Sure, in hind sight, and for the time being, it is easy for me to stand up to mention I thought otherwise to those wise men and women. Anyway, I suggested we leave our property investments alone and I’m very pleased we did. For not only have there been reasonable returns but we saved ourselves in possible CGT & the bid spread costs in getting back what we had at the start had we listened to them. (So, when do we listen to those wise folk and act on their advice? That is maybe why one works with a financial advisor for two heads should be better than one.)

How often is it mentioned in these pages, if you have a well thought out plan leave it alone to do what it was designed to do? The following makes interesting reading.

Published, 18 April 2012
Author: Gareth Stokes : Editor,  FA News

Fund managers and other investment professionals can choose from four main asset classes when they structure a portfolio. These include bonds, cash, equities and property – where the property subset typically comprises the listed property investments on offer through the Johannesburg Stock Exchange. Listed property is a key building block for income fund managers due to the consistent growth offered by rental incomes.

It is worth noting the different structures available within the listed property universe. Investors can either purchase linked units in property loan stock companies, which hold direct investments in commercial, retail or industrial properties; or in listed property unit trusts (PUTS), which also invest directly in fixed property. Another option is via the collective investments industry where a number of property unit trusts funds are mandated to invest in listed property.

Listed property exceeds long term expectations

Local investors have enjoyed fantastic returns from the listed property sector in recent years. To find out about the asset class’ 2011 performance – and about prospects for 2012 – we attended a presentation by Mariette Warner, Listed Property Fund Manager at Absa Asset Management. “2011 was an interesting year,” said Warner, “because property returns are closely inked to the bond yield.” As the long bond yield falls – and it has exhibited extreme volatility of late – the SA Listed Property index rises. That said, the index mirrored other asset classes last year, swinging rapidly from its low point (down 9.6% by the end of the first quarter) to end virtually unchanged at 31 December 2011. The good news is that yields on listed property remained buoyant, ensuring an 8.9% total return for the full year!

Listed property comfortably outperformed bonds, cash and equities on a 12-month view… And over the past nine years (the SA Listed Property index was created in 2003) the asset class has delivered compound average annual returns of some 25%! In other words, property has trounced the JSE All share (18.2%) and All Bond index (10.2%) over the past decade… The five year performance is just as impressive with 14.3% per annum from listed property versus bonds (8.6%), cash (8.5%) and equities (8.1%). “Listed property has generated fantastic income for investors,” said Warner, before reminding investors that share selection played a huge part in listed property unit trust performance.

Warner provided a table of the real earnings growth achieved between 2007 and 2011 across a wide selection of property funds as proof. The best performer over five years provided 8.4% real annual compound growth versus a  9.2% contraction from the worst performer! An investor in the best performer would have turned R100 into R175 over the period – the middle-of-the-road opportunity turned R100 into R146 – while the worst performer almost halved the initial investment.

Matching property funds with investor requirements

Warner said the optimal mix of listed property investments would vary from one fund manager to the next based on their specific requirements. She discussed strategies suited to long term value investors, income dependent investors, high risk speculators and those keen on price arbitrage opportunities.

“Listed property exists to beat the performance on bonds and cash,” said Warner. The fantastic performance over one, three, five and even nine years – which saw listed property trounce all other asset classes – has been great for long term value investors. The combination of income and capital growth over a long period has enabled fund managers to produce truly staggering returns. Income dependent investors have been well served too, thanks to the likes of Fountainhead Property Trust, which Warner singled out as a proxy for index. This conservatively managed company has grown its distributable income per unit each year going back to 1994!

Speculators have enjoyed a field day thanks to funds offering different distribution strategies under the same umbrella. Warner discussed this section with reference to Hospitality Property Fund’s ‘A’ and ‘B’ units. During the property market boom of 2002 to mid-2008 speculators made a killing by backing the higher distribution on the ‘B’ units over the safer but lower ‘A’ unit returns. A shift in economic fortunes beginning 2009 led to lower interest rates and a more difficult rental market – with the result returns on the ‘B’ units dried up too! It is extremely difficult to calculate Net Asset Values when distributions vary – so such speculation is only for investors with strong nerves!

