Category Archives: Finance

Business Credit Cards for Startups

As the founder of a startup, there are plenty of good reasons for you to consider using a business credit card. Not only can it help you keep personal and business finances separate, it can come in handy for covering cash flow, building your credit history, and saving money through various perks and rewards.

Not all business credit cards for startups are equal, however, and you’ll want to choose one that best fits the needs of your business. If you’re required to travel often, for example, you might want to go with a card that offers great airfare and hotel rewards. If you’re looking to transfer existing debt from a high cost loan or credit card, you’ll want to choose a card with a low or zero balance transfer fee. Others who plan to carry a balance might choose one with a low interest rate.

Why wouldn’t I just use my personal credit card?

Well, glad you asked. Here are three serious advantages to using a business credit card for business purchases:

  1. Having a business credit card allows you to keep your personal and business expenses separate. You’ll be able to track business expenses more easily, making tax time, as well as maintaining a company budget, much less of a headache.
  2. By getting a card in the name of your business you’ll start to establish a business credit scoreseparate from your personal one. That means that if you have to make a late payment, your business credit will take the hit instead of your personal credit (there are exceptions—read about which business credit cards report to personal credit bureaus here).
  3. As you start to establish a business credit profile, you’ll build your business’s credibility. When it comes time to apply for other business financing, solid business credit scores can help you qualify for more financing at better rates.

Let’s take a closer look at a few business credit cards that might help you take your company to the next level.


Product solutions being sold to those with UK pensions

In April 2006 new legislation in the UK introduced the concept of Qualified Recognised Overseas Pension Schemes (QROPS). The motivation was to allow anyone with a UK pension who had left the country or who was planning to leave the country to transfer their pension savings to an overseas pension without incurring the 55{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} tax that would otherwise be levied on such transfers.

Legislators clearly had the intention of allowing individuals more flexibility with their pensions and to prevent their savings from being eroded by tax. On the face of it, it was a positive move.

However, good intentions don’t always lead to good outcomes. This is not because there is anything wrong with the concept or with the products, but because they have led to the growth of an ‘advice’ industry with some questionable practices.

Over the last number of years, a growing number of firms have been cropping up all over the world, including in South Africa, claiming to specialise in QROPS products. They encourage those with UK pensions to transfer them into QROPS on the basis of a range of supposed advantages.

The most widely trumpeted of these is their tax efficiency. The UK currently has a ‘lifetime allowance’, below which contributions are given tax relief, but above which benefits are heavily taxed.

Moving your money into a QROPS would avoid this limit. However, since the limit is currently £1.25 million and will drop to £1.0 million in April next year, only a small percentage of people are really affected.

Another tax issue put forward by those promoting QROPS is that pensions in the UK may face a 45{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} tax charge on the death of the main member, with only the remainder being left to a nominated beneficiary. However, this only applies to members over the age of 75 and is only in place until April 2016. After that date, good planning would make it possible to avoid this tax altogether.

There is therefore little reason for anyone under the age of 74 to even be worried about this, and yet it is widely repeated on websites promoting QROPS.

These examples highlight the kind of marketing used for these products. Generally, they only tell half the story.

In fact, many of the supposed advantages of QROPS are now available in the UK. For example, there is no need to buy an annuity with a UK pension any more, a number of UK providers allow multi-currency funds, and there is huge flexibility in investment choices. In other words, it is not necessary to move your pension out of the UK to reduce your currency or market risk.

It also appears that those marketing QROPS are using the fact that the UK has dropped the lifetime allowance for pension funds to argue that people are better off moving their money elsewhere as further detrimental changes might follow. However, without knowing what those changes might be, how does anyone know whether they really need to avoid them or not?

It is also highly debatable whether all of the offshore jurisdictions being promoted as QROPS havens are as safe and well-governed as they are made out to be. A popular jurisdiction for those selling QROPS in South Africa is Gibraltar, where pensions are not a regulated activity, there is no financial services ombudsman and the Gibraltar Financial Services Commission does not resolve disputes between consumers and licensed firms. It’s difficult to argue that investors will receive better protection there than in the UK.

