Podcast: Inheriting a fortune

In Latest, The Fat Wallet by Kristia van Heerden

I liked the idea of doing a podcast on inheriting a large sum of money. I’ve dreamed about that kind of good fortune many times, as I’m sure you have. I hope this episode allows you to daydream about the kind of life you would lead if someone left you a small fortune. (Hopefully someone you’ll miss fondly, but not deeply. It’s hard to be happy about anything with a broken heart.)

I’ve said this before, but the most important question you ever have to answer about your money is, “What do I want my money to do?” If you can’t answer that question, your financial life will always feel somewhat unsatisfying. I’ve written about it here.

It’s especially important to be armed with the answer to that question when you inherit a small fortune. To be safe, perhaps think of the the answer now. You never know what might happen tomorrow. If you’re not sure what you want money for, you’ll likely watch it disappear before you can work out your strategy.

Ken inherited R3m. Here’s his story.

Upon hearing you get an unexpected inheritance you really don’t know what to do. Googling to look for podcasts really didn’t bring up too many good ideas. Most articles very generically state that you need to pay off any debt, pay of your house, have an emergency fund etc etc etc.

I’m in my early 30s. I’m self-employed. At this stage I’m single, no children so I don’t have to take anyone else into consideration. I earn a decent salary, I have no debt. I despise debt and was raised in a house where debt was the sworn enemy. Even buying my house a few years ago I felt sick that I had to borrow money.

My house is paid off.  Obviously there are maintenance costs and levies, but I’d rather do this than pay off a bond.

I have money invested in Satrix. I only started contributing to ETFs and not just my RA about two years ago. Before that I made some lump sum deposits when I could. Due to trying to diversify I now own way too many different ETFs, but I’m now more focused on why I buy certain ETFs.

I have an RA with a life insurer (not 10x at this stage). I have an emergency fund in an interest-bearing 24hr notice account. I’m currently saving for a new car in a multi-deposit fixed term savings account at Capitec with 7.6% interest. I don’t intend buying a new car with the inheritance. I drive what you’ll call a “sensible car”.

I lead a pretty simple life. Fat Wallet has definitely reminded me that keeping your costs down is the best investment you will ever make. I do have a few vices that money gets spent on but I’ve been fortunate to do so over the last few years.

I intend for the inheritance to provide me with lasting security. Most of it will be invested and I will continue to rely on my own financial strategy (which is basically ETFs) to build my wealth. I will probably spend about R200,000 of it on a trip of a lifetime – this is ridiculous, but given my circumstances I feel it can be justified.

I’m thinking a lot about offshore investments due to the current conditions and political uncertainty in our country.

Clean swearing bleeped out show is below.

Win of the week: Jenny Pigeon, who wrote back in episode 92. She got in touch with her friend and advisor after that episode and managed to renegotiate her fees.

“My advisor subsequently dropped her initial fee and halved her annual fee. So this was a good outcome for me.”

But she wrote us a great email that made my day:

I’ve started a happiness journal and there is a 21 day instruction to send out letters to friends and people that have had a positive effect on your life. It struck me that my happiness levels have really moved up since I have become a regular listener. I think the reason is the sense of empowerment, enthusiasm and curiosity  that this kind of information imparts.

You and Simon turn dry subject matter into something very digestible.

Thank you for making a positive contribution to my happiness.

Gerhard’s wife is about to become an entrepreneur. They are trying to figure out what to do about her pension.

My wife is leaving the comfort of a steady income and starting her own thing.

She has a pension with her current employer. When she leaves her job that pension will be paid out to her; what in your opinion will be the best option?

Here is the list of what we have made while lying in bed awake at three in the morning:

  1.       Pay of our debt and start the new adventure with a clean slate
  2.       Use that money it to fund the start-up
  3.       Open an Easy Equities account for her and save it in RA

Carel wants to know where his fees go when he buys a share.