Price arbitrage opportunities make more sense for cautious fund managers. Absa Asset Managers takes advantage of price volatility to ‘bottom fish’, adding sensibly priced units to their portfolio. “With price arbitrage the risk can be assessed,” said Warner. She used a graph of Vukile Property Fund’s dividend yield divided by the index dividend yield to demonstrate clear ‘buy’ and ‘sell’ opportunities…

A similar plot for 2012

Warner expects 2012 to play out along similar lines to 2011, though she predicts more stable returns from listed property thanks to a stable long bond market. “If we look at the SA inflation cycle we can only conclude that bonds are expensive at present (based on real bond yields), but not as expensive as mid-2010 and well below the ‘peaks’ in early 2000 and 2004,” she said. Property remains a higher risk than bonds, so investors should expect a risk premium on property.

As Q1 2012 flashed by the listed property sector offered an attractive 8% forward yield – giving investors an opportunity to ‘sample’ South Africa’s growing rental income streams. Share selection remains critical and fund managers who want to deliver market beating returns will have to carefully consider their listed property investments as well as the inflation risk to long bonds. The inflation risk is offset by the 4% to 5% per annum forecast growth in rental yields.

Editor’s thoughts: Absa Asset Management expects South Africa’s rental vacancies to improve from 2013 – with rental income following suit the year after. As for the current year, investors can look forward to similar returns to those generated in 2011. And that means we’re ‘booking’ around 8% total return from listed properties. Do you consider listed property investments (for your client’s discretionary capital) or do you rather leave the ‘income’ generating investments to retirement fund managers?

Any down cycle can last longer than we would wish, causing great discomfort at times.

Please take a look at this really very clever Powerpoint presentation by, Allan Grey. Click on the short cut and open with Powerpoint.  Once open, select the ‘single screen’ view and click each slide to proceed.

Jumping ship to lose

The case shown is a real client who elected not to use the services of a financial advisor. In the first place their selection of portfolios is poor, in fact, downright dangerous. Especially so for their age. In the second, and third and fourth, and so on places, ….. well, see for yourself.

Would you like to have be in their shoes? Not using the services of an independent financial advisor has, in all probability been a foolhardy and costly mistake.  Surely the advisor’s fee  would be worth the protection from this irrational  behaviour, no doubt driven by pure emotion. Then, I am an independent financial advisor, so I must be slanted towards our services; not quite at any price, but certainly a price.

I really hope you gain from this as it is a very good lesson to be taken away from here.

Allan Duff

Is it not so often that what appears to be clever is so simple?  I believe that is what makes clever things, being simple. At least, the supporting logic behind it is simple. The article here shall remain topical, not just next year, or the year after, and not simply at year end, but all year, every year. Sure it is written as a suggested philosophy for 2012 but why not simply make it a philosophy? Simple really! I hope you benefit more than a wee bit from this.

Published in, DAILY NEWS

November 27 2011

Author not

Enough with the prophets of doom and gloom! A fresh new year is staring you in the face, and what better time to face your realities and get your financial ducks in a row!

Here are twelve practical ideas to set you up for a financially fit 2012:

1. Call in the experts

A meeting with a financial adviser is the first step on the road to financial independence; what follows is entirely up to you. A good qualified financial adviser will take a holistic view at your financial situation and will suggest a financial plan to help you reach your goals by considering your risk profile, life stage, financial position and time available to you to reach those goals.

2. Prioritise your financial needs

Without a sense of priorities, you’ll have limited success in planning your budget. Decide what you most critically need to spend your money on, and develop a realistic spending and savings plan. If your children’s education is a key concern, then list it as a priority area and allocate a lesser position of importance to that flat screen TV.

3. Clear and avoid unnecessary debt

Financially stretched or not, the last thing you need is excessive debt. This can be defined as debt that you have incurred to buy things that you don’t really need, for example a flat screen television! Through careful planning with your financial adviser, try to pay off all your expensive debt such as your credit card or personal loans. Anything bought on credit ends up costing you a lot more than the original price, so save up to buy something rather than paying it off – and save on interest!

