Case Study
Marius Botha
This case study is based on the six-step financial planning
process, which is also recommended by the Financial Planning
Institute of Southern Africa.
David and Sarah Lee approach you to assist them with their
financial planning.
When you make recommendations, please use the
assumptions and rates provided in Annexure 1.
2
Step 1
Establishing and Defining a Professional
Relationship with your Client
QUESTION 1
David is concerned about the continuity of your business and the
lapsing of your FSB licence. Please advise him with regard to:
1.1 Under what circumstances your licence will/can lapse.
(4)
1.2 What will the situation be should your licence lapse with
regard to you being able to assist him with his financial
planning?
(1)
3
Step 2
Gathering the Client’s Information
and Goals
Note
As all the information in this step is provided,
no marks will be allocated for this step.
4
Family Structure
David is 53 years old (date of birth: 1 January 1958). Sarah,
his second wife, is 48 years old (date of birth: 14 January
1963).
David and Sarah were married in 1992 (out of community of
property, with the inclusion of the accrual system). This is the
second marriage for both spouses. David has one child, Andy,
(22) from his previous marriage and Sarah has one daughter,
Jessica (21) from her previous marriage. They also have one
child, Peter (17), born from their current marriage.
5
Andy works as an IT consultant. Jessica is a full time student
and lives with David and Sarah. Peter is in Grade 12 and is a
promising student.
When David and Sarah got married in 1992, the CPI was
36,5. It is currently 133,5.
In terms of their Ante Nuptial Contract, David’s estate was
valued at R300 000 at date of marriage and Sarah’s estate
was valued at R20 000.
6
Business Interests
David and Jerry Roux (his cousin) own a wood furniture
manufacturing business. They supply handmade quality
furniture mainly to hotels and guest lodges. They bought the
business in 1998 for a purchase price of R1 000 000. The
business showed rapid growth in the first few years, but the
recession has hit them hard and business is currently slow and
uncertain.
7
The auditor values the business, Classic Creations (Pty) Ltd, at
R5 000 000. David holds 60% of the shares and Jerry 40%.
David and Jerry have a buy and sell agreement in place.
Classic Creations (Pty) Ltd employs 11 staff members and one
manager, Simon.
The business is suffering because of low staff morale. The
employees feel that they are not offered any employee benefits
whilst the competitors are offering such benefits to their staff.
With a potentially lucrative contract about to be signed, it is
imperative that high productivity levels are sustained. They
cannot afford to lose staff at this critical stage.
8
Assets: David Lee
Primary Residence (see Note 1)
Flat (rented out) (see Note 2)
2 350 000
600 000
Classic Creations (Pty) Ltd (60%) (see Note 3)
3 000 000
Loan account (David Lee Family Trust) (see Note 4)
2 300 000
Unit trusts
100 000
Furniture and household effects
100 000
Car
250 000
Cash
30 000
Total
8 730 000
9
Liabilities: David Lee
Bond on primary residence
1 000 000
Overdraft
Car
Total
120 000
200 000
1 320 000
Notes
 The primary residence was bought in 2003 for a purchase
price of R 750 000.
 The flat was inherited from his father in 2011.
 Classic Creations(Pty) Ltd (the entire company), was valued
at R 3 000 000 on 1 October 2001.
 The David Lee Family Trust holds shares in Funky Fashion
(Pty) Ltd (see Question 3.3).
10
Policies
David has two life policies on his own life:
 Policy A: Life cover of R 1 000 000 payable to the estate.
 Policy B: Life cover of R 800 000 payable to Sarah.
David was previously employed at a large corporate institution
and when he resigned (1998) he transferred his total provident
fund benefit to a preservation fund.
David does not want to sell his interest in Classic Creations
(Pty) Ltd when he retires. He will retire at the age of 68.
At retirement, David estimates that he will need an income of
70% of his salary. He will need the income for 10 years after
retirement.
11
Assets: Sarah Lee
Property (inherited)
Car
Cash
1 200 000
100 000
50 000
Liabilities: Sarah Lee
None
12
Inter Vivos Trust
The David Lee Family Trust was formed in 1996. David, Sarah
and their accountant are the current trustees.
The income beneficiaries and capital beneficiaries are David,
Sarah and their descendants.
13
Last Will and Testament
David bequeaths the primary residence and the household
effects and furniture to Sarah. The residue is bequeathed to his
sons in equal shares.
