it may not be such a good idea as an investment.

Bear in mind that not everyone has a 4×4, so it’s also important for the property to be accessible, as well as in a good location. A popular area and nearby attractions will all work in your favour when finding tenants or a future buyer, and it’s also worth trying to understand what tourists visiting the area are interested in. For example, people who go on holiday to the coast are likely to want a good view of the sea. If possible, it may be worth creating a best-of-both-worlds situation where you can enjoy a certain idyll or lifestyle, while still being in reach of amenities and activities that will attract other people.

4. Finances
When it comes to buying a holiday home, it’s important to retain your investment as well as enjoy the element of escapism. Praven Subbramoney, CEO of Private Bank Lending at FNB, notes in an article published by All4Women that many “holiday homes are financed like any other investment property. Therefore, an ideal option would be that of a structured loan, as it provides secured finance for property acquisitions that allow investors to borrow against a mixture of asset classes such as a combination of property, shares, cash or investment portfolio.”

Don’t hesitate to arrange a meeting if you wish to discuss your options and review your situation to decide whether a holiday home may be a good investment for you — both personally and financially speaking.

(Info sourced from

Who pays the difference?


Good health care is not always easily obtainable and quickly becomes a costly experience. Many people who have health cover policies sometimes expect to have more cover than their policy actually includes, and they are saddled with high shortfall bills; they land up paying the difference between the medical cover rate, and the cost of the specialist.

This is because having medical aid doesn’t necessarily mean that you will be fully covered for all treatments. This is because, every year, medical aid providers establish a base rate that can be charged for all procedures, and your medical aid plan will pay a percentage of this rate. A good plan can pay up to 300%, but many specialists or private hospitals charge more than 300%, which can often result in a shortfall that needs to be covered. For example, if a surgeon charges 350% of the base rate and your medical aid covers 300%, you will end up with an additional 50% that needs to be paid.

What is gap cover?

Although small, adhoc amounts can be manageable if a non-urgent issue arises, an accident or the sudden onset of an illness can leave you with no time to save, and you can be left needing to cover a hefty shortfall.

To protect yourself in the event of an emergency, gap cover can be as important as medical cover. Gap cover could be considered as a top-up medical insurance that is designed to pay the difference (the gap) between what a private doctor charges and what your medical scheme pays.

You can only take out gap cover if you already have medical aid, but only one policy is usually required to cover a member and their dependants (as long as they are all on the same scheme with the same options). It can, therefore, work out very affordable if you have several dependants.

What is covered?

Although premiums can still be relatively cheap and benefits can be extensive, times are a-changing when it comes to gap cover, so it’s important to be aware of exactly what is covered. According to an article published on Fin 24, gap cover insurers have needed to curtail their expenditure to remain financially viable in the face of increasing private healthcare costs. After all, insurance schemes are run for profit, and gap cover is an insurance product that complies with the regulations of the Short-term and Long-term Insurance Acts, rather than those of the Medical Schemes Act of 1998.

Gap cover used to pay the difference between what your medical scheme paid and your total medical bill, which meant that even if you had the cheapest hospital plan, you would be covered in full if you had gap cover. However, this also meant that the largest share of medical costs often fell on the shoulders of gap cover providers, instead of medical schemes. Gap cover providers have been known to carry up to 80% of costs, and such heavy shortfalls have meant that full gap cover payment is no longer often sustainable in the long-term.

Consequently, many gap cover providers have introduced new calculations as to how much of the co-payment they will cover, through a match-pay system based on your medical scheme. Depending on your policy, some providers agree to pay up to five times what your medical scheme has paid, while others will only pay up to twice the amount. So, if your bill comes to ZAR20,000, of which your medical scheme will cover ZAR5,000, your gap cover will pay ZAR10,000 if it pays twice the medical scheme contribution. You will still then need to pay ZAR5,000 by yourself. It is, therefore, worth having a medical scheme that pays out as great a percentage as possible of the base tariff, as this will affect how much will be covered by your gap cover too.

It’s also important to note that gap cover will only cover the shortfall on approved specialists or procedures, so it won’t cover something that is excluded by your medical aid plan. Although having gap cover is still highly worthwhile, it’s best to ensure you are informed about what your gap cover policy will likely not pay for, such as upgrades to a private room, wheelchairs or crutches, and cosmetic procedures. Do also read the fine print because there could be some delicate nuances, such as dental treatment may be provided, but only in hospital.

Given all the exclusions and new calculations, it is important that you have a detailed understanding of what your medical aid covers and how your gap cover will work in conjunction with this. If you have any health concerns, the last thing you need to worry about is whether you can afford to receive the appropriate help, so it’s advisable to be as extensively covered as possible when it comes to medical treatment in South Africa. Don’t hesitate to arrange a meeting if you wish to discuss whether you can afford to put (or not put) your family on a gap cover plan.