4. No credit cards

If you’re lucky enough to get a year-end bonus, consider using at least part of it to pay off your credit card debt. And, if you weren’t lucky enough to get a bonus, work out another plan with your financial adviser to get rid of your credit card debt. With no monthly credit card payments you will be able to purchase more things in cash, and you can avoid credit purchases and the interest payable that comes with credit. To remove the temptation of clocking up credit card debt again, leave your card at home or commit to only using it for emergencies.

5. Plan for your old age

You are not able to generate an income forever, so make sure your financial plan makes full provision for your retirement. Your adviser can suggest retirement savings options to you that can accommodate your budget and financial goals. Ask your financial adviser about the tax benefits of taking out a retirement annuity (RA) for the best retirement that a lifetime of hard work deserves.

6. Protect your income

Just as you should insure your prized possessions, such as your car or house, it is important to protect your greatest asset, your ability to earn income. This asset can disappear in a flash, for instance if you are disabled in an accident or if you lose the ability to work due to serious illness. Most people think “that won’t happen to me”, but it really isn’t worth taking that chance. A range of income protector plans or disability cover options are available from financial services providers to safeguard yourself if you are no longer able to work.

7. Quit pricy bad habits

Smoking doesn’t just spell bad news for your health. It’s also bad news for your pocket. Depending on how much you smoke, quitting the habit can save you about R600 per month, that’s R7 200 a year! Also, a non-smoker generally pays lower life insurance premiums and a non-smoker is generally healthier, which means fewer visits to the doctor and a saving on medication costs. Another health tip that can save you money is to make sure you visit your dentist, doctor or gynae for that annual check-up. Prevention is better than cure and it’s also cheaper!

8. The s-word…Save!

If we want to achieve our financial goals and live our dreams, we simply have to start saving. If your employer offers you an annual increase, allocate a portion of it to savings before you get used to having the extra money in your pocket. Better yet, set up a savings account debit order for the 1st of every month! That way you won’t miss the extra money, as it will feel like you never really had it to begin with. You might think you can’t afford to save, but you will be surprised how you can make it work if saving is your priority.

9. Work on your spending habits

It’s easy to spend our hard-earned salary on less important expenses – money that could be used to achieve a particular goal, or for emergency savings. Because it’s so easy to “swipe the plastic”, leave your credit cards at home and try to only bring them out in emergencies. Beware of luxuries dressed up as necessities. Watch out for cash leakage. If cash in your purse disappears – leaving you with nothing to show for it, take note of what you spent it on. Although it’s tempting to spend more when your income climbs due to well-deserved raises and promotions rather use those increases to save more.

10. Plan your spending

Plan purchases. Only buy what you planned to buy. Make a shopping list and stick to it so you don’t overspend. When buying big, expensive items, do an online search for price comparisons. Always ask yourself: do I really need this? If the answer is no, put the item back and walk away. Carry less cash and leave your credit cards at home unless you need to make a planned purchase.

11. Make sure you have a Will

Everyone should have a Will. Not only does it help to spell out who the beneficiaries should be of your estate (who should get your money, your car, house, savings etc) when you die, it also helps to ensure that your last wishes are known and understood.

For example, you may have very specific instructions on who should take care of your minor children should you die unexpectedly. Having a Will means that your family and friends will be comforted during a very difficult time in the knowledge that your last wishes were clearly communicated.

12. Plan for the longer term

Once you’ve put everything into place to kick off a financially fit year, set your vision on the longer-term. It’s well and fine to plan one year in advance, but to really achieve your goals and to ensure you have a plan that will lead you to them step-by-step, you need to think further ahead – to 2013, 2020, 2025 and beyond.

Take control of your finances and embrace the New Year with the determination to be the financially savvy person you are destined to be.

