Making no decision is also a decision

By Andró Griessel

Decisions, whether they are made or not, determine the way your life turns out. I cannot emphasize this enough. You can decide not to make a decision, but this in itself is also a decision, and has consequences. The ability to make good decisions about a variety of aspects of your life is, whether you like it or not, of cardinal importance for your own wellbeing and that of the people close to you.

What follows is a real example of how a lack of decision-making had financial impact on an individual and his family. George (not his real name) contacted me a little over eight years ago for advice about his policies. He mainly had three needs:

  • He wanted peace of mind on whether he was over- or under-insured;
  • He wanted to be financially free by the age of 55 (he was 41 years old at that stage); and
  • He needed a will.

The problems

To answer his questions were relatively easy. However, in my feedback, under the section titled “Estate Planning”, I brought up the following as a significant point of concern:

  • At that stage, George already had a personal estate of R30.5 million (including life insurance). His estate would already have been liable for a significant amount of estate duty if he did not give attention to his structuring. The problem would only get bigger and bigger.
  • In the absence of a trust, all his assets would have gone to his wife should he pass away, who had no financial background.
  • The shares in an unlisted company (let’s call it XYZ) to the value of R10 million held a large capital gains tax implication, which would also only increase over time.

By holding fast-growing assets (such as the XYZ shares and other high-growth assets) in your own name, you create a bigger estate problem for your children someday. A total of 20% of whatever the amounts will become (in this case it appeared to be anything between R50mil and R100mil) is a large amount of money and they will not be unreasonable when asking why we did not plan better in this case.

Furthermore, we also have the capital gains tax that becomes payable at the death of the longest-living spouse or when it is bequeathed to a trust instead of the spouse. By transferring your XYZ shares to a trust now and making all future investments in this investment vehicle, it will not have a lot of value on day one, but the value-add will be significant 10 years down the line.

The assets in your personal estate can therefore be eroded with time (through inflation and donations), while the assets in the trust can become very valuable.

The end
George did not want to appoint a financial adviser on a permanent basis, along with the associated benefits thereof, and contracted me on an hourly basis. After my feedback (of which the points mentioned above are only an excerpt) he received an invoice of R5 490, and our paths separated.

Recently, George contacted me again for advice with regard to a few aspects of his financial planning. Again, he is comfortable to engage on an hourly basis. The good news is that George did very well over the past eight years and his assets, thanks to dividends from XYZ and the growth in the value of the assets, grew to more than R50 million (excluding the returns from life insurance). The bad news is that George never followed the advice I gave him in 2013.

In my opening paragraph in George’s 2013 presentation under the section “Estate Planning”, I state the following: “The accumulation of wealth is important, but the preservation of this wealth against third parties, including the South African Revenue Service (SARS), is most probably just as important, if not more.” These words will come to haunt George if I look at his current situation:

A few pertinent points:

  • If we accept that he leaves his life insurance and pension fund to his 2nd wife (to take care of her) at death, and he transfers his investments and shares in XYZ to a trust for his children, the current estate duty payable to SARS will be R10.2 million.
  • At a rate of “only” 1%, his executor’s fees will amount to roughly R700 000.
  • The current capital gains tax payable by the remaining heirs (his trust or sons) will be R7.9 million.
  • The total amount of costs to be paid by the estate are R18.8 million.
  • If the advice given in 2013 had been followed, the estate duty payable would have been roughly R1.3 million, the executor’s fees would have been R65 000 and the capital gains tax would have been R0, a total difference of approximately R17.4 million.

What do we learn from this?
When you are working with growth assets, any current problems only get bigger with time. The pain that you have to endure now (usually in the form of capital gains tax), will simply become bigger if you ignore it. You will achieve very little by trying to postpone it.

Good advice is worth absolutely nothing if it is not implemented. Know when to count your pennies and when you are being “penny wise but pound foolish”. When you are working with a professional financial adviser, remember that they are looking at your financial planning from a holistic perspective and therefore are able to identify potential landmines that you did not even know existed. The most important thing is that they remind you of the potential land mine every year when they see you for your annual review. This process leads to better decisions and better financial outcomes for you and your family over time.

Finally: My wish for you is that you enjoy this year and that you may make good decisions in 2022 and thereafter!

Andró Griessel is a certified financial planner and managing director of Woodland Wealth (Previously ProVérte Wealth and Risk Management). Contact him at

Although all possible care was taken in the drafting of this document, the factual correctness of the information contained herein cannot be guaranteed. This document does not constitute advice and anyone planning on taking any financial action based on this document, is strongly advised to first consult with their personal financial advisor. Woodland Wealth is an authorised financial service provider with FSP no. 5966.

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