CASE STUDY

THABO AND NANDIPHA

Thabo $(31)$ and Nandipha $(28)$ Mhlana are young professionals who have recently relocated to Cape Town. They resided in Gqeberha before the relocation, and decided to make the move when Thabo was offered a new employment opportunity at the end of $2023.$

Your clients got married fairly recently. After lobola negotiations were concluded, Thabo paid the agreed price in the form of livestock to Nandipha's family. Their traditional wedding ceremony and celebrations took place on the $3$rd and $4$th of December $2021.$ Currently, this marriage has not been registered with the Department of Home Affairs. They do however have a Lobola letter and their social media accounts have thousands of pictures taken on the day.

Nandipha's sister contracted COVID$-19$ and passed away in September $2021,$ leaving a daughter, Khwezi. Nandipha's mother, Babalwa, was appointed as legal guardian over Khwezi, but the family decided it would be in Khwezi's best interest to reside with Nandipha. Nandipha has been primary caregiver to Khwezi, who has just turned four years of age. Thabo has taken on the role of father to Khwezi, and they are a close$-$knit, happy family. Nandipha is currently four months pregnant, and Khwezi is very excited to welcome the new addition to the family.

Both Thabo and Nandipha are first$-$generation graduates and assist their families financially. Thabo pays an amount of R$6,000$ to his father monthly, and Nandipha R$4,000$ per month to her mother. These funds are used to support their extended families.

Thabo is a quantity surveyor and works for a multi$-$national company in Cape Town. His remuneration package is currently R$1,875,000$ per annum of which $80\%$ is his pensionable salary. His employer offers pension fund benefits and group risk insurance as benefits. Upon his death he is entitled to $4$ times his annual salary plus his fund credit in the form of a death benefit. Medical scheme benefits are not included. Thabo has never belonged to a medical scheme. Nandipha has been a member of a medical scheme for the past three years.

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.

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$],[\backslash$table$[[$Pension fund $($current$],[$employer$)]],$R$62500,,$No beneficiaries appointed.$],[$NANDIPHA$\text{'}$S ASSETS$],[,$SET,VALUE,$\backslash$table$[[$PURCHASE$],[$PRICE$]],$COMMENTS$],[,\backslash$table$[[$siness interest: Sole$],[$prietor$]],$R$700000,$R$50000,\backslash$table$[[$Nandipha invested R$50000$ into her business in January$],[2023]]],[$POLICIES AND GROUP LIFE COVER$],[$POLICY$,$OWNER,$\backslash$table$[[$LIFE$],[$INSURED$]],$INSURED VALUE,COMMENTS$],[1,$Life insurance,Thabo,Thabo,R$4000000,*$ Beneficiary: Khwezi$],[2,\backslash$table$[[$Life insurance and$],[$disability cover$]],$Thabo,Thabo,R$1000000,\backslash$table$[[-$ Beneficiary: Nandipha$],[-$ Disability cover is an$],[$accelerated benefit$]]],[3,\backslash$table$[[$Life insurance and$],[$disability cover$]],$Nandipha,Nandipha,R$1000000,\backslash$table$[[-$ Beneficiary: Thabo$],[-$ Disability cover is an$],[$accelerated benefit$]]],[4,\backslash$table$[[$Unapproved group$],[$life cover$]],$Thabo,Thabo,R$2500000,\backslash$table$[[-$ No beneficiaries$],[$appointed$]]]]$

ASSUMPTIONS

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

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

Estimated value of Nandipha's gross estate: R$5500000$

Estimated value of Thabo's estate: R$10000000$

Round off all rand amounts to the nearest rand $($no decimals$)$

In the event where you are of the opinion that there is not enough information available, ensure that you indicate that you are making an assumption together with a valid reason for making such assumption.

Thabo is concerned about whether the provision that he has made through his place of employment is sufficient.

$4\mathrm{.}1$ Explain to Thabo what will happen to the proceeds of his unapproved group life assurance policy and calculate the after$-$tax value. Discuss and calculate all taxes that are applicable.

$4\mathrm{.}2$ Explain to Thabo what will happen to the proceeds of his death benefit from his pension fund and calculate the after$-$tax value. Discuss and calculate all taxes that are applicable.

$4\mathrm{.}3$ Assume that you are a trustee on Thabo's pension fund. Discuss how the death benefits will be distributed. Use s$37$C of the Pension Funds Act to guide your decision and make reference to the following in your answer:

Indicate the who the possib