Question:
My father passed away recently. He held a considerable share portfolio as part of his assets.
Unfortunately, he had been unwell for more than seven years and so had not changed any of his holdings. The portfolio includes shares such as Tongaat, Nampak, City Lodge and PPC, which were still blue chips when he bought them. He also had quite a few shares in Anglo American, Anglo American Platinum and Mondi which are valuable, but not as valuable as they were at their highs.
I have two questions: can one transfer these shares into an account in the name of his children, and if one of my siblings wants to realise cash, is it worth selling the shares he owned in companies such as Barloworld, Standard Bank and FirstRand, say, rather than the resources stocks now, or do we wait for values to recover?
— Anonymous
Answer:
My deepest condolences on the passing of your father and your family’s loss.
Unfortunately, if this share portfolio was not structured within a trust or a private company entity where the children are involved out of an ownership or continuity planning principle, this is a discretionary investment where a beneficiary cannot be nominated.
This means the investment will be deemed an asset in the deceased estate and dealt with according to the will, and the winding-up of the estate will determine the outcome. This asset cannot be transferred directly if it was purely structured in the individual’s personal name. Depending on the value of the estate, estate duty tax of 20%-25% can be expected.
Once estate duty tax and capital gains tax have been settled, the proceeds will be divided among the relevant beneficiaries.
My recommendation will be to involve a wealth manager together with the executor of the estate to optimise the timing of the sale of the assets where possible. Unfortunately, selling assets from an estate needs to be done as quickly as possible within the timeline of winding up the estate.
To address your question regarding the specific shares, there is a lot to be said about each sector in the current cycle, as well as each individual share, and how this will fit into a holistic investment strategy.
Yes, based on the analysis and current position of a few of these companies I would have sold off the assets, but this would need to be analysed on timeline, tax implication and a holistic view on the specific portfolio. As the assets will ultimately be sold off throughout this process, a wealth manager could provide guidance on what would be the best possible route with the proceeds for everyone involved.
If cash proceeds are not required for any specific need immediately, I would always recommend reinvesting funds. Depending on the specific profile of each individual, as well as their existing investment portfolios, the investment strategy and vehicles can be defined.
Unfortunately, this is quite a time-consuming process in South Africa and a 12- to 24-month period can be expected. As with any substantial portfolio, I would recommend ensuring a team to advise on the specifics — apart from the executor, a strong auditing team or tax adviser and a strong legal opinion should the executor not address this area.
— Elke Brink, wealth adviser at R21 Wealth Management, Stellenbosch
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