QUESTION THREE

$[10]$

Nandipha is reconsidering whether her emergency fund $(R400000$ that is invested in a money market is in an appropriate investment vehicle. She would like to have income available in case of an emergency but has accumulated so much funds that she would like to invest any excess funds for when Khwezi turns $18$ and requires tertiary education. She would like an investment that would pay out a lump sum amount at maturity. She has done some research and seeks your advice on the following investment vehicles:

An endowment policy

Current investment $-$ Money market collective investment scheme

Tax Free Savings Account

Real Estate Investment Trust $($REIT$)$

Advise Nandipha on what would be the best investment vehicle based on his needs by doing a comparison of the aforementioned investment vehicles. Ensure that you take into account all of the possible tax implications, contributions and premiums, and possible returns of each investment vehicle when providing Nandipha with advice.

$(10)$

EBFD$411-$ ASSIGNMENT $2024$

PAGE $3$ OF $7$

Nandipha is a qualified and registered dietician. She was employed by a private hospital group in Gqeberha, but resigned when the relocation took place. Nandipha is currently practicing in her own name, as a sole proprietor. Nandipha's wish is for her practice to be sold to a former colleague should she pass away. The proceeds of this sale should then be used to provide for Thabo, Khwezi and her and Thabo's future children.

THABO AND NANDIPHA'S ASSETS, POLICIES AND GROUP LIFE COVER

$\backslash$table$[[$THABO$\text{'}$S ASSETS$],[$ASSET$,$VALUE,$\backslash$table$[[$PURCHASE$],[$PRICE$]],$COMMENTS$],[$Primary residence,$\backslash$table$[[$R$5000000],[($full value$)]],\backslash$table$[[$R$5000000],[($full value$)]],\backslash$table$[[$Registered in the names of both Thabo and Nandipha.$],[$Purchased January $2023.],[-$ Outstanding Mortgage bond: R$4900000.]]],[$Motor vehicle,R$700000,$R$800000,-$ Settlement amount: R$650000],[$Livestock$,$R$500000,,\backslash$table$[[$Thabo$\text{'}$s father presented him with five cows for his ${18}^{th}$ birthday.$],[$This small herd has increased to a current count of $100$ cows.$]]],[\backslash$table$[[$Collective investment$],[$scheme$]],R50000,$R$45000,-$ This small herd has increased to a current count of $100$ cows.$],[\backslash$table$[[$Pension fund $($current$],[$employer$)]],R62500,,$No beneficiaries appointed.$],[$NANDIPHA$\text{'}$S ASSETS$],[$Asset$,$Value,$\backslash$table$[[$Purchase$],[$price$]],$Comments$],[$Primary residence,$\backslash$table$[[$R$5000000],[($full value$)]],\backslash$table$[[$R$5000000],[($full value$)]],\backslash$table$[[-$ Registered in the names of both Thabo and Nandipha.$],[-$ Purchased January $2023.],[-$ Outstanding Mortgage bond: R$4900000.]]],[$Motor vehicle,$R500000,R700000,-$ Settlement amount: R$650000],[\backslash$table$[[$Emergency fund$],[($Money Market$)]],$R$400000,,,],[$Flat in Gqeberha,R$500000,R300000,\backslash$table$[[$Nandipha purchased this flat in $2015$ with the proceeds of a damages$],[$claim that was awarded to her.$]]],[\backslash$table$[[$Business interest: Sole$],[$proprietor$]],R250000,$R$50000,$Nandipha invested R$50000$ into her business in January $2023],[$POLICIES AND GROUP LIFE COVER$],[$Policy$,$Owner,Llfe insured,Insured value,Comments$],[1,$Life insurance,Thabo,Thabo,$R4000000,-$ Beneficiary: Khwezi$],[2,\backslash$table$[[$Life insurance and$],[$disability cover$]],$Thabo,Thabo,$R1000000,\backslash$table$[[-$ Beneficiary: Nandipha$],[-$ Disability cover is an accelerated benefit$]]],[3.,\backslash$table$[[$Life insurance and$],[$disability cover$]],$Nandipha,Nandipha,$R1000000,\backslash$table$[[-$ Beneficiary: Thabo$],[-$ Disability cover is an accelerated benefit$]]],[4,\backslash$table$[[$Unapproved group$],[$life cover$]],$Thabo,Thabo,$\backslash$table$[[5$ annual pensionable$],[$salary for life cover$]],-$ No beneficiaries appointed$]]$

ASSUMPTIONS

SARS lists the standard value for a cow as R$40$

Thabo's marginal tax rate currently is $36\%$

Nandipha's marginal tax rate currently is $45\%$

The inflation rate is currently $7\%$ per annum.

The return on any investments made is at a rate of $8\%$ per annum.

Costs in the estate:

Administration costs: R$10000$

$\_$ Transfer costs$*$ of primary residence: $R15000$