Andrew and Sarah had done the hard part. Decades of senior careers, deliberate saving, a substantial offshore portfolio built over time. When they relocated to a coastal town five years ago and stepped back from full-time work, the capital was there. The structure wasn’t.
Their local retirement funds were in default mandates. Their offshore holdings included direct US equities with an unresolved situs tax problem. The local cash — R6 million — was sitting in a savings account. Their estate plans hadn’t been updated since their children were teenagers.
This is a case study about what it takes to get a complex financial picture under control: the decisions we made, why we made them, and what the outcomes looked like on paper and in practice.
Client Profile
| Detail | |
|---|---|
| Names | Andrew and Sarah |
| Ages | Early 60s |
| Life stage | Recently retired; relocated from Johannesburg to the coast |
| Retirement funds (local) | ~R25 million |
| Offshore portfolio | USD 2 million (~R36m at engagement) |
| Local cash | R6 million |
| Total balance sheet | ~R67 million |
| Monthly income target | R80,000 net |
| Annual flat fee | R120,000 p.a. |
The Situation
Andrew and Sarah weren’t in financial difficulty. But their R67 million balance sheet was less organised than it looked. The retirement funds had never been reviewed since default enrolment. The offshore holdings — accumulated through legitimate SARB allowances and earnings over many years — included direct US and UK shares that created a situs tax exposure neither of them had been flagged about. The local cash was earning below-market rates, sitting in the same retail savings account it had always been in. And their wills hadn’t been touched in over a decade.
They also had two adult children — one settled in South Africa, one abroad — and a vague desire to ensure both were set up properly. It was the kind of situation where everything is technically fine but nothing is quite working as well as it could.
What they needed was someone to look at all of it together: retirement income, offshore structure, tax, estate, and the next generation — and build a plan that addressed the pieces in the right order.
Living Annuity Structure
We converted Andrew and Sarah’s retirement funds into two separate living annuities with deliberately different mandates and drawdown rates.
Annuity A was set at a 2.5% drawdown with an Inflation+3% investment mandate — the conservative pool, designed to grow in real terms and provide optionality later. Annuity B was set at 4% drawdown with an Inflation+5% mandate — higher growth, higher risk, but still well within sustainable territory. Together, the two annuities generate a combined starting income of approximately R960,000 per year before tax.
Structuring it this way has a practical benefit beyond the numbers: it preserves flexibility. As they age and their risk appetite changes, one annuity can be converted to a guaranteed life annuity for income certainty, while the other continues as a growth vehicle. It also allows them to adjust drawdown rates on one without touching the other. That kind of optionality is harder to create after the fact.
After tax, the two annuities cover roughly three-quarters of their R80,000 monthly income target. The remainder comes from local and offshore capital.
Offshore Restructuring
The USD 2 million offshore portfolio was the most urgent structural problem we found. It was invested across direct US and UK equities — which created a situs tax risk that Andrew and Sarah hadn’t been warned about. US shares held directly by a non-US person are subject to US estate tax on the value above USD 60,000 at death. At their portfolio size, that was a material exposure.
We recommended exiting the direct holdings and reinvesting through offshore investment wrappers. The upfront cost was approximately R500,000 in CGT — a real, immediate expense. The case for absorbing it was clear: eliminating the situs risk, reducing the effective CGT rate on future withdrawals from 18% to 12%, removing executor complications, and simplifying the ongoing tax reporting that had become increasingly burdensome.
The restructured offshore portfolio targets USD CPI+6% under a long-term accumulation mandate, with planned withdrawals of around 10% of the portfolio every five years for lifestyle purposes. The wrapper structure means those withdrawals are handled as capital gains events, not income — keeping the tax treatment as efficient as possible.
We also used the restructuring process to bring in a tax specialist to reconcile years of offshore transaction history and ensure full SARS compliance. Their previous custodian had limited reporting capability, which had created gaps in the record-keeping over time. That was resolved as part of the engagement.
Local Cash: Income and Estate Planning
The R6 million in local cash was doing two things: nothing productive, and accumulating tax in Andrew’s name. We addressed both.
R5 million was transferred to Sarah’s name — a donation between spouses that is exempt from donations tax and created a meaningful annual tax saving through income splitting. We invested R5 million of that capital into a dividend-growth equity portfolio in her name, targeting a starting yield of approximately 6% per year (around R300,000 p.a.) with expected dividend growth of 5–6% annually. This gives them a third income stream that rises over time and is taxed at 20% withholding on dividends rather than at their marginal rate.
The remaining R1 million was moved into a high-yield institutional money market account in Sarah’s name — providing emergency liquidity, a better interest rate than the retail account they’d been using, and accessible capital in the event of Andrew’s death while the estate winds up.