So why do these firms argue so enthusiastically in favour of QROPS?

Unfortunately, the answer is that there is a lot of money to be made in selling them. The potential commissions are significant.

Independent analysis of these products has shown that, depending on how they are structured, investors can pay up to 18{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} of their savings in often undisclosed or hidden fees in the first year alone. That means that they need to be very sure that the benefits they are getting are worth it.

Investments and higher interest rates

The US Federal Reserve’s policy committee next meets on 16 and 17 September, and a number of analysts believe that it may well announce the first interest rate increase in the country since June 2006.

Although the recent devaluing of the Yuan might push the timeline out again, it has already been a long time coming and the start of the rate-tightening cycle has been talked about for many months now. The question this raises for investors though, is what the Fed hiking rates will mean for the markets and how they should prepare for it.

“The starting point is to think about why rates go up in the first place,” says Rhynhardt Roodt, portfolio manager at Investec Asset Management. “They generally go up because times are pretty good, the economy is starting to do well and central banks start seeing some warning signs like inflation starting to pick up and the job market tightening. They want to prevent an overheating scenario and that is normally the start of the rate cycle.”

Although it is happening gradually, this is what is taking place in the US. However it is certainly not what is playing out in other parts of the world.

“The global growth backdrop is very unsynchronised at the moment,” Roodt says. “It’s very unlike the period of 2005 to 2008 going into the great financial crisis when global growth was very co-ordinated. It was predominantly led by emerging markets and China, but just about every economy in the world was expanding.”

Now, however, economies are at very different points in their respective growth cycles.

“The US is by far the leading economy in terms of where they are in the broader economic cycle,” Roodt says. “Europe is just emerging from recession, which means that things are getting less bad there, but it’s hardly robust, so they are not close to raising rates. Japan is in a similar scenario. China is on the other side of the spectrum – in a slowdown phase where growth rates are falling and they are reducing interest rates.”

This disjointed nature of the global economy makes the answer to the question of how to invest a lot more difficult and quite dependent on which markets you are looking at.

The usual response

The textbook way to manage your investments in a rising interest rate environment is to move out of defensive assets. This would ordinarily be the strategy one would pursue in the US at this point.

“You generally don’t want to own bonds when interest rates are rising,” Roodt says. “Because there is growth, you want to lean towards growth assets like equity.”

However, given the low interest rate environment we have experienced over the last five years, bonds have been unattractive for some time already. Equity markets in general are also looking fully-priced, meaning that there is less potential there than one would normally expect at this point in the cycle.

In particular, one area of the market that might usually be primed to go up at this point is currently in the doldrums.

“Within equities you would typically want to consider more later-cycle, non-defensive type shares, but again, the answer is not that simple,” Roodt says. “The companies that fit that description are typically commodities, but with China slowing I don’t think that’s the answer now.”

This is clearly an unusual environment, and one that makes stock picking and asset allocation very difficult. However, there are some standard considerations that still make sense.

“What you want to avoid are your typical bond-proxy, high-yielding, defensive sectors like utilities, healthcare and telecommunications,” says Roodt. “The hunt for yield becomes less of a theme when rates go up and those high yield sectors tend to begin to struggle. I would probably expect things like utilities and consumer staples to begin to under-perform against the broader US market should interest rates move higher.”

He suggests that more cyclical sectors like traditional IT and consumer discretionary may be the more likely winners.

Business Credit Cards for Travel

The Platinum Delta SkyMiles card from American Express is a great card for frequent Delta travelers who plan to make a large amount in purchases ($50,000+) on their card each calendar year. This card has a killer signup offer—Earn 35,000 bonus miles and 5,000 Medallion® Qualification Miles (MQMs) after you spend $1,000 in purchases on your new Card in your first 3 months. Earn a $100 statement credit after you make a Delta purchase with your new Card within your first 3 months.MQMs help you get closer to reaching Medallion status in the Delta SkyMiles program.