From Business iafrica.com via Liberty Life’s Blueprint at Breaksfast

07/11/2011

“Oh look, yet another Christmas TV special! How touching to have the meaning of Christmas brought to us by cola, fast food and beer… Who’d have ever guessed that product consumption, popular entertainment and spirituality would mix so harmoniously?” — Bill Watterson, Calvin & Hobbes

Everybody loves a windfall. It doesn’t have to be a fortune; even finding a forgotten R20 in a coat pocket is enough to put a smile on your face. With the end of the year rushing closer many of us are looking forward to a rather large boon – that much-anticipated thirteenth cheque.

This money is often spent long before it arrives in our bank accounts. The safe bet is that it will be used to buy the little luxuries that a monthly salary could not usually accommodate. But if we reframe our views toward this annual windfall we could turn it into a small fortune rather than a fading memory.

Guaranteed tax-free return

Let’s assume you get an R8000 bonus cheque this year. Instead of blowing it you decide to put the money towards paying off your house. If your bond is sitting at R700 000, and you deposit the money into it, you could eliminate a whopping R60 700 from the total interest charges over the life of the bond.

Investing to beat inflation

If you don’t have a bond you could think about investing the money. If you bought some Unit Trusts and earned an eight percent return over three years you will have grown your bonus by R2161. If you invested your bonus every year for five years you would amass R59 500 (capital and growth).

Paying to sleep better

If, like the average South African, you carry a lot of credit card debt then paying off your credit card/s will be a worthwhile investment. Unsecured debt is very expensive — it could be costing you 10 percent more than your home loan. If you can free up R1000 per month after paying off these loans you could make significant contributions to your retirement savings.

Investing for your future

If you don’t have a retirement plan then your R8000 would be a great kick-start.

If you get an annual increase with your bonus then use the increase to add to this investment every month. You may think that saving say R500 per month may not be worth it, but if you invest for six years at a return of eight percent you will have
R36 500 after five years and R294 000 after 20 years. If you increase your payments annually by at least the rate of inflation this figure will run well into the millions.

Steven Braudo from Group and Retail SA strategy at Liberty Life says another way to use your bonus is to make sure that you are covered for any insurance renewals that typically happen at the beginning of January. Sometimes the premiums can be hefty and if you have not made provision for them in your already stressed budget you run the risk of returned debit orders. If you do not pick this up your policies could lapse.

Look after your wheels

Use your bonus to give your car a thorough service and keep it in good shape for a few extra years.

If you buy three R100 000 cars in a 12-year period you will have paid out over R150 000 in interest charges, enough to pay for another new vehicle. In addition, a new car loses 20 percent of its value as soon as you drive it off the showroom floor.

Get smarter

When was the last time you spent money on your continuing education?

Gone are the days when you could leave school or college and do the same job for 25 years without learning new skills. Whatever industry or service you are in, the changes are so swift that if you do not continually educate yourself you will be left behind.

So, instead of buying a beach holiday full of sand, sunburn and cheesy photographs rather put your bonus check to work. By getting into the habit of making windfalls (and your monthly pay cheque) work for you, one day you will wake up and not have to go to work. Now that’s a bonus worth planning for!

Watch your credit card instalments

Many people complain about their bonds and car payments, but often their credit card instalments add up to more than their car payments.

13th cheque — how it works

If your employment contract states you are entitled to a 13th cheque you are entitled to it regardless of company profits.

Did you know?

At the turn of the 20th century, US employers began substituting the traditional Christmas offerings to employees of turkeys, sweets or gold coins with a cash bonus. As early as 1902, JP Morgan & Company broke the record by giving each of their employees a full-year’s salary as a Christmas present.

These two recent posts are excellent in their advice and give a lot of good facts.

The role of Special Trusts in financial planning

By: Geraldine Macpherson, Legal Marketing Specialist at Liberty Life

A special trust is a trust created solely for the benefit of a person who suffers from a mental illness (as defined in The Mental Health Act), or, a person who suffers from any serious physical disability. This is known as a Type A Special Trust and has the following requirements:

• The trustees may not have the discretion to pay income or capital to any other person whilst the qualifying beneficiary is still alive.
• A qualifying person must as a result of the physical or mental disability not be able to manage his own financial affairs, or, if over the age of 18, not be able to provide for his own maintenance; and
• The person must be alive on the last day of February of the relevant year of assessment – the trust will not qualify to receive the favourable tax treatment in the year that the qualifying person dies, and it will instead be taxed as a normal trust.
• SARS must approve the trust deed as a Special Trust Type A and will register it accordingly.