He is very fond of Sarah’s daughter and thinks of her as his
own. David believes that she will inherit from her own father,
but he still wants to leave her something. In his will, he
bequeaths his retirement fund benefit to her.
Sarah bequeaths her entire estate to David.
14
Monthly Income and Expenses: David and Sarah
Salary:
Rental Income:
David
David
Sarah
Interest:
David
Sarah
Dividends:
David
Bond
David
Car
David
Life Insurance
David
Education cost David
Household expenses
David and Sarah
Overdraft interest David
Fuel
David and Sarah
Entertainment/vacations David and Sarah
45 000
3 000
7 000
800
150
200
56 150
10 000
6 000
4 000
6 000
18 000
1 200
3 000
4 000
52 200
15
Step 3
Analysing and Evaluating the Client’s
Financial Status
16
Step 4
Develop the Financial Planning
Recommendations and present them
to the Client
17
QUESTION 2
Question 2.1
Accept that David passes away today.
David requests that you calculate the following at his death:
2.1.1 Accrual claim
(8)
2.1.2 Capital gains tax
(4)
2.1.3 Estate duty.
(4)
Assume that the last expenses and master’s fee amount to
R60 000.
(16)
18
Question 2.2
Analyse the liquidity of his estate and make recommendations,
if necessary. Show all your calculations and the cost
implications of your recommendations.
(4)
19
QUESTION 3
Question 3.1
David and Sarah’s son, Peter, is going to University in 2012.
He wants to complete BComm, LLB at Stellenbosch (5 years).
Assume that university fees for 2012 will amount to R30 000
per annum and are expected to increase by 6% per annum.
David wants to utilize the unit trust investment for the university
fees. He believes that growth of 7% can be earned. David
requests you to calculate the total education cost as a lump
sum to establish whether the investment value of the unit trust
at this time (today) will be sufficient to cover the fees.
(4)
20
Question 3.2
David’s Unit Trust portfolio is invested in two Old Mutual Unit
Trust funds: Old Mutual Enhanced Income Fund and Old
Mutual Financial Services Fund. David is a moderate investor.
3.2.1 He wants you to review the attached fund fact sheets and
advise him whether the funds are suitable for him,
considering his risk profile, but ignoring the fact that his
son will go to university next year.
(4)
3.2.2 He also wants to know how the costs of the funds
compare, what are included and excluded from the total
expense ratio (TER) and whether lower costs are an
indication of a superior product. Advise him on these
matters.
(10)
21
Question 3.3
David and his sister, Caroline Steward, operate a business,
Funky Fashion (Pty) Ltd. On the advice of their tax specialist,
they transferred their shareholding in the business to their
respective Inter Vivos Trusts on loan account (non-interest
bearing). On the death of Caroline, the shares held by the
Caroline Steward Trust must be bought by the David Lee Family
Trust and on the death of David, The Caroline Steward Family
Trust must purchase the shares held by the David Lee Family
Trust. They approach you regarding a buy and sell agreement
that will be funded by life insurance policies on the life of David
and Caroline.
22
They have asked you to explain the following to them:
3.3.1 What requirements have to be met in order to ensure
that the policies that are used for buy and sell
structures, are exempt from estate duty?
(3)
3.3.2 Will the policies that David and Caroline intend to make
use of be exempt from estate duty? Please motivate
your answer.
(4)
3.3.3 How should the policies be structured in order to
ensure that they will meet the purpose of the buy and
sell agreement?
(3)
(10)
23
Question 3.4
David is revising his will and wants to bequeath the loan
account to the trust. This bequest will avoid the trust having to
repay the amount when he dies. He seeks your advice
regarding the tax implications of the bequest, as well as
alternative suggestions that will enable him to make an
informed and tax effective decision.
(8)
24
Question 3.5
Simon, the manager, has resigned with effect of the end of
the previous month. A restraint of trade agreement was in
place to protect the business against this eventuality. David is
unsure of the tax implications for the company and for Simon,
and seeks your assistance. Please explain the current tax
position for both parties with regard to the restraint of trade
position.
(6)
25
Question 3.6
After Simon left, staff satisfaction levels dropped to an all-time
low. Research made it clear that the staff want the company to
implement a preferred compensation scheme.
3.6.1 David wants you to explain how the plan works and
whether it will be appropriate for all the employees of
the business.
(4)
3.6.2 Are there any alternative retirement structures that they
should consider, and why would you regard the
suggested alternatives as appropriate?