What are the transaction fees when doing a trade on the JSE? Does all of it go to JSE?

Is JSE Ltd a private company, i.e. would they charge as much as the market would allow, or are there other factors involved?

I personally think that transaction fees are the biggest barrier to entry to the JSE. How much of this is physical labour (infrastructure maintenance) and how much of it is just settlement trust?

Francois wants to know if it’s worth moving an RA for a few percentage point saving.

I am wondering if it’s worth changing my RA provider again?

I’m currently with etfsaRA, paying 1% fees.

Easy Equities RA charge 0.6% exl. Vat. Will it be worth changing to save 0.3% on fees?

Will I pay a penalty if transferred?

A few years ago I section 14 transferred from Sanlam RA to etfsaRA (after listening to Simon). They penalised me, but well worth the saving in fees.

Here’s the spreadsheet Hendrik made for us to help you figure it out.

Miles is upset about fee sliding scales.

Why do the likes of Allan Gray, PPS, 10x and most other fund managers charge lower platform fees the more the client invests?

Surely the admin will be the same for a R100,000 client and a R3,000,000 client? So prejudiced IMHO. They have us by the proverbial genitals  and it really makes me the moer in.

Greg has been paying over 4% for his Sanlam RA, so he decided to move it. When he requested the move, they refused to move the last contribution he made.

This week I broke the news to my Sanlam RA “financial advisor” that I want to transfer to 10x. I was given a quote. Surprisingly it said there’s only a 0.13% about transfer charge, but my previous monthly contribution of R5000 was also outstanding.

I queried why this R5000 was deducted and they said it had been received, but did not yet reflect on the system due to the general standard 25 days clearance period and that it would not be deducted from my transferable amount.

I could be wrong, but 25 days clearance period just sounds like taking the piss, to me.

So I asked them to then amend the quote to therefore say that this R5000 will not be deducted from my transferable amount. They said they can’t do that since the system does not give them that option and “let’s see mid next with a new quotation.”

Jaco is earning dollars abroad. He’s got some offshore accounts and local accounts.

I have Isle of Man account and transfer most of money into this account.

I still have monthly obligations in SA and have to transfer some money to SA.

My financial situation is as follows:

I have two paid-off properties from which I earn a monthly income.

I have a TFSA for both me and my wife.

I have dollars invested in the Prescient Global Funds (Integrity) in an offshore account in Ireland through SA Integrity Asset management

I have money invested with Allan Gray in various unit trusts.

I have dollars in Sasfin offshore funds

I have two RAs – OM and Sanlam.

I also have some rands in shares, but feel that I need to get out of it.

The money in Isle of Man account will be invested into the First world hybrid real estate fund through Marriott

The other money I want to invest offshore, but not through a broker in SA. I am interested in investing with Vanguard World – It appears to be a great fund and everyone invests in it.

How do I invest in this fund from Saudi Arabia?

I want to buy Apple shares but don’t know a broker overseas – any advice?

I am not paying income tax at the moment apart from the tax on the rental income. Other income is not taxable at the moment due to me being out of the country.

How do I invest the rest of the income I have in the Isle of man account?

Any other advice on how and where to invest would be appreciated.

This is the Moneyweb article I was referring to in the podcast. 

Ian has made some great changes to his personal portfolio since listening to the show. He’s considering a few more and wants to know if he should have a pension fund and a provident fund or just one or the other.

  • The funds are both administered by the same company, and our group requires us to be on them so I can’t move.

Nipun has some ETFs in the US and has questions about the impact on his estate.

I have a Webtrader account with Standard Bank and have purchased USD denominated ETFs listed in the US in this account.

Would estate taxes be paid for this investment in SA or US & the rate of tax? I understand that assets over $60000 are taxed in the US.

Do I require a Will in the US or is my SA Will applicable?

What’s the most tax efficient way to invest offshore, can I continue with Webtrader of find another vehicle for investments?