Added benefits:

  1. Earn 2 Miles per dollar spent on purchases made directly with Delta. Earn 1 mile on every eligible dollar spent on purchases.
  2. No foreign transaction fees.
  3. Earn more miles with boost programs: 10,000 bonus miles and 10,000 MQMs after $25,000 in purchases each calendar year, as well as another bonus after $50,000.
  4. Earn a domestic, round-trip companion pass each year you renew the card.
  5. Added Delta bonuses: free checked bag, priority boarding, 20{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} savings (via a statement credit) on eligible purchases made in-flight.


  1. If Delta isn’t a convenient airline for you, this won’t be the best card.
  2. Annual fee: $195

The Starwood Preferred Guest Business Credit Card from American Express offers a flexible rewards program for frequent flyers of many different airlines who enjoy comfortable resort and hotel stays. Earn 25,000 bonus Starpoints® after you use your new Card to make $5,000 in purchases within the first 3 months. Along with a generous rewards program, new cardholders will earn additional bonus points if they spend even more. Earn SPG Gold status after 30,000 in purchases on your card in a calendar year, which allows you to score more hotel upgrades, late checkouts, welcome gifts during hotel stays, and more.

Added benefits:

  1. Five “starpoints” per dollar spent at Starwood Hotels, two points per dollar at Marriott Reward hotels, and one point on all other purchases.
  2. Points can be redeemed at over 1,300 hotels and resorts, and over 150 airlines within the SPG program.
  3. No foreign transaction fees.
  4. Free Boingo WiFi at over 1M Boingo hotspots.
  5. Access to Sheraton Club Lounge.

The right choices after the death of a spouse

In this advice column Mikayla Collins from NFB Private Wealth answers a question from a reader who needs advice for a widowed relative.

Q: Someone in our family is 60 years old, has never worked but has a tax number and is a recent widow. She currently has no means of receiving an income other than the option of renting out her immediate residence as a way of earning a little income every month to take care of expenses.

 The house is fully paid for and therefore she won’t have to worry about a bond. With her monthly expenses in mind, the rental from her unit will be enough to look after rates and levies as well as 90{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} of her monthly expense which is very positive.

Our question is simply, with a sizeable spousal inheritance of around R8 million, what would your advice be to someone in that specific situation?

We believe that she would require to use some of it – possibly dividends or withdrawals over time – to assist her with maintenance to her house or to supplement her lifestyle in some way, shape or form.

We’re not naive to know that having a rental income would provide her the ability to never need to touch her capital investment, but should she need to, what would the correct investment be and are there any penalties involved in investing that amount of money? And what are they?

We do not know what would be the best route to take and would really appreciate your time and expertise.

It seems as if it has already been decided that your relative will rent out her residence for income. I assume that you have taken alternative living arrangements into account in your calculation of expenses and there will be a shortfall of around 10{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} of her monthly expenses thereafter, which must be provided for in deciding on an investment strategy.

So what we are left with is R8 million inheritance to invest, with the objectives of providing a small income and allowing for ad hoc withdrawals should the need arise.

Firstly, you need to determine the rand amount of monthly income that she will require, and the portion of the R8 million capital that will be needed to provide this income, remembering to take inflation into account. This portion can be invested to provide dividends and interest, and the decision of the underlying investment would depend on her risk preferences and need for capital protection.

If she wants complete capital protection, then she could use an interest bearing bank account such as a 32 day notice or fixed deposit, where she would get in the region of 7{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} per annum at current rates. But bear in mind this would not allow for inflationary increases. If she wanted some dividend income then she could look at a share portfolio, or she could consider income focused and cautious unit trust funds as a mix of both dividends and interest.

If she invested through a voluntary structure such as a unit trust investment or share portfolio, 15{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} withholding tax would be applied to dividends, and any interest above R23 800 per annum would be taxed as income. Capital gains tax would apply to any units or shares sold if applicable.

If she invests through a living annuity structure, local dividend tax and tax on interest will not be applied, and capital gains will not be taxed, but all income withdrawn will be taxed at her marginal rate of tax.