(2)
(6)
26
Question 3.7
Sarah is a home-executive. She occasionally helps out at the
business by doing the bookkeeping and rendering general
secretarial assistance as and when needed. David wants to
transfer the flat, which is currently being rented out, to Sarah as
she has a more advantageous income tax rate. This, he
believes, will result in a meaningful saving. Advise David on his
intended transfer with regard to the donations tax and income
tax implications?
(4)
27
Question 3.8
The business is currently under financial pressure, but they are
about to enter into a lucrative contract to manufacture furniture
for a new hotel. The business approached the Bank to provide
funding. The funding will be approved, but only if David signs an
unlimited personal surety. David wants to protect his personal
estate. He does not want to leave his wife and children
destitute. What measures can be instituted to protect David’s
personal estate?
(3)
28
Question 3.9
David heard that nominating a beneficiary on a life policy will
protect the proceeds from attachment in case he dies, leaving an
insolvent estate. He wants to know whether this is true. Explain it
to him with reference to authority.
(5)
(56)
29
QUESTION 4
Question 4.1
David is classified as a moderate investor.
His retirement fund benefit is invested in a Balanced Fund with a
spread of 50% equity, 20% bonds, 10% property and 20% cash. The
returns (with standard deviation in brackets) on the different asset
classes are:
Equity:
8%
(13,5%)
Bonds:
5%
(9,5%)
Property:
4%
(7%)
Cash:
6%
(2%)
4.1.1 Give a brief description of the risk appetite and proposed
investment spread for a moderate investor.
(2)
4.1.2 Calculate the average return of the balanced fund.
(2)
(4)
30
Question 4.2
David consults you on the bequest of his retirement
preservation benefit to Jessica. He wants you to confirm that
the benefit will be paid to Jessica. Advise him on the legal
position and if Jessica will be entitled to any benefits.
(4)
31
Question 4.3
David wants to focus on his retirement planning. He requests
you to do a calculation to show if he has sufficiently provided
for retirement. He asks you to ignore the business for
retirement purposes. Assume an inflation rate of 6% and that
the net growth of investments amount to 7%.
(4)
32
Question 4.4
Calculate the maximum amount that David can contribute
towards a retirement annuity fund in order to make use of the
full allowable income tax deduction.
(2)
(14)
33
Step 5
Implementation of your Recommendations
QUESTION 5
David is concerned that he will not be able to afford the
recommendations that you made.
In light of his current income and expenses please advise him
whether he can afford to implement your recommendations, taking
into consideration that Peter is going to university next year which
will increase his monthly expenditure. lf not, what do you suggest
in this regard?
(2)
34
Step 6
Review and Monitor
QUESTION 6
One of your clients wants to terminate the business relationship
with you with immediate effect. What are your obligations as a
financial services provider, in terms of the Financial Advisory and
Intermediary Services Act 37 of 2002, General Code of Conduct,
if your client makes this request?
(3)
TOTAL: 100
35
Annexure 1
Should the details prove insufficient, you may make the necessary assumptions,
provided that:
 You indicate that you have made an assumption;
 You give reasons for the assumption;
 The assumption/s are in line with the facts, needs and preferences of
your clients.
 In respect of any investment product that you recommend, use the growth
rate of 7%
 For any life cover or dread disease cover recommended, use the following
premium rates per R 10 000: David R 10,00 pm; Sarah R6,00 pm.
 Any lump sum disability cover recommended, use the following premium
rates per R 10 000: David R5,00 pm.
 For any income protector recommended, use the following premium rates
per R10 000: David R500,00 pm.
36
Answer to Question 2.1.1
 The inflation adjusted values of the estates at date of marriage
are as follows:
David
= 300 000 ÷ 36.5
 133.5 =
R1 097 260
Sarah
=
 133.5 =
R73 151
20 000 ÷ 36.5
37
Answer to Question 2.1.1
 The current values of their respective estates and the accruals
are:
Assets
Plus: Policy payable to estate
Less: Inheritance during the marriage
Less: Liabilities
Less: Values at marriage (inflation adjusted)
Accruals
David
8 730 000
1 000 000
9 730 000
600 000
9 130 000
1 320 000
7 810 000
1 097 260
6 712 740
Sarah
1 350 000
0
1 350 000
1 200 000
150 000
0
150 000
73 151
76 849
38
Answer to Question 2.1.1
Note. The paper does not state whether the property inherited
by Sarah was inherited during the marriage or before the
marriage was concluded. It is assumed for the purpose of this
exercise that it was inherited during the marriage. It is
consequently excluded from the accrual. Capital gains tax
payable on the death of David has not been taken into account
for the purposes of the accrual calculation. There seems to be
different points of view in this regard.
