Month: August 2018


Being good stewards of our money

Clever ways to keep yourself on track with your savings goals

I am having more and more discussions with clients who are finding it tough to make ends meet every month. If you are someone for whom examining columns of figures and sorting through receipts is akin to root canal treatment, then this newsletter may contain your solution.

I also share some ideas on how to participate in #MandelaDay, this being July and with many of our fellow citizens struggling to have just one meal a day.

An App to help budget and save on costs

Being a good steward of your money usually starts with a budget. I personally have found huge value in using an App called 22seven (click here). Powered by Old Mutual, it is a wonderful budgeting tool that nudges you from time to time to help you save on costs. It links to your bank account and other instruments you may select, and pulls all the information from each through.
I have found that 22seven really helps me in sticking to my budget and finding areas in which I can save, by keeping me up to date and informed. And you can be assured of safety as the app has banking security in the back end.

Stash and Save

Each month has its own budgetary demands, and sustainig your saving goals can be difficult. I love the App by Liberty called Stash (click here). This App opens a tax-free savings account for you, and also links to your day-to-day banking card. Each time you swipe your card, the App rounds up your purchase and puts the difference into your tax-free savings account. You can set the limits and amounts in the App. I would suggest using this as a long-term investment to benefit from the tax-free structure. Please consult with your financial planner to understand the regulations related to tax-free savings accounts, especially if you have an existing tax-free savings account.

#MandelaDay and me

When I feel overwhelmed by the extent of the need in South Africa, where we have such high levels of unemployment and poverty, the starfish principle reminds me that I can make a difference to at least one person. So, the call for #ActionAgainstPoverty offers many opportunities to participate in creating change. has initiatives to join, and here are a few ideas in addition:

FTFA: make Mandela Day poverty alleviation sustainable

As official food security partner of the Nelson Mandela Foundation, Food&Trees For Africa has earmarked schools and community gardens with whom they have worked for the past year, to receive support. Get involved and your contribution – big or small – will grow to have an impact for years to come. FTFA is planting orchards and expanding food gardens in schools and communities: email

Warm regards


Reaping rewards of disciplined saving

Craig Turton, Certified Financial Planner® and MD of Chartered Financial Planning, shares the wisdom of focused saving.

Julia is just the kind of investor a financial planner appreciates.

Julia is a single woman who holds a management position within a media business. She travels extensively for work and puts in long hours.

Having started with a R9,000 a month salary, and having been my client for 15 years she now has a balance sheet in excess of R5million.

How has this 37-year old client created such substantial financial security?

She has chosen to place the majority of her assets in investments rather than lifestyle assets. An investor will potentially live off the growth of the investment one day; a lifestyle asset usually depreciates and is earmarked for lifestyle use – it is not included her investment assets.

In my experience, many clients invest more heavily in lifestyle assets such as large homes, flashy cars and holiday homes. In contrast, Julia, from her first pay cheque, determined her level of comfort required to make her happy – this is her lifestyle ceiling. Once she reached this level, she began to invest in investments rather than lifestyle elements.

At a price …

At each of our financial planning meetings, and checking her new asset value, Julia gains confidence to keep doing what she is doing. She is often concerned that her friends don’t know how well she really has done through investing. She is happy to share but is seldom asked.

Julia is by no means ‘stingy’, and enjoys time out with friends, usually paying for more than required. An avid golfer, she has travelled to some top international golf courses. She has found the balance to live happily now but also save for the future.

