When I remind everyone about the tax and investing benefits that The Treasury gives us each tax year. Not sure why we all wait until the end of the tax year, the clever ones invest in their RA and tax-free funds in the beginning of the tax year, for an extra 11 months in the market. Time in the market is everything.
But we are human. And I can feel your eyes glaze over when I talk about the tax advantages of investing in RA’s and Tax Free funds. So, I will concentrate on three benefits that are sometimes unnoticed.
Ninety-One points out that if you invested in their Opportunities Fund in a RA rather than a discretionary account, your return would be twice as large over a 15-year period, assuming you are taxed at the maximum marginal rate. This we know. But forget that all income and capital gain within the RA is free of tax. Added bonus.
Those who want to leave an estate to their heirs should consider an RA. The RA does not fall into your estate so avoids estate duty (t’s and c’s apply) and executors fees. The T and C is related to disallowed contributions over and above your annual R 350 000 or 27.5% RA contribution limit. These contributions may fall into your estate, but only if your Heir takes a lump sum. If your Heir elects to take an annuity, and we suggest a living annuity, all of the RA value, including the disallowed portions, will be free of capital gains tax, estate duty, and executors’ fees. Your Heir will only pay tax on the amount of the annuity that they include in their taxable income, and this can be as little as 2,5% of the capital value of the RA.
The outstanding benefit of an RA is that the process of getting funds to your Heirs is a lot less onerous than going through The Master of The High Court when it falls into your estate. The Master of the High Court Estate process now takes in excess of two years.
But I feel I have made things less clear. Maybe we should chat?
Look forward to hearing from you.
Keep safe.