As David’s estate shows a bigger accrual than that of Sarah she
will have the following claim against his estate:
(6 712 740 – 76 849)
÷
2 =
R3 317 946
39
Answer to Question 2.1.2
Base cost of Classic Creations
i. MV on 1 October 2001 was R1 800 000
ii. 20% of (proceeds minus post VDV expenses) is R600 000
(20% of R3 000 000), or
iii. TABC = R600 000 + [3 ÷ 14 (R3 000 000 – R600 000)]
= R1 114 286
R1 800 000 is the biggest and thus selected as VDV.
40
Answer to Question 2.1.2
Asset
Primary residence
Flat
Classic Creations (Pty)
Ltd
Loan Account Trust
Unit trusts
Car
Capital gain
Less: Annual exclusion
Aggregate capital gain
Proceeds
Base cost
600 000
3 000 000
600 000
1 800 000
2 300 000
100 000
2 300 000
100 000
Taxable capital gain
Capital gains tax (one-third)
Exclusion/
roll-over
Roll-over
0
0
0
Personal use
Gain/Loss
0
0
1 200 000
0
0
0
1 200 000
300 000
900 000
300 000
R120 000
41
Property (given)
Deemed Property
– Policy A – payable to his estate
– Policy B – payable to his spouse
Total value of estate
Less Deductions
Master’s fee and last expenses (given)
Liabilities
Capital gains tax
Executor’s remuneration (0.0399  R9 730 000)
Accrual claim [section 4(lA)}
Accrual to spouse [section 4(q)] – (see note)
Net Estate
Less: Section 4A
Dutiable estate
8 730 000
1 000 000
800 000
60 000
1 320 000
120 000
388 227
3 317 946
3 250 000
1 800 000
10 530 000
8 456 173
2 073 827
3 500 000
zero
No estate duty is payable.
Note on section 4(q) deduction. It is the total of the primary residence,
household effects and furniture and policy of R800 000).
42
The question is to calculate whether there will be sufficient cash in David’s
estate to pay all liabilities and expenses.
Cash available in the estate should David die.
Proceeds of shares sold (buy-and-sell agreement)
3 000 000
Policy proceeds to estate
1 000 000
Cash
30 000
Total cash on death
4 030 000
The following cash is needed on David’s death
Master’s fee and last expenses (given)
Liabilities
Executor’s remuneration (0.0399  R9 730 000)
Capital gains tax
Total cash needed
60 000
1 320 000
388 227
120 000
1 888 227
There will be no cash shortfall so no recommendation needs to be made.
There is a big surplus.
43
Answer to Question 3.1
One must calculate the lump sum that he must invest at the beginning of 2012
that will allow him to make annual withdrawals starting with R30 000 in beginning
of 2012 and that increases by 6% per annum whilst the fund in which it is
invested will grow by 7% per annum. This amount must be compared to the
current value of his unit trust investment (R100 000).
Resultant rate (% change) = (7 – 6) ÷ 1.06 = 0.9434%
Begin mode and 1 P/YR
30 000
PMT
5
N
0.9434
I/Yr
PV
147 222
As the amount calculated above is greater than the current value of his unit
trust funds, the unit trust funds will not be sufficient to pay the university fees
for the 5 year course.
44
Answer to Questions 3.2.1 and 3.2.2
 Company products involved so not discussed
45
Answer to Question 3.3.1
1. To qualify for the exclusion, the policy must have been taken out
or acquired by a person who was the partner (coshareholder/co-member) of the deceased as at date of his death
2. On the date of death of the deceased the person who acquired
the policy must have been a partner of the deceased, or have
held any share or like interest in a company in which the
deceased on that date held any share or like interest.
3. The purpose of the policy must be to enable that person to
acquire the whole or part of the deceased’s interest in the
partnership or the deceased’s share or like interest in that
company and any claim by the deceased against that company.
4. No premiums on the policy were paid or borne by the
deceased.
46
Answer to Question 3.3.2
 For the exclusion to apply, it is a requirement in terms of
section 3(3)(a)(iA) of the Estate Duty Act that the person
who took out the policy (the trustee of the Caroline Steward
Family Trust), as well as the deceased (the person whose
life has been insured – David the trustee of the David Lee
Family Trust) hold a share in the company as at date of
death of the deceased.