Reasons for her success

  • Having been employed at the same business for 14 years, Julia has kept her Pension Fund contributions in place. This is called compulsory saving. Often, when leaving an employer, employees will cash in their Pension Funds to fund their lifestyles or an entrepreneurial endeavour. Julia has already determined, should she resign, to transfer her Pension fund so it remains a retirement asset, whether into a Preservation fund or to her new employer.
  • Her father convinced her to save from day one of work into a unit trust – it has now grown to R563,000. The key to the unit trust investment is being well diversified in the investment and never trying to time the market or change managers. She has stuck to investment strategy we selected.
  • Julia has lived in the same property since age 23. Purchased for R800,000, it is now worth R1,650,000, and was paid off over 14 years by transferring her bonuses every year and an extra few thousand every month. This was a focus for Julia.
  • Julia bought a rental property three years ago, knowing there was huge potential for a corporate rental; the property was in a growth area so she decided to invest. She bought for R750,000 and three years later it has grown in value to R960,000. The rental yields R7,000 per month in income which more than covers the bond. Julia has used all her surplus monthly cash to lower the bond to R344,000. I have advised her that settling her bond 100% would affect her taxable income as there would be no interest to offset the income. Sometimes having a bond on a rental property is a good idea due to tax. We have agreed to adjust her thinking by rather focusing on building up enough of a lump sum to transfer offshore. This is one area where she is lacking.

Through her employer, Julia has accumulated R747,000 in share options. She will have to realise these shares in 2018 as part of the share agreement. She will need to pay some Capital Gains Tax on the proceeds and once she has the funds in place, we will add a portion to her new offshore investment and a portion to a new well-diversified share portfolio.

She had a Retirement Annuity to which she was contributing and has built up to R344,000. We stopped these contributions four years ago as she was not getting the deduction on the premium. Even though she can now contribute again and get the deduction, we decided rather to focus on offshore and creating more liquidity in her portfolio. This forms part of her retirement strategy.

Julia spread her risk between assets. Her share portfolio and properties would be regarded as growth assets and ‘risky’ for some. But over the last 14 years, the ‘risk’ has paid off. She has invested in the most risky fund she can with her Pension due to her age and time to retirement, with regulation 28 a factor. This is probably regarded as a moderate risk. Her Retirement Annuity is invested the same way.

Her emergency fund is in a cash account as she understands there should be no risk associated here as she could draw on it anytime. Her unit trusts are invested in a strategy targeting 6% above inflation over a seven-year period. Since inception, this investment has performed according to its target, even though in the last two years it has performed below inflation.
With this is mind, Julia has stuck to her investment strategy and has not disinvested or thought of moving to something more conservative. She understands and is comfortable with this short-term underperformance, knowing that the markets turn, and these returns will improve.

Interesting notables

Over the past three years, in a tough economic environment, Julia’s balance sheet has grown on average by 14%. At every meeting she asks me if she is on track for retirement, should she buy a new car, and so on. Her salary is R47,000 per month before tax.

At age 65, her retirement assets will have a current value of just over R10,000,000 in today’s terms. This will offer her R50,000 per month with little risk of the capital depreciating. Julia loves what she does and may work to age 70.


  • Emergency fund: R110,000
  • Unit trust with a monthly contribution of R5000 to R563,000
  • Nissan: R67,000
  • Primary residence which is paid off: R1,650,000
  • Rental property with a corporate tenant: R960,000 (rental income of R7000 per month)
  • Company Pension fund: contributing 15% to the Pension Fund and value at R732,000
  • Share portfolio: R747,000
  • Retirement Annuity: R344,000 (no contributions)
  • Debt: R344,000 on rental property

Takeaways: remain invested, keep to investment strategy, understand the key component of diversity, use tax incentives.

Julia thinks about her investments but is not tempted to move or change. Her decisions are now around where she invests new money.

Of course, Julia is not married and does not have the expense of children. Her investment will need to be adjusted when this time comes but not for now. She has done the hard yards with her investment, and compounding on her investments will stand her in great stead even should the cost of parenthood arise.


Preserving Your Legacy

It is our goal at Chartered Legacy & Trust to ensure that your wishes, as expressed in your Last Will and Testament, are given effect to after your death.
How best to achieve this depends on your particular family circumstances and who your nominated beneficiaries in your Will are; for example, you may be financially supporting an elderly parent who no longer has the mental capacity to manage her own financial affairs. How do you ensure that the money left to her in your Will is managed correctly and used for the purpose for which you intended?