Creating a Special Trust in your Will

In 2003, a second category of special trust, Type B, was recognised with the following requirements:

• A trust created in terms of the will of a deceased person,
• Solely for the benefit of trust beneficiaries who are relatives of the deceased,
• And, where the youngest beneficiary has not yet reached the age of 21 years on the last day of February in a year of assessment – the trust will be taxed as a normal trust in the year in which the youngest beneficiary turns 21.
• The trust beneficiaries must all be alive at the date of the death of the deceased – an unborn child may, however, also benefit.
• A relative includes the spouse or anyone related to the deceased or his spouse within the 3rd degree of consanguinity, and includes an adopted child.
• Each year the financial officer will submit the return to SARS confirming that the trust qualifies as a Type B Special Trust and request that it be taxed accordingly.

What are the tax consequences of Special Trusts:

• All the income tax provisions that relate to trusts in general, apply to special trusts as well.
• A special trust is taxed according to the rates applicable to natural persons (18% – 40%).
• Exemptions and rebates applicable to natural persons are not applicable to special trusts.
• Section 10A of the Income Tax Act, which allows the capital element of voluntary purchased annuity (VPA) to be exempt from tax, applies to Type A Special Trusts only.
• The following CGT inclusions and exclusions applicable to individuals, also apply to special trusts:
  • The annual exclusion of R20 000.
  • Inclusion rate of 25%.
  • R1.5 million primary residence exclusion, and R2 million exclusion.
  • Personal use assets excluded.
  • Compensation for personal injury, illness or defamation of the trust beneficiary.
  • On the death of the trust beneficiary, for CGT purposes only, the status of the trust as a special trust is preserved until the earlier of the disposal of all the assets held by the trust or two years after the date of death of the beneficiary.

Children with mental or physical disabilities need special care which can be provided either at home with specialised care-givers or at specialised institutions, both of which come at considerable costs. Should the parents pre-decease their special needs children, who will bear the financial burden for their child’s special needs? A policy on the lives of the parents either owned by the trust, or, owned by the parent with the trust as beneficiary can satisfy this need, alleviating the burden on surviving family members, also giving peace of mind to specialised institutions that fees will be provided for.

The use of a testamentary trust for minors is a must in every estate plan – particularly on the simultaneous death of both parents, or if the parents are divorced – on the death of either of the parents. There are benefits in providing for separate trusts for the children and the surviving spouse.

Where the trust established for the surviving spouse is solely for the spouse’s benefit (with no discretion for the trustees to pay a third party during the spouse’s lifetime) then the assets transferred to that trust will still qualify for the section  4(q) deduction in the deceased spouse’s estate. The children’s trust will qualify for the favourable tax treatment as a Type B Special Trust, up until such time as the youngest child reaches the age of 21 (even though the general age of majority has been amended to age 18).

Life assurance policies on the lives of the parents, payable to the testamentary trust to be established for the benefit of the minor children, can provide for the needs of the children as beneficiaries of the trust, creating financial stability and peace of mind.

Children with mental or physical disabilities need special care

A special trust is a trust created solely for the benefit of a person who suffers from a mental illness (as defined in The Mental Health Act), or, a person who suffers from any serious physical disability.

This is known as a Type A Special Trust and has the following requirements:

• The trustees may not have the discretion to pay income or capital to any other person whilst the qualifying beneficiary is still alive.
• A qualifying person must as a result of the physical or mental disability not be able to manage his own financial affairs, or, if over the age of 18, not be able to provide for his own maintenance; and
• The person must be alive on the last day of February of the relevant year of assessment – the trust will not qualify to receive the favourable tax treatment in the year that the qualifying person dies, and it will instead be taxed as a normal trust.
• SARS must approve the trust deed as a Special Trust Type A and will register it accordingly.