Time to Review your Medical Cover


Towards the end of every year, many medical schemes announce their annual contribution increases for the following year. This makes these last few months of 2018 the perfect time to review your cover and make any necessary amendments, as, until the start of December, most medical aid providers will allow you to change plans or options without penalties.

Alternatively, if you are not happy with your provider, you can even go as far as to switch medical schemes, just be prepared that a new scheme may come with a waiting period of up to six months (during which time you will only be covered for emergencies), and may also charge you higher premiums or penalties, depending on your age and circumstances.

Your medical cover requirements can easily change from year to year — financially and medically speaking — so it makes sense to take this opportunity to review your plan and understand how you are currently covered and whether that is still appropriate. Granted, it’s hard to predict how much you may incur in terms of future medical expenses, so it is difficult to know which plan to choose. However, that is why it’s important to review your medical cover annually to ensure that your plan is in line with your health concerns and budget.

If you aren’t sure about whether you should change your options, start by first calculating how much of your medical expenses over the past year was covered by your medical aid. Once you have worked out this amount, you can then decide whether it would work out more cost-
effective to pay a higher monthly contribution in return for more benefits, or switch to a cheaper option and simply pay more out of your own pocket if the need arises.

If you are relatively young and healthy, you hopefully won’t require much medical attention next year, so it may be worth considering a low-cost option. However, if you are older, suffer from a condition or have a precarious family medical history, it may pay to upgrade.

Money issues

As contribution increases for medical cover tend to be above the Consumer Price Index inflation rate each year, affording adequate cover can be a concern for many people. The good news is that medical schemes and day hospitals are trying to collaborate in order to tackle the high cost of healthcare in South Africa. Procedures at a day hospital are less expensive and you can avoid any unnecessary overnight stays that can end up adding a lot to the bill.

It’s also a good idea to make the most of any opportunities that your medical scheme offers to improve your general wellbeing. Most schemes nowadays offer wellness programmes and reward you for living healthily. If you can be proactive and stick to a programme, the benefits can compensate for some of the costs of your cover.

If funds are currently tight for you, be sure to at least have a hospital plan, which will cover you for certain chronic conditions and hospital admissions. By law, even the most basic of medical schemes should also provide Prescribed Minimum Benefits (PMBs) that will ensure you are covered if you have a life-threatening or chronic condition that is on the PMB list. However, you may need to meet certain requirements before some schemes will cover you.

You could also choose a network option, which is cheaper but means you will be limited to certain healthcare providers within a network. This means that if your nearby hospital or GP isn’t a member of the scheme’s provider network, you may need to change doctors or be prepared to travel further to have an operation or see a specialist. However, the cost of some network options is calculated based on your monthly earnings, so they will come with lower premiums if you’re not currently earning a comfortable salary.

You could also choose an option with a medical savings account, whereby up to a quarter of your monthly contribution goes into the account and the full savings amount for the year will be available from January. Once you have depleted the funds in your savings account, you will need to fund any further medical expenses. So if you don’t feel that a savings allocation will be sufficient to meet your needs, you may be interested in getting threshold cover, whereby any unused savings each year will roll over.

If you do wish to consider changing plans or options, be sure to thoroughly review all benefits and conditions. Take the time to understand how your cover will change, and it’s advisable to contact your provider to clarify all details. For example, if you change to a lower-cost option, it’s possible that you may no longer be covered for certain medication or treatment, such as antidepressants or anxiety medications; or you may be covered for a different brand of medication to that which you previously used.

Don’t hesitate to also arrange a meeting to discuss your financial situation so that you can decide what steps you can afford to take with regards to your medical cover.

(Info from

Make a Mental Note


“Without mental health there can be no true physical health” – Dr Brock Chisholm, the first Director-General of the World Health Organisation (WHO)

Dr Brock Chisholm was a psychiatrist who asserted the notion that mental and physical health are linked, and an increasing amount of evidence highlights the impact that mental illnesses — particularly depression and anxiety — can have on physical health. Even though this may be the case, policy unfortunately still continues to lag behind when it comes to addressing mental health issues in South Africa.

Wednesday, 10th October marks this year’s World Mental Health Day, which will focus on young people and their mental health. Presented by the World Federation of Mental Health, the goal of this day is to raise awareness about mental health issues and encourage people to help those dealing with such issues.

