How Should You Invest R20 Million After Selling a Business or Receiving an Inheritance?

You’ve just sold a business or received an inheritance. You now have R20 million in capital, and the question “how do I invest this?” feels urgent. The short answer is: pause. Understand the tax position you’re already in, then deploy into the right structures in the right sequence. This is not a single product decision. It’s a multi-stage plan covering tax, structure, drawdown order, offshore allocation, and eventually, estate duty.

The most common mistake I see at this scale is rushing to “park” the money in a fixed deposit while you think. That decision itself carries consequences. Where you park it today affects your tax position for years. A lump sum of R20 million touches capital gains tax, income tax on interest and dividends, your annual offshore allowance, estate duty, and potentially retirement fund rules, all at once.

The right approach works through five decisions in order: clarifying your tax position now, which structures to fill first, how much to hold offshore, what income to draw sustainably, and how the assets eventually pass to your family.

What to Do in the First 90 Days

Your first 90 days matter more than you might think, because the decisions you make then shape your tax and investment position for years.

Start by stabilising the capital in a low-risk, liquid vehicle while you make considered decisions, not permanent ones. A money market fund