A way of addressing your concerns in the aforementioned example would be to create a testamentary trust (also referred to as a trust mortis causa). A testamentary trust differs from a discretionary or inter vivos trust in that it is created in your Last Will and Testament, and only comes into effect on your death and only if the circumstances as at the date of your death still require it.

When must I create a Testamentary Trust?

There are various situations that would justify creating a testamentary trust in your Last Will and Testament. Here is a list of some of these circumstances:

1. Your beneficiaries are your minor children or grandchildren

In terms of South African law, beneficiaries under the age of 18 years are not able to inherit in their personal capacity. The law requires that their inheritance be paid into the Guardian’s Fund which is under the control of the Master of the High Court. The funds are available to the minor but application must be made to the Master of the High Court and the use of the funds is at his discretion.

As an alternative, you can make provision in your Will for any inheritance due to a minor to be paid into a testamentary trust created and set up in terms of your Will. Minor beneficiaries still have access to the money, but at the discretion of your nominated trustees and under their control. The monies remain in trust until the beneficiary reaches an age predetermined by you or at the trustees’ discretion, at which point their inheritance can be transferred into their names.

This is of particular relevance where parents of young children die simultaneously in an accident. Their estates can then be paid into a testamentary trust setup in terms of their Will which is then managed by the nominated trustees for the benefit and maintenance for the surviving children.

2. Your beneficiary is a disabled or dependent child or family member

If you have a child or a family member who:

  • has a physical and/or mental disability; and/or
  • is financially dependent on you; and/or
  • is incapable of managing their own affairs

A testamentary trust can be set up on your death to provide for such a person until their death or a date specified by you. The trustees of your testamentary trust will step into your shoes and ensure that your beneficiary is taken care of and looked after in the way you would have looked after them yourself.

Your children/beneficiary may be majors, but lack the necessary maturity or experience to take responsibility of their inheritance. They may not be financially savvy, declared insolvent or there may be a spouse whom you feel is a negative financial influence over your nominated beneficiary. Payment of their inheritance into a testamentary trust protects the inheritance until the beneficiary is in a better position to manage their own affairs.

A testamentary trust set up for minors or persons with a mental disability can be registered with SARS as a special trust and taxed as an individual provided they are the sole beneficiaries of the trust during their lifetime.

3. You want to benefit from Section 4A – Estate Duty Abatement

As a way of reducing the amount of estate duty payable on the death of the surviving spouse, on the death of the first dying spouse, the estate duty abatement (currently R3 500 000) can be bequeathed to a testamentary trust. The beneficiaries of the testamentary trust will be your surviving spouse and descendants, and they will have discretionary access to the funds for their maintenance. The benefit of this is that the money grows in the testamentary trust and not in the hands of the surviving spouse, where the growth may attract estate duty on the death of the surviving spouse.

Basic Structure and Formalities

So how do you go about setting up a testamentary trust?

The basic structure and formalities applicable to a Last Will and Testament will still apply when you creating a testamentary trust in your Will. However, your Will becomes more lengthy as it must include all the relevant trust provisions necessary for the creation of a trust. The trustees derive their powers from the trust deed therefore there must be sufficient detail in the Will.

When it comes to creating a testamentary trust:

  • Your intention must be clear that you would like to create a testamentary trust and the provisions of this testamentary trust must be listed in your last will and testament;
  • The reason and goal of the testamentary trust must be clear;
  • Beneficiaries must be named specifically;
  • The assets must be identified, which are to be subject to the control of the trustees of your testamentary trust;
  • Trustees of the testamentary trust must be listed;
  • Termination of the testamentary trust must be determined or determinable;
  • Beneficiaries to inherit the capital of the trust must be named in order for the assets to be paid to them on the date of termination of the testamentary trust.

There are costs involved in the setting up and the running of a testamentary trust just as there are in the case of an inter vivos trust. This must be kept in mind when considering whether the amount to be paid into the testamentary is sufficient to cover the costs. A further caveat is that as a testamentary trust forms part of your last Will and Testament is cannot be amended.