Creating a Special Trust in your Will

In 2003, a second category of special trust, Type B, was recognised with the following requirements:

• A trust created in terms of the will of a deceased person,
• Solely for the benefit of trust beneficiaries who are relatives of the deceased,
• And, where the youngest beneficiary has not yet reached the age of 21 years on the last day of February in a year of assessment – the trust will be taxed as a normal trust in the year in which the youngest beneficiary turns 21.
• The trust beneficiaries must all be alive at the date of the death of the deceased – an unborn child may, however, also benefit.
• A relative includes the spouse or anyone related to the deceased or his spouse within the 3rd degree of consanguinity, and includes an adopted child.
• Each year the financial officer will submit the return to SARS confirming that the trust qualifies as a Type B Special Trust and request that it be taxed accordingly.

What are the tax consequences of Special Trusts:

• All the income tax provisions that relate to trusts in general, apply to special trusts as well.
• A special trust is taxed according to the rates applicable to natural persons (18% – 40%).
• Exemptions and rebates applicable to natural persons are not applicable to special trusts.
• Section 10A of the Income Tax Act, which allows the capital element of voluntary purchased annuity (VPA) to be exempt from tax, applies to Type A Special Trusts only.
• The following CGT inclusions and exclusions applicable to individuals, also apply to special trusts:
  • The annual exclusion of R20 000.
  • Inclusion rate of 25%.
  • R1.5 million primary residence exclusion, and R2 million exclusion.
  • Personal use assets excluded.
  • Compensation for personal injury, illness or defamation of the trust beneficiary.
  • On the death of the trust beneficiary, for CGT purposes only, the status of the trust as a special trust is preserved until the earlier of the disposal of all the assets held by the trust or two years after the date of death of the beneficiary.

Children with mental or physical disabilities need special care which can be provided either at home with specialised care-givers or at specialised institutions, both of which come at considerable costs.

Should the parents pre-decease their special needs children, who will bear the financial burden for their child’s special needs?

A policy on the lives of the parents either owned by the trust, or, owned by the parent with the trust as beneficiary can satisfy this need, alleviating the burden on surviving family members, also giving peace of mind to specialised institutions that fees will be provided for.

The use of a testamentary trust for minors is a must in every estate plan – particularly on the simultaneous death of both parents, or if the parents are divorced – on the death of either of the parents.

There are benefits in providing for separate trusts for the children and the surviving spouse.

Where the trust established for the surviving spouse is solely for the spouse’s benefit (with no discretion for the trustees to pay a third party during the spouse’s lifetime) then the assets transferred to that trust will still qualify for the section 4(q) deduction in the deceased spouse’s estate.

The children’s trust will qualify for the favourable tax treatment as a Type B Special Trust, up until such time as the youngest child reaches the age of 21 (even though the general age of majority has been amended to age 18).

Life assurance policies on the lives of the parents, payable to the testamentary trust to be established for the benefit of the minor children, can provide for the needs of the children as beneficiaries of the trust, creating financial stability and peace of mind.

Geraldine Macpherson is Legal Marketing Specialist at Liberty Life

Editorial

28-09-2010

The best protection is a plan
“Investing requires both the creation and execution of a plan; everything else is speculation.” Guy Fletcher, chief investment officer, Peregrine iQ (now Vunani Fund Managers), in The Effective Investor, Franco Busetti.

Every investor wants to grow and protect wealth. Yes – we take on risk in the pursuit of good returns – but the ultimate goal is to grow wealth not lose it. And so investors will often ask is my money safe or is my money protected.

Despite some excellent legislation there are still risks around. And there are also various forms of protection- each at its own cost. But one of the biggest risks around is not having a suitable plan and sticking to it.

People want to hear that there is some way of avoiding a market adjustment, says Gavin Came, director, Financial Intermediaries Association of Southern Africa and chair of the Financial Planning Exco. With a proper plan and appropriate investment portfolio you can weather the changes and lower volatility. But you need patience and time.

“There is no stable answer or formula to the market that will guarantee a road to wealth. Like all endeavours, it requires hard work, commitment, passion, an open mind, a strong gut and an ability to admit mistakes – and of course a dollop of good luck.” Richard Pitt, BlueAlpha Investment Management, in The Effective Investor.

