There are several instruments besides tax-free savings plans and retirement annuity funds in which investors can invest (or “save”). Examples are unit trusts and listed shares that are traded on a stock exchange. Where savings are invested with a long-term investment horizon there is usually significant growth potential in the value of the investment. Therefore two types of tax need to be reckoned with, namely capital gains tax (CGT) and estate duty (ED). CGT is payable when an investment is disposed of at a profit, while ED is payable on the value of the assets possessed by an individual at the time of death.
Here are two tips for managing your investments in a “tax savvy” manner.
Transfer of growth assets to a trust can be highly beneficial from an estate and tax planning perspective.
The sooner restructuring is attended to, the better. Although capital gains above R30 000 will be subject to CGT when assets are transferred to the trust, this is a small price to pay compared to the exponentially higher future tax liabilities that the estate will incur when the owner dies.
The information provided above should not be considered in isolation. It should, however, be considered as part of an overarching and comprehensive estate planning strategy.
Please contact your relationship director or Danie van Zyl at firstname.lastname@example.org or 021 840 1600 should you require more information in this regard.