If you are a business person, one of the biggest risks you face is your business failing. With 80% of businesses failing within the first 5 years, it makes sense for business people to protect themselves and their families against the risk of insolvency. Many businesses go through a period of time when business is booming and then there are dry patches when they are hardly getting any business. The trick is to invest your money during the positive times so that you have a cushion to fall back on during the rough times. Should your business fail completely, you should NOT lose your home or all of your investments.

There are a number of ways to protect yourself against business failure and today I want to speak about how to use an Endowment Policy to Protect yourself against Insolvency & to also save on Tax.

1. If your endowment has been in place for 3 years or longer, it is protected against your creditors. That means that if your business fails, your creditors cannot attach your endowment. An endowment policy has a minimum term of 5 years. You can put money as a one-off and you can add to the initial investment as and when you have funds available. You can only withdraw the money after 5 years but if you do not need it at the time, you can keep the endowment running. The full value of the endowment is protected from your creditors and if you use the endowment to buy a house or for some other investment, the house is also protected from your creditors because it would have been bought from the proceeds of the endowment.
2. You can also appoint beneficiaries for your endowment. This would save you 3.5% in Executors fees
3. High net worth customers are now paying tax at 45%. An endowment is taxed at 30% so it makes sense to use an endowment if your tax bracket is higher than 30% as you save on tax
4. Capital gains tax is 12% within an endowment vesus the 18%  that you would be charged as an individual

Key features of the endowment policy

• Minimum one-off payment is R100 000
• NO monthly payments to the endowment
• Ad hoc payments are R25 000
• Minimum investment term is 5 years
• You can withdraw your funds after 5 years or let the investment continue until you need the money

If you have R100 000 or more to invest and you want to save on tax and protect your funds against creditors in the event of business failure; drop me an email at phumelele@thuthuka-sa.co.za