 In this case, David (the deceased and trustee of the David
Lee Family Trust), does not hold a share in Funky Fashion
(Pty) Ltd as his shares has been transferred to his family
trust.
47
Answer to Question 3.3.3
 The two trusts should enter into a buy-and-sell agreement in
terms of which the David Lee Family Trust agrees to sell the
shares that it owns in Funky Fashions (Pty) Ltd to the Caroline
Steward Family Trust on David’s death and in terms of which
the Caroline Steward Family Trust agrees to buy such shares
from the David Lee Family Trust. Also vice versa.
 The David Lee Family Trust should take out a policy on the life
of Caroline and the Caroline Steward Family Trust should take
out a policy on the life of David
 As both policies will be dutiable the amount insured for must
include the estate duty. The amount needed must be divided
by 0.80.
48
Answer to Question 3.4
 In ITC 1793 there was a bequest of loan to trust. Court
ruled that paragraph 12(5) of Eighth Schedule applies.
 In ITC 1835 loan was part of residue that was a
bequeathed to trust. Court ruled that paragraph 12(5) of
Eighth Schedule did not apply as it was not the intention of
the testator to discharge the debt.
49
Answer to Question 3.4
From SARS Comprehensive Guide to CGT.
 Were it not for paragraph 12(5), the discharge of a debt by a
creditor would have no CGT implications for the debtor. After
all, the debt owed is a liability, not an asset, and without an
asset CGT cannot be imposed. In order to subject the debtor to
CGT, paragraph 12(5)(b) creates the following four things in
the hands of the debtor:
•
•
•
Asset: The debtor is deemed to have acquired a claim to the debt
reduced or discharged.
Base cost: The base cost of the asset is deemed to be nil.
Proceeds: The proceeds are determined as follows:
50
o If the debtor paid nothing – the amount discharged or reduced.
o If the debtor paid something – the difference between the amount paid and
the amount discharged or reduced.
• Disposal: The claim acquired by the debtor is deemed to be disposed
of.
 In other words, the debtor will have a capital gain equal to
the amount of the debt that has been discharged or reduced
less any amount paid to the creditor.
51
Answer to Question 3.4
From SARS Comprehensive Guide to CGT.
It has been suggested that the problem encountered in ITC 1793 can be
circumvented by the deceased to leaving cash or other assets to the heir, which
can be used by the heir to repay the debt due. Whether such a strategy would
succeed will depend on the facts of each case. No doubt the intention of the
parties concerning repayment of the debt during the deceased’s lifetime will be
a relevant factor. A loan made without any expectation of repayment may be
regarded as a donation in disguise.
 CGT inclusion rate for trust is 50%.
 CGT would be R2 300 000  0.66667  0.4 = R613 333.
 He can bequeath the loan account to somebody else.
 The trust can insure his life to redeem loan in the event of his death.
52
Answer to Question 3.5
The recipient (Simon the manager)
 The payment is included in his gross income [paragraph (cA) of the
definition in gross income].
For the payer (the company)
 The restraint payment is deductible by the company as Simon is a
natural person and the amount is included in Simon’s income.
 The amount to be deducted may not exceed in any year of
assessment the lesser of


so much of the amount incurred as is equal to the amount divided by the
number of years or part thereof during which the restraint of trade will
apply; or
one-third of the amount incurred.
 Section 23(l) prohibits a restraint of trade payment as a deduction
but not if it qualifies under section 11(cA).
53
Answer to Question 3.6
Answer to Question 3.6.1
 Preferred compensation is not a retirement vehicle but a vehicle used
for the retention of the services of key employees. It is not a
requirement that all participants must be key employees.
•
•
•
•
•
•
Employer and employee to enter into agreement.
Employee to take out endowment policy on his life and cede it as
security to employer.
Employer increases salary of employee for an amount equal to policy
premium plus tax attracted (e.g. 10 000 ÷ 0,6 = R16 667.
Employer to cancel security cession if employee still in his employ after a
stated period (maturity).
Increased salary amount tax deductible by employer [section 11(a)].
Policy pay-out to employee tax-free.
54
Answer to Question 3.6.2
 A pension or provident fund would be more appropriate.
 In the case of a pension fund it will provide the employee with
a tax deduction in respect of the contributions.