Statistics show that approximately a third of South Africans will suffer from a mental health condition in their lifetime, which can affect a person’s capacity to maintain relationships and a job. However, the stigma attached to many mental health issues makes it even more difficult for those affected to get the help that they so vitally need, which causes further problems — be that physical, social or financial.

One of the first steps in dealing with mental health issues is to quash any ill-informed and damaging attitudes. This can be done by raising awareness as to the facts, so that we can develop a better understanding of the problems that so many people face. Once it is widely recognised that a mental health issue is a valid medical issue, we can set about further identifying causes and working on better solutions.

Mental Health and Medical Schemes

Being diagnosed with a mental health condition can be unnerving, and understandably comes with questions regarding treatments and long-term prognosis, as well as what will be paid for by medical aid. However, the Director of the South African Depression and Anxiety Group (SADAG) notes that “individuals accessing mental health and psychiatric services are frequently uninformed, not only about what services are offered, but also about what to expect from mental health and psychiatric professionals. Mental health and psychiatric patients frequently complain that they haven’t been told their diagnosis, what the medication they have been prescribed is for, or what to expect from the medication. “

There have been some disturbing issues with medical aid schemes in South Africa, as psychiatric patients often haven’t enjoyed the same rights as those with more general medical conditions (in both the public health sector and by private medical aid schemes).

Although some medical aid providers have tried to make changes to their plans, it is still often the case that not all medical conditions are afforded equal consideration. It’s important to understand that a psychotic episode can be compared to a heart attack in its unpredictability and debilitating nature.

However, psychiatric medications are prescribed less readily than medications for heart disease, and some medical aids only cover 15 outpatient visits each year or three weeks of hospitalisation for patients with mental illnesses.

Costs can become quite substantial when it comes to treating a mental illness, and many patients who have found the right treatment are unable to afford it. Sadly, the majority of people in low to middle-income brackets don’t receive any treatment for severe disorders. It is a Catch-22 situation in that a mental illness can severely impact someone’s financial productivity, leaving them in a situation where they don’t have the necessary funds to treat their condition in order to be able to function properly and earn money again.

This World Mental Health Day, it’s important to know your rights when it comes to the treatment you are eligible to receive for a mental health condition. Your expectations should be in line with what your scheme offers, so don’t hesitate to arrange a meeting if you have any doubts.

Medical schemes currently have Prescribed Minimum Benefits (PMBs), which provide access to a basic minimum of health services, regardless of the chosen plan. These are a feature of the Medical Schemes Act to ensure that medical schemes fully cover the costs related to the diagnosis and treatment of emergency and chronic conditions. Even a hospital plan should offer PMBs, although a medical aid provider can have certain conditions to obtaining these benefits.

Try to set aside some time to familiarise yourself with your scheme’s provisions and protocols, and make any changes if necessary. Prioritise both your mental and physical well-being, and don’t underestimate the prevalence or effects of mental health conditions.

Information for this blog was sourced through

The Lowdown on Inheritance and Donations Tax


Understanding how your (or your loved one’s) possessions and wealth are treated when you pass away is crucial to how you plan for what will happen to them. This blog is aimed at breaking down an incredibly paper-heavy, jargon-filled process!

When a taxpayer dies, all their assets are placed in an estate, which is commonly referred to as a ‘deceased estate’. Assets can include a property, a car, money in the bank, and even furniture.

Once an executor has completed all the administration and has repaid all the deceased’s debts, the remaining assets will be distributed to the beneficiaries, which can be heirs and/or legatees (a legatee receives a specific asset from the estate, while an heir receives the balance).

Anyone who owns a property in South Africa is forced to comply with South African inheritance laws, and inheritances are governed by The Administration of Estates Act, The Wills Act, and The Intestate Succession Act (yup – paper-heavy!).

There are agreements with certain countries to avoid double taxation in relation to estate duty, such as the UK, USA, Zimbabwe, Botswana, Lesotho and Swaziland.

A brief overview of estate duty

Estate duty is a tax on the transfer of assets from a deceased estate to beneficiaries and, as of February 2018, the rate of estate duty increased from 20% to 25% on estates worth more than ZAR30 million.

A person is liable to pay tax on all income that they receive or accrue up until the time of their death, and an executor will act as the representative taxpayer to settle any outstanding debts. The deceased estate can be tallied up from the date of death, and all assets will be held by the estate until the account has been inspected and finalised. Once this has been done, the assets will be either distributed amongst the heirs or delivered to the trustee.

An estate worth less than ZAR30 million is subject to estate duty of 20%, after a deduction of ZAR3.5 million against the net value of the estate has been taken into account. For example, if the total net value of an estate equates to ZAR4.5 million, an amount of ZAR200,000 will be liable to be paid in estate duty (20% of ZAR1 million, which is the amount exceeding ZAR3.5 million). Generally, the executor will take care of paying the estate duty, but there are times when the beneficiary pays the duty directly.

Inheritance vs. donations tax

The good news is that you don’t need to pay tax on any money that you inherit, as an asset inherited is a ‘capital receipt’ and is not included in your gross income. You also won’t have to pay Capital Gains Tax on an inheritance as, if CGT is applicable, it is usually paid by the estate.

In terms of taxation, an inheritance is treated differently to a donation and a gift. Companies or trusts are exempt from paying tax on up to ZAR10,000 in casual gifts in one tax year, while South African residents can receive up to ZAR100,000 worth of donations tax-free.

However, any donations above this amount are subject to a donations tax of 20%. So, if you are donated ZAR140,000 (whether in a once-off lump sum or over several donations), ZAR8,000 will be payable in donations tax (20% of ZAR40,000, which is the amount exceeding ZAR100,000).

When it comes to property, donations tax is payable at a flat rate of 20% on the value of a donated property. However, donations exceeding ZAR30 million are taxed at a rate of 25%; and only the first ZAR100,000 of property donated each year is exempt from tax.

It is the donor’s responsibility to pay donations tax when donating property, but if they fail to do so within a set time period, the onus falls on both the donee and the donor together. However, donations tax doesn’t apply between spouses, South African group companies and if donations are made to certain public benefit organisations.

In light of these regulations and restrictions, it’s important to decide how you can best arrange your affairs to ensure you maximise the amount you can give to your loved ones. Don’t hesitate to arrange a meeting to discuss your liabilities and options, so that you can ensure your assets aren’t subject to unnecessary deductions.

Information for this blog was sourced from:

How to Reduce Estate Costs


Death can be an expensive affair and it is easy to underestimate the costs involved, especially as some unconsidered fees can quickly add up.

As well as the funeral expenses, those left behind can be liable to pay mortgage bond cancellation costs, appraisement costs, Master’s Office fees, legal fees, costs of realisation of assets, bank charges, transfer costs of fixed property or shares, maintenance of assets, advertising costs, probate fees, postage and sundry costs, short-term insurance, taxes on investments, and even duplicate motor vehicle registration certificates…

Estate costs generally fall into two categories – administration costs, which arise as a result of the death; and claims against the estate, which are the liabilities of the deceased.

Generally, the biggest administration costs tend to be the executor’s and conveyancing fees.

However, advance planning can help to cover estate costs or at least reduce them significantly. Here are 6 things you can do now to reduce your estate costs for your loved ones in the future. Don’t hesitate to arrange a meeting to discuss your options.

1. Leave a valid will

If you die without a valid will, your estate will be devolved according to The Intestate Succession Act, rather than in accordance with your wishes. Not only is it likely that some of your assets will not be distributed how you wish them to be, but this process can often be more complicated and come with higher legal fees, as well as the potential for costly disputes.

2. Negotiate the executor’s fee

The devolution of an estate requires an executor to sign off the liquidation and distribution of assets, and confirm that all costs are correct. Once you have appointed an executor, you should try to negotiate the executor’s fee when you are drafting your will. You could either then stipulate the fee in the will or request that the executor confirm the agreed fee in writing.

Depending on the composition of your estate, the executor will quote a fee in accordance with how much work is required, and you could potentially negotiate up to a 50% discount.

If your estate is relatively straightforward — for example, you only have one heir, no business or offshore assets, and sufficient cash to cover all costs, you may find that the executor will offer a big discount.

However, if you do not explicitly specify the executor’s remuneration in your will, it may likely be calculated according to a prescribed tariff of 3.5% of the gross value of all your assets. The executor will also be entitled to a 6% fee on all income earned after the date of your death, and if the executor has registered for VAT, then another 15% will be added to the grand total.

3. Avoid costs of security

According to an article published on Moneyweb last year, “costs of security can be avoided completely by exempting the nominated executor from lodging the bond of security in the will.”

4. Prepay your funeral

Planning and paying for your funeral before you die removes a rather big expense that your family or estate must cover after you’ve passed. By choosing the type of funeral you would like in advance, you not only fix the costs, but you also save your loved ones the difficult job of making decisions and having extra admin while they are in mourning. You can simply pre-pay the money into an insurance fund or trust account where it will sit until the time comes to pay for your funeral.

5. Jointly own property

A simple way of potentially reducing estate costs is to hold assets, such as a house, with another person. When you die, any joint asset should automatically pass over to the surviving owner, so will not be considered part of your estate and subject to probate fees. Do note that probate fees can be substantial, so it is important to factor them into your estate planning.

6. Buy life insurance

If there is insufficient cash to settle administration costs and claims against your estate, the executor will need to approach your heirs to see if they are willing to pay the shortfall to avoid the sale of any valuable assets.

If you don’t have enough funds to cover a bond, think carefully about whether you wish to leave the property to someone specific, as they would have to settle the costs and the property may end up being more of a burden than a benefit. If you wish to bequeath an item to a beneficiary, it is best to do so free from any liabilities, as all your debts must be paid before any money or property can be passed on.

To avoid leaving your heirs in a situation where they are forced to settle outstanding debts, it is important to take out life and/or bond insurance to ensure sufficient cash is available to cover any accumulated claims.

Life insurance proceeds are always paid tax-free, and you can name your estate as the beneficiary, in which case the money will be paid to your estate to cover estate costs. Although your estate will pay probate fees on the proceeds, it will ensure your estate has enough cash to pay debts, taxes and other obligations, so as to avoid the sale of assets that beneficiaries may wish to keep.

Alternatively, you could name a beneficiary for your insurance proceeds, and the money will be paid directly to them. If you do this, the money bypasses the estate process and will not form part of your estate, so will not be subject to probate fees and there won’t be any delay in receiving the money.

(Information gathered from and

Truths About Trusts


Did you know that a trust is not simply: a trust?

There are many different classifications of trusts in South Africa, such as ownership trusts, bewind trusts and curatorship trusts.

Trusts can either be created during a person’s lifetime, which is known as an inter vivos trust, or set up according to a person’s will after they die, which is known as a mortis causa trust.

Different trusts give beneficiaries different rights, depending on how much a trustee wishes to distribute of an income, assets or capital to beneficiaries. And trusts can be used for a variety of purposes, from asset protection to charity. There are also ‘special trusts’, which can be set up for the benefit of a person with a disability, or relatives who are under 18 years old.

Although trusts have been around for centuries, there are many misconceptions that surround them and they have become far less popular in the last couple of decades. The SA Revenue Service (SARS) is arguably partly to blame for the bad reputation that trusts now have, and their continual criticism has resulted in many owners deregistering their trusts and transferring out their assets.

Given that there is a quagmire of misinformation out there, it is important to educate yourself if you have a trust or are thinking of creating one. Here are 5 truths about trusts that may debunk some myths and help you on your way:

1. Trusts aren’t only for the wealthy

Although many people believe that trusts are only for the rich, the best time to set up a trust is actually when you are making preparations to build wealth, before you have accumulated a significant fortune. Registering a trust after you’ve generated wealth could end up being expensive — due to various costs, such as capital gains tax and transfer fees that you will need to pay when you move your assets into trust.

2. Trusts can help with tax planning

A unique feature of trusts is that they allow you to shift tax burdens from the trusts to beneficiaries through the ‘conduit principle’, which, according to the South African Institute of Chartered Accountants (SAICA), means that “if income accrues to a trust and the trustees award it to one or more beneficiaries in the same year, the income retains its nature in the hands of the beneficiary.” This basically results in less taxes needing to be paid.

Even though the sole point of a trust isn’t to save on taxes, you do stand to save on capital gains tax, estate duty, executor’s fees and income tax if you set up a trust and manage it properly. Consequently, SARS is not a fan of trusts, particularly because trusts enable the postponement — and potentially the avoidance — of estate duty in the event of death.

All trusts need to be registered with SARS and the trustee is usually the representative taxpayer of a trust. However, the income of a trust can be taxed in the hands of the donor, beneficiary, or the trust itself.

3. You can still control your assets in a trust

Contrary to popular belief, a trust can be structured in such a way that allows you to maintain a sense of control over your assets. You can legally be both a trustee and the founder, and you can even be a beneficiary, while maintaining the legitimacy of the trust.

4. You can do your own admin

When it comes to setting up a trust, be sure to choose your service provider wisely, as some charge exorbitant fees. If possible, it can be worth doing as much of the administration as possible yourself, so as to reduce costs and ensure that your financial plan is executed as per your intentions.

5. It’s important to read your trust deeds

If you do decide to include a trust in your estate planning, be sure to always take the time to read your trust deeds and to adapt your trusts to any changing circumstances. Many trustees have little knowledge of what is expected of them as managers of a trust. And no trustee can ever claim ignorance if they don’t strictly adhere to the management of a trust deed.

However, a trust will only be investigated by SARS if it is obviously being misused or mismanaged. If it is correctly structured and administered in accordance with common law, the trust deed, and the Trust Property Control Act, a trust is a perfectly legitimate investment vehicle for South African tax residents.

(Information gathered from SARS and IOL)