Deciding which investment is best for her needs will therefore depend on the rand amount of income required. The most tax efficient structure will differ depending on the amount she needs.

Consider when investing your savings in retirement

In this advice column Mikayla Collins from NFB Private Wealth answers a question from a reader who needs advice on investing in retirement.

Q: I am retiring within the next 3 months and would like to ask advice in my situation. I am 70 years old and have R900 000 to invest. It is currently in a money market fund earning interest of approximately 7.25{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327}.

I have no dependants, my townhouse is paid for, my car is paid for and I have no debt. I just have my monthly expenses which are rates, electricity, levy and living expenses.

As I am retiring soon, I need to invest this amount, probably split into two different portfolios – one to generate an income and one to grow the capital over the long term. I don’t want to submit to a ‘pension’ fund as such as that would also attract charges each month which I cannot afford. I want to invest most of this lump sum myself as I cannot afford to attract any extra fees each month being paid to an investment adviser.

I would welcome your reply as to your suggestions and identifying a few funds which would give me what I am looking for or any alternative suggestions.

Also, at my age what taxes would I be liable for when investing in a fund to draw from?

From your question it is clear that you are aware of the need to grow your capital as well as provide income. Most people aim only to maximize their income, forgetting about the long term effects of inflation, and the fact that some growth is needed over and above the income they are taking. People who do not take note of this, end up drawing down on their capital and running out of money later on.

As far as income is concerned, you should be looking at income funds, which invest only in cash, government and corporate bonds and listed property. They allow you to have access to the returns provided by government and corporate bonds, but still have access to your money should you need it.

Income is the primary focus, so these funds will not invest in equity and the income you receive should be quite stable. The top ten income funds have produced between 8{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} and 10{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} in a very low interest rate environment, where banks would have given you around 5{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} to 7{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327}.

Choosing funds for growth is more likely to be where you may struggle and if you don’t want to pay adviser fees you are going to have to do a lot of research yourself. We cannot under any circumstances recommend funds to you without knowing your specific needs and constraints and your willingness and ability to accept risk and volatility.

This is not only in terms of local regulations, but also international ethical and professional standards. The question you ask may seem simple but even in trying to put together a few simple tips, there is a lot more to it than just recommending a few funds.

However, here are some basic guidelines:

Stick to the asset managers you know. They are well known for a reason and usually it is because they are consistent in performance. If you refer to their websites, the information is quite easy to find. Get a few fact sheets for the funds you are interested in and compare them to each other.

Start by comparing the returns – not just over one year but three, five and ten years. If you are presented with two funds with similar returns, you should then choose the one with the lower risk or volatility.

How is estate duty calculated

In this advice column Geraldine MacPherson from Liberty answers a question from a reader who has questions around structuring his estate.

Q: I have some questions regarding estate planning . What I need to know is whether there is enough cash in my and wife’s estate to pay the estate duty and executors fees.

In order for me to make adequate provision for the costs associated with dealing with our affairs, I would like to get an estimate of the estate duty and executor’s fees.  

My questions are as follows. When determining the value of the estate on which the estate duty and executor’s fees are based:


  • Are assets such as property and motor vehicles valued at purchase price or at market value? If the latter, who determines the market value and on what basis?

The value of the assets is based on their market value, which the executor is tasked with determining. When it comes to assets such as immovable property, an appraiser appointed in terms of the Administration of Deceased Estates Act will have to be used and the estate will have to pay this person’s fees.

Practically, the car’s value will be the book value, unless it is sold, in which case it will be the actual sale price. Note that the Master can insist on an appraiser valuing any property (not only immovable property) if he has reason to believe that the value provided by the executor is not reasonable.

  • Are life insurance policies included in the assets as deemed property a) for the purposes of calculating executor’s fees; and b) for the purposes of calculating estate duty? 

If a beneficiary has been nominated then the policy benefits will pay directly to the beneficiary and will not fall into the estate. The executor will therefore not be eligible to charge his fee on the amount and it will only not attract estate duty if one of the spouses is the beneficiary or if it is a qualifying keyman or buy and sell policy.