In a note released today Investec Asset Management’s Jeremy Gardiner answers the question so what should investors be doing now?

“The simple answer is nothing. As we have said before, you can’t change sails during a hurricane, ie the time to adjust your portfolio is when markets are calm in anticipation of weather coming ahead, and not when you’re in the eye of the storm. If you wanted to lighten your equity holdings or switch out of the rand, you should have done that a while ago. Not now, after the rand has weakened.

“Tinkering with your portfolio at this time will most likely see you making emotional rather than fundamental decisions. Yes, the rand has taken a smack, as have markets; and yes, they may still both weaken further, but given that this weakness is in reaction to global events and emerging markets such as Brazil and India are being punished just as severely, our currency and market should retrace some of the losses and you run the risk of being caught on the wrong side of that.

“What you need to do is correctly identify your risk profile, create a portfolio appropriate to your risk profile and let it ride out any volatility markets present.”

Trusts as a vehicle for holding property are not as popular and in vogue as they once were, says Lanice Steward, MD of Anne Porter Knight Frank, and the main reason for this, she believes, is that the capital gains taxes on property held in a trust are now higher than those for individuals.

Nevertheless, says Steward, in her opinion, trusts will always have an important part to play in estate planning because they offer safeguards against misuse of the legacy.

“The decision as to how to hold the property should be made in conjunction with the client’s financial advisor and not the estate agent who is usually unaware of the client’s financial situation,” said Steward.

“Regrettably,” she added, “it has to be admitted that many of the less experienced agents have caused problems here because they are not completely au fait with the legal and tax differences applicable to trusts, companies and close corporations.”

Over the last ten years or more, said Steward, a number of High Court judgements have caused agreements entered into by trustees to be set aside. The main reason for this being that widely recognised, widely accepted legal principles have not been observed.
“The attorneys, Smith Tabata Buchanan Boyes,” said Steward, “have produced an excellent summary of the four main reasons why trust agreements involving property are “void ab initio” (i.e. invalid from inception) and these should be learned by all estate agents and the public. They are

Sylvia Walker

Distracted by the exciting flurry of invites, fittings and honeymoon bookings, couples tend to avoid conversations relating to their finances before marriage. While women often have their own financial plan before getting engaged, having an individual plan is not enough. As a married couple, you’ll need to take each others’ financial needs into consideration. So before you tie the knot, it’s important to set aside time to talk about money matters.

Market Development Manager for Old Mutual South Africa, Sylvia Walker, believes that it is vital to make provision for your partner in case something happens to you unexpectedly – and your partner should do the same. “Protection against death or disability resulting from an accident will give you both peace of mind, knowing that your family will be taken care of financially,” she says. Old Mutual’s claims experience shows that 25% of deaths are due to accidents.

“Disability cover can cover the costs of making adjustments to your lifestyle after an accident. Even if you are completely disabled and unable to work, adequate cover will ensure that you will continue to receive an income,” she explains. “Life cover is crucial to ensure that your loved one is taken care of in the event of your death.” Life cover can help to ease the burden of debt such as an outstanding bond and other costs upon your death.

Having an updated will is an important part of a financial plan, to determine how your estate gets divided when you pass.

If you are married in community of property and pass away, your spouse is entitled to half of all the assets in the communal estate and is therefore effectively the owner of half of all your assets. The other half of your assets will be divided between the people you nominated as heirs in your will. If however, your marriage is out of community of property, your spouse will have no automatic right to any of your assets and your entire estate will devolve in terms of your will, unless there is a maintenance claim instituted against the estate.

Without any will and without children, your spouse will inherit your entire estate, whether you are married in or out of community of property. If you do have children, it’s more complex, but your estate is basically divided up between your spouse and your children.

“There are major implications should you pass away without having a will in place – especially if there are children involved,” confirms Walker. So speak to a financial adviser or your broker about updating your financial plan. “An adviser can help you to get your finances in order, leaving you to focus on enjoying life to the fullest,” she says.