Combined, these changes produced an annual tax saving of approximately R75,000 — and ensured their income comfortably exceeded the R80,000 per month target.
Estate Planning and the Next Generation
Their wills were updated to properly reflect both local and offshore assets, with beneficiary nominations across the annuities and wrappers reviewed and aligned. Executor roles were clarified and estate liquidity was modelled to ensure there was enough accessible capital to fund the winding-up process without forcing asset sales.
We also considered, and concluded against, an offshore trust structure. The offshore wrapper delivered the majority of the estate planning benefits — situs protection, simplified administration, CGT efficiency — at a fraction of the cost and complexity. There was no meaningful advantage to adding a trust layer at this stage.
For the children, we facilitated investment account openings for both, provided a structured briefing on how the family’s assets were organised, and helped their overseas child understand the cross-border implications of the offshore trust from a UK tax perspective. They were connected with a specialist in London for that piece. The family conversation was handled as part of the engagement, not separately from it.
The Fee Model
We charge Andrew and Sarah R120,000 per year — reviewed annually. This reflects the genuine scope of the work: two living annuities under active oversight, an offshore portfolio requiring tax management and periodic withdrawal planning, local equity portfolio management, estate coordination, and an annual family review.
| Fee model | Annual cost | Notes |
|---|---|---|
| Industry AUM fee (0.5%) | ~R335,000 | Based on ~R67m total balance sheet |
| Henceforward flat fee | R120,000 | Fixed scope; reviewed annually as complexity evolves |
| Annual difference | ~R215,000 | Reinvestable or available for lifestyle |
For context, R120,000 on a R67 million balance sheet represents 0.18% of assets — one of the lowest effective rates available for this level of advisory complexity. The fee savings are real, but the more important point is structural: a flat fee means we have no incentive to recommend more complex or more expensive products. The advice is aligned to the outcome, not the account size.
Frequently Asked Questions
What is situs tax and why does it matter for South African
Situs tax refers to estate taxes levied by a foreign country on assets physically located there — most notably the US and UK. The US applies estate tax of up to 40% on the value of US-based assets above USD 60,000 held by non-US persons at death. South Africans holding direct US shares are exposed to this risk. Holding those assets through an offshore wrapper removes the direct exposure.
Is it better to have one living annuity or two?
Two living annuities can offer meaningful flexibility — different drawdown rates, different investment mandates, and the ability to manage each independently as circumstances change. It also preserves the option to convert one to a guaranteed life annuity later, without locking in all your capital at once. The trade-off is slightly more administrative complexity at review time.
What does income splitting between spouses achieve?
South African tax is applied individually, not on a household basis. Transferring income-producing assets to a lower-earning spouse — using the tax-free spousal donation — means that income is taxed at the lower marginal rate. On a meaningful capital sum, this can produce a sustained annual tax saving without any change to the investment strategy itself.
When does an offshore trust make sense?
Offshore trusts make sense when the assets are large enough to justify the setup and ongoing governance costs, when the estate planning benefits go beyond what a wrapper can deliver, or when there are specific multi-generational structuring needs. For many South African investors, a well-structured offshore wrapper delivers the majority of the estate and tax benefits at significantly lower cost and complexity.
How does Henceforward justify R120,000 per year for one client?
The fee reflects the scope — two living annuities, an active offshore portfolio, local equity management, annual estate reviews, family coordination, tax specialist engagement, and biannual comprehensive reviews. On a R67 million balance sheet, it equates to 0.18% of assets. The equivalent AUM fee at a standard 0.5% would be R335,000. The flat fee is meaningfully lower, and it doesn't grow as the portfolio does.
What This Engagement Delivered
Andrew and Sarah came to us with a balance sheet that looked organised but wasn’t. Two years into the engagement, they have a retirement income structure that comfortably exceeds their target, an offshore portfolio properly structured for tax and estate purposes, local capital working harder than it was, and an estate plan that will actually do what they intend it to.
The situs tax problem is resolved. The CGT rate on offshore withdrawals is lower. The annual tax saving from income splitting is running. The children are briefed and invested. None of those things were visible from outside the engagement — they emerged from reviewing the detail carefully, in the right order.
If you have a complex balance sheet across local and offshore assets and haven’t had a thorough review of the structure — not just the returns — that’s worth addressing. For more on offshore investing for South Africans and how the estate planning side interacts with the investment side, that’s a good starting point.
If your financial picture spans multiple retirement vehicles, offshore assets, and estate planning considerations that haven’t all been looked at together, we’re happy to start with a structured review. It’s usually the integration work that adds the most value.