If, however, no beneficiary is nominated or the estate is nominated as the beneficiary, then the benefits will fall into the estate, under the administration of the executor and he will charge his fee accordingly.

In such a case, the benefits will also be taken into account when calculating estate duty, unless the life insurance policy is exempt in terms of the provisions of the Estate Duty Act, or accrues to the surviving spouse. Interestingly, it is the person who receives the benefits who will have to actually pay the estate duty attributed to the policy benefits.

The types of policies that are exempt are certain employer owned policies, such as certain keyman policies, certain buy and sell policies, and policies that have been taken out to meet a requirement in an ante nuptial contract. In addition, any benefits, including death benefits from long term insurance policies that accrue to a surviving spouse, qualify as a deduction when it comes to estate duty under section 4(q) of the Act, thus no estate will be attributed to those policies. 

  • I have a retirement income fund (living annuity). Is this included in the assets of the estate for the purposes of a) calculating the executor’s fees; and b) for the purposes of calculating estate duty? If so, what value is given to this retirement funding given that it is pre-tax money?

If you have nominated a beneficiary for the annuity, then the benefit will pay directly to that beneficiary and it will not be included in the estate. The executor will therefore not be eligible for a fee on it. If no beneficiary is nominated, then the benefit will be paid to the deceased’s estate, as a lump sum.

This lump sum will attract retirement tax in the deceased’s hands, and the after tax benefit will be paid to the estate. The executor will then deal with this asset and will accordingly charge his fee.

In terms of current legislation, the benefits in an approved retirement fund or compulsory annuity are exempt from estate duty. This may change to some extent going forward, as National Treasury intends to include any “disallowed contributions” for estate duty purposes. We only have draft legislation on this at this point in time, so we do not know for certain how this will actually play out.

Reduce the costs in an estate

The death of a spouse, friend or relative is often an emotional time even before estate matters are addressed.

And truth be told, death can be an expensive and cumbersome affair, particularly if estate planning was neglected, the claims against the estate start accumulating and there isn’t sufficient cash to settle outstanding debts.

People generally underestimate the costs related to death, says Ronel Williams, chairperson of the Fiduciary Institute of Southern African (Fisa). Most individuals have a fairly good grasp of significant expenses like a mortgage bond that would have to be settled, but the smaller fees can also add up.

To avoid a situation where valuable assets have to be sold to settle outstanding debts, it is important to do proper planning and take out life and/or bond insurance to ensure sufficient cash is available, she notes.


The costs involved in an estate can broadly be classified as administration costs and claims against the estate. The administration costs are incurred after death as a result of the death. Claims against the estate are those the deceased was liable for at the time of death, the notable exception being tax, Williams explains.

Administration costs as well as most claims against the estate will generally need to be paid in cash, although there are exceptions, for example the bond on the property. If the bank that holds the bond is satisfied and the heir to the property agrees to it, the bank may replace the heir as the new debtor.

Williams says quite often estates are solvent, but there is insufficient cash to settle administration costs and claims against the estate. In the event of a cash shortfall the executor will approach the heirs to the balance of the estate to see if they would be willing to pay the required cash into the estate to avoid the sale of assets.

If the heirs are not willing to do this, the executor may have no choice but to sell estate assets to raise the necessary cash.

“This is far from ideal as the executor may be forced to sell a valuable asset to generate a small amount of cash.”

If there is a bond on the property and not sufficient cash in the estate, it is not a good idea to leave the property to someone specific as the costs of the estate would have to be settled from the residue. Where a particular item is bequeathed to a beneficiary, the person would normally receive it free from any liabilities. This could result in a situation where the beneficiaries of the residue of the estate may be asked to pay cash into the estate even though they wouldn’t receive any benefit from the property, Williams says.

The most significant administration costs are generally the executor’s and conveyancing fees.