55
Answer to Question 3.7
 There is no indication that the transfer of the flat is
remuneration for the services that she renders at the company.
In fact it cannot be, as if it were to be the case, such
remuneration would be paid by the company and not from the
private assets of her husband. The fact that she does work for
the company is ignored.
•
•
•
The donation between spouses is exempt from donations tax.
The rental income will be included in the income of the donor spouse,
David [section 7(2)].
Only if the sole or main purpose of donation is the reduction,
postponement or avoidance of the donor’s liability for any tax etc. under
the Income Tax Act or any Act administered by SARS.
56
Answer to Question 3.8
 The company can take out a policy for the life of David.
 David and the company to enter into an agreement that in the
event of David’s death the company will use the proceeds of
the policy for no other purpose than to redeem the bank loan.
 This means that the bank will not have to recover such loan
from David’s estate.
 The policy proceeds (less premiums plus 6% interest) will be
dutiable. The sum insured must cover the value of the
outstanding loan plus the estate duty thereon.
 The premium not tax deductible and proceeds not subject to
income tax.
57
Answer to Question 3.9
 In Pieterse v Shrosbree N O and Others; Shrosbree N O v Love and
Others 2005(1) SA 309 SCA held that
•
A beneficiary nomination is a stipulatio alteri and on acceptance of the
benefit by the nominee it is payable to the nominee and not part of the
insolvent estate.
•
Section 63 of the Long-term Insurance Act contains no provision that
purports to divert the policy proceeds to the insolvent estate.
•
If David should be declared insolvent before his death the trustees of
his insolvent estate will be entitled to cancel the beneficiary nomination
so that the policy will be included in his insolvent estate.
•
Certain dispositions by a person prior to sequestration can be set aside
by court. Not discussed in Shrosbree.
58
Answer to Question 4.1.1
From Handbook page 725.
The moderate investor is looking for both income and growth.
The equity content dominates the bonds and cash content.
The portfolio, however, would tend to be less volatile than the
market as a whole.
Equities
55%
Gilts
35%
Cash
10%
59
Answer to Question 4.1.2
 The average return on the balanced fund is calculated as
follows (easiest method):
50
20
10
20
at
at
at
at
8%
5%
4%
6%
=
=
=
=
4
1
0,4
1,2
6,6%
60
Answer to Question 4.2
 Retirement benefits do not form part of the estate of the
member on death (section 37C). Cannot bequeath.
 As he will be survived by dependants the trustees will have
the discretion to make an equitable distribution between such
dependants.
 In terms of the definition of dependant a person that the
deceased member did in fact maintain is also a dependant.
If he maintains her she is a dependant.
 Once he retires he can nominate her as beneficiary to the
living annuity. Section 37C will not apply and she will then
receive the benefit.
61
Answer to Question 4.3
R45 000  12
=
R540 000
70% of R540 000
=
R378 000
378 000
15
6
FV
Then
7–6
1 ÷ 1,06
PV
N
I/YR
905 899
=
=
1
0,9434%
62
Answer to Question 4.3
905 899
10
0,9434
PV
PMT
N
I/YR
R8 687 344
The capital needed is R8 687 344
One cannot calculate whether it is sufficient as retirement
fund value is not given.
63
Answer to Question 4.4
15% of (taxable salary plus rental income).
(R540 000 + R36 000)  0.15 =
R86 400 p. a
R7 200 per month.
64
Answer to Question 5
 No life insurance was recommended as there was no
shortfall.
 The only recommendation is a contribution to an RA fund.
His disposable monthly income is R3 950 (R56 150 –
R52 200). He should therefore restrict his contribution to
what he can afford. David currently pays education costs of
R6 000 per month for Peter. This (R72 000 per year) is less
than the university fees for 2012. David will probably not
even have to use the unit trust funds for education
purposes. David has nothing to be concerned about.
65
Answer to Question 6
 Paragraph 20 General Code of Conduct
 An FSP, subject to contractual obligations, must give
immediate effect to a request of a client who wishes to
terminate any agreement with the provider relating to a
financial product or advice (page 111; The FAIS ACT
Explained; Hattingh and Millard).
66
Dismantling Deferred Compensation







Employer’s tax position
Employee’s tax position
Value forfeited by employee
Future premiums
Surrender
Paid-up
Agreement
67
 Future tax position of employer
 Future Tax position of employee
 Is the employee receiving the same value?
68
The END
Thank you
69