Finally …

While we may find considering our own mortality either morbid or macabre, the proper planning can save our beneficiaries so much strife and so many difficulties. Having an objective and expert partner is invaluable in creating a practical and accurate way of ensuring your loved ones are cared for once you are no longer around.


What lessons are you teaching your children about money?

My son started grade one this year, and sport is becoming a big factor in our lives. Besides the obvious consideration of what sporting interests will cost us as parents (think of a full cricket or soccer kit, or golf clubs), I have been intrigued by the field-side interactions I have witnessed of late.

“Come on, Liam, for every goal you score I will give you R10.”
“Ethan, you will get R50 for each lap you swim.”

I wonder how this form of encouragement works. When the kids get in the car after the match or gala, do they ask for the money and do the parents then give them the money? And what do the kids then do with the money? What are we teaching our kids about money?

I tried this on my son, the goalkeeper. I said to him (in private), “My boy, for every goal you save, I will give you R10.” He did quite well, but at no point did he look at me and say, “Dad, I have saved six goals, so you need to give me R60.” En route home, he never asked and has never asked since. I now know that money is not a driving factor for my son. I believe my just being there supporting him is enough for him to want to try improve all the time.

For adults, I know monetary reward can be a motivator for harder work, greater innovation, better performance – and there is nothing wrong with setting goals in this regard. And I believe we are equally responsible for cultivating a positive attitude to money in our children.

Meaningful money lessons

Here are some ideas to help our children have a healthy relationship with money:

  • Money is often a hot topic for parents, and at times, our feelings can be quite negative, with costs adding up and the related stress increasing. Our kids pick up on these anxious chats and negative vibes and then associate them with money. Try to keep money conversations with your kids positive and have the hard discussions with your spouse when they are asleep.
  • We can teach our kids that it is not hard to make money; they must just find opportunities. There are lots of problems in the world, and we can teach our kids how to solve problems and reward them with money for being innovative. This way they understand by solving something on their own can lead to making money.
  • Quality schooling is vitally important but don’t undervalue the lessons in reading at home, listening skills, self education and talking to successful people to learn how they think and work.
  • “If you are doing what you love, you will never work another day in your life”. We have all heard this sage adage. Encourage your children from a young age to use their natural talents, abilities and passions to think of solutions to fix problems. Don’t be afraid to teach your kids to think big … the more we allow ourselves to think deeply, the more we are likely to get paid one day, or pay ourselves.
  • Encourage your kids to do as much as possible at a young age. But if they fail, they shouldn’t move on to the next thing automatically. Persistence is crucial and failure is not fatal. Success is reached by failing over and over again.
  • Teach your kids to respect people on all levels in society. A car guard is working to put food on the table for his family. Just because he has a different job and maybe earns less than us, doesn’t mean he is not a man. He is a man providing for his family and this should be respected.
  • Money makes you happy. We have all heard this. Money in your bank account can possibly make life easier or allow you to feel some degree of security, but no amount can create contentment. Happiness comes from family, friends and love. We should instill this value in our kids. We need money to survive for sure, but there are no guarantees of happiness – that’s up to us.

Enjoy the last vestiges of summer and embrace the promise of winter with lots of enthusiasm!

Warm regards


Tax return filing

If filling in a tax return were an easy task, the South African Revenue Service (SARS) would not have a page dedicated to ‘How to complete your income tax return’.

When in doubt, turn to a professional for advice, but in the meantime here are some tips for a smooth tax return submission:

Income versus salary

Ensure that you include all your sources of income:

  • Interest that you have earned on your investments

Don’t be tempted to omit this. All financial institutions complete an IT3(b) certificate, from which SARS learns what interest you have earned in the year of assessment. You will face penalties for any omissions.

  • Income from renting out a property, such as a holiday home
  • Income from a trust


Home office expenses

SARS is scrutinising home office expenses, and random site visits are not unheard of.