If the will does not explicitly specify the executor’s remuneration, it will be calculated according to a prescribed tariff, currently 3.5{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} of the gross value of the assets subject to a minimum remuneration of R350. The executor is also entitled to a fee on all income earned after the date of death, currently 6{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327}. If the executor is a VAT vendor, another 14{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} must be added.

Assuming an estate value of R2 million comprising of a fixed property of R1 million, shares, furniture, vehicles and cash, the executor’s fee at a tariff of 3.5{3f122c2f069eda3d0860a1f81bf979c88e8fd4d59794181835181851b7558327} would amount to R70 000 (plus VAT if the executor is a VAT vendor). Conveyancing fees will be an estimated R18 000 plus VAT. Depending on the situation, funeral costs may be another R20 000, while other fees (Master’s Office fees, advertising costs, mortgage bond cancellation and tax fees) can easily add another R10 000. By law advertisements have to be placed in a local newspaper and the Government Gazette, with estimated costs of between R400 and R700 and R40 respectively. Master’s fees are payable to the South African Revenue Service (Sars) in all estates where an executor is appointed with a gross value of R15 000 or more. The maximum fee is R600.

Where applicable mortgage bond cancellation costs, appraisement costs, costs of realisation of assets, transfer costs of fixed property or shares, bank charges, maintenance of assets and tax fees will also have to be paid. The executor is also allowed to claim an amount for postage and sundry costs, while funeral expenses, short-term insurance, maintenance of assets and the cost of a duplicate motor vehicle registration certificate may also have to be taken into account.

Emotions that could derail your will and estate plan

People often draft a will with the best intentions, and even though the document may be technically sound, emotional decisions can have far-reaching consequences for the beneficiaries. They may even result in potential delays when winding up the estate.

To discuss the feelings or sentiments that could derail your estate planning, I’m joined by the CEO of the Fiduciary Institute of Southern Africa, Louis van Vuren. Louis, I’d like to discuss each of these emotions in some detail, but let’s unpack the issues first. What has been your experience? What are the five emotional issues that may create problems when winding up an estate?

LOUIS VAN VUREN: Ingé, firstly the desire to control – even after your death. Then also the desire to keep the peace – specifically in difficult family circumstances. Then there is also sympathy with struggling children, trying to look after your struggling children after your death, sometimes at the expense of other considerations. Feelings of guilt, or what I sometimes call debts of honour, when people feel they want to set the record straight or set things right in the will that they haven’t got round to during their lifetime. And then lastly feelings of superiority, whether it’s moral superiority or racial superiority or whatever. That also sometimes comes between a good, practical legally enforceable will and the wishes of the testator.

INGÉ LAMPRECHT: Louis, like you mentioned just now, impractical provisions in a will are often due to a desire to control or rule from the grave, so to speak. Why is this problematic and how do you avoid it?

LOUIS VAN VUREN: Ingé, the reality is that it doesn’t matter how carefully you think about things prior to your death, after your death circumstances can change drastically. And then if your will and the provisions of your will and how you would like things to happen after your death – sometimes for many years to come in certain cases – do not take into consideration the fact that circumstances can change drastically, this can lead to impractical situations, impractical solutions, etc.

One example would be: it has been, especially in the farming community, for many years customary to leave the farm and the farming operations to, let’s say, a son with the usufruct in favour of the surviving spouse, usually the wife. And the usufruct – in itself there is nothing wrong with it and it’s a perfectly legal structure – but the practical side of this is that often the farmers also try to limit the usufruct by stipulating that it will exist until the death or remarriage of the surviving spouse. And when people started living together and not necessarily getting married, there were all kinds of hilarious ways of trying to avoid a situation where the surviving spouse would still enjoy the usufruct after living with somebody.

An example that I came across many years ago was where the will stipulated that if the surviving spouse, the wife, stayed with any man under the roof of that farmhouse for more than five nights, the usufruct would be cancelled and everything would then go to the son. Now obviously the surviving spouse then found a very creative way around that. She married a year-long friend of theirs and they stayed in the house on the farm from Monday to Saturday morning, then went to town for the weekend and came back on the next Monday morning.

INGÉ LAMPRECHT: Very clever!

LOUIS VAN VUREN: Not breaking the conditions of the will. That’s just a hilarious example of where trying to rule from the grave didn’t work.

Then the other thing: there are conditions without sanction or an alternative bequest if the condition is not met. Now, that means nothing if you do not attach a sanction to a conditional bequest. An example of a conditional bequest would be: “I bequeath R1 million to my son, but he can only get it if he runs the Comrades Marathon in under six hours.” If you don’t set an alternative in the will, that means nothing because the condition is then unenforceable.

INGÉ LAMPRECHT: Louis, a lot of South African families are so-called “reconstituted” families. If this is your second or third marriage, there may be competing interests at play and a desire to keep the peace. What do you see in practice?

LOUIS VAN VUREN: Ingé, a reconstituted family can be a very simple situation, but it can also be a very complex situation. You can just think of all the different permutations with regard to children. In these families you get my children, your children, our children – and those are all competing interests. The current spouse may not be the natural parent of any of the children. Then you have the competing interests in the estate plan and, in crafting a practical and legally binding will, the challenge of addressing competing interests of looking after the surviving spouse, but at the same time protecting the interests of the children.

There is a slightly obscure provision in the Wills Act of 1953, which basically provides that if you bequeath something to the surviving spouse and a descendant or descendants – your children, for example – and let’s say one of the children renounces that inheritance, then that portion that would have gone to the child who renounced the inheritance will go to the surviving spouse. There is no way you can avoid it. You cannot write that legislative provision out of your will. It overrules any provision in your will. So that is not necessarily a problem if the children are all the children of the surviving spouse, the natural children of the surviving spouse.

But if the surviving spouse is not that natural parent of any of the children, that could become a problem. The conflict has to be managed – that conflict and those competing interests have to be managed in crafting the estate plan and drafting the will, making sure that you balance the interests of the surviving spouse and the children in a situation like that. If you don’t manage it at the planning and drafting stage, it will become messy after your death.

Harvard House answers a question from a reader who is making his first investments

I am sure that you will feel very satisfied that you moved your first R20 000 offshore given the weakness in the local currency. However, it is still worth noting a point of caution:

The rand’s major fall in December was very much about political action. The falls up to the end of November 2015, and again in early January, however, were not.

South Africa is an emerging market economy and major exporter of commodities. With the slow-down in China this has placed all such countries in a similar position.

Secondly the US Fed’s clear intention to raise interest rates and the uncertainty as to the trajectory of the increase has created a flight to the dollar and created dollar strength on a broad front. The combination of these two factors has created a perfect storm for the rand. Mr Zuma then punched a hole in the bottom of a boat that was already taking on water.

If you believe that this can never be reversed, then you need to reconsider the history of the rand between 2000 and 2010 and link that to commodity prices. This is not to say that the rand is going to return to R6 to the Greenback. The level it goes to is way less important than the level you get in at. Diversify by all means, but understand the risk.

To answer your question specifically, gold is a difficult subject. South Africa is full of gold bulls for various reasons and I have met many who swear by it.

However the dollar gold price and the US dollar have a largely inverse relationship. In dollar terms you would have lost money in gold over the last five years. This means that this becomes a rand bet.

The problem is that if commodities run, the dollar weakens, the rand strengthens (by implication) and the gold price rises. That means that you are in a net neutral position.

The other issue with gold is the lack of compounding. Gold produces no income (like dividends or interest), which means you are purely buying price action.

The question then is, can gold form part of a diversified portfolio? It can, but I certainly wouldn’t make it too big a percentage.

Finally, I do not think any young person could fail by investing in a tax-free savings account (TFSA). The benefits are substantial and if well planned it could become the jewel in a future retirement portfolio.

The key for young people using a TFSA is to invest for growth (don’t worry too much about volatility), don’t steal from the kitty, and as best as possible, use your R30 000 per annum contribution limit. The benefits of being able to convert a growth investment into an income investment in 30 or 40 years time that attracts no capital gains tax liability and produces tax-free income will be invaluable.