To calculate office expenses accurately, the following formula is recommended:

Medical expenses

Simply uploading your medical aid tax certificate is not sufficient for the claim for out-of-pocket expenses. SARS carefully looks for the proof of payment for qualifying medical expenses paid out of the taxpayer’s own pocket; so, for SARS to allow the deduction, a medical invoice must be submitted with a proof of payment.

Travel allowances

When it comes to claiming a travel allowance, it is not unusual for SARS to request more information, in addition to a taxpayer’s log book.

Glitches and errors

Should you forget to upload all the necessary documents, an additional assessment will be raised, and you could find yourself owing SARS money. Have all your supporting documents ready before you complete and submit your ITR12 tax return.

Filing taxes can be a complicated matter, and SARS recognises that taxpayers may make genuine errors when submitting their tax form. Deal with errors in the following ways:

  • Request for correction: Use this form if you have made an error or omission on your return, or if you believe SARS has captured your information incorrectly.
  • Notice of objection: Use this form when your information has been captured correctly, but you disagree with your assessment outcome. This must be done within the (TAA) prescription period: 30 days from date of assessment.

For more details on this, consult the SARS guide.

To start your own tax filing, visit the official Tax Season 2018 for Individuals page on the SARS website.

If doing your taxes on your own is too daunting, consider using a tax practitioner – they may save you time, money and stress. The SARS call centre is not always the best route to go.


Eight tips to avoid anguish when winding up an estate

Three years ago, Chartered client, Karen lost her husband, Peter, to cancer – a life-shattering event after fourteen years of marriage. Three years of difficulties ensued while Peter’s estate was being wound up. Karen says, “I want to pass on to Chartered clients the lessons I learned, so that they will be better prepared than I was.” “It was an unbelievably difficult time for me. We were both previously married and divorced, and in Peter, I had found my ultimate soul-mate. His disease was rapidly progressive and totally devastating. He was just 59 when he was diagnosed.”

To help clients avoid experiencing the same difficulties, Karen shares practical advice in EIGHT tips. Regularly reviewing and, if necessary, revising the contents of your Will ensures that it always accurately reflects your intentions. We had a joint will in which our assets were left to each other. Everything seemed fine until we discovered that the Will no longer reflected our wishes.

We then consulted with Chartered Legacy and Trust to ensure that our Wills were valid and that no legal flaws hindered the winding up process of Peter’s estate. My tip is to get proper legal advice from a recognised expert, as I did with Chartered, before finalising your will. Get guidance when it comes to tricky assets like trusts, business shareholdings and assets held offshore. A proper, legal Will is only the start. In our case, Peter kept things quite close to his chest. He was the money-person in the family; there were so many things that I did not understand or even know about. The rule for husbands (particularly): be totally open with your wives. Take them through the investments, policies, assets; every area must be explained. And do it long before you start having medical issues – with Peter, once he was sick, he was both unable and unwilling to discuss these matters. Winding up an estate is technically complex, frustrating and lengthy, if it has not already been properly set up.

Appoint a competent company as the agent to support you as the executor. But be warned, you will still spend hours signing forms and hunting for documents. It is a long, tedious process. Answer this question: if your spouse died yesterday and all his/her assets were frozen for up to three years, would you have enough cash to live on? Enough said. “I believe that the surviving spouse should wait a while before making important changes like selling the house or moving across the country. In an emotional state, important decisions can easily be wrong. Take your time to recover.” “Peter was young, we were looking forward to a long retirement. He had so many hobbies, things he wanted to do. I know this sounds trite, but I urge people to enjoy their lives today, savour their relationships now. For us, the cancer was a sudden end to our dreams. A key part of this preparation process is also to have a belief system in place. We all die, we just don’t know when.” Tip four: Cash flow Tip five: Don’t rush Tip six: Be prepared (Karen and Peter are pseudonyms to preserve our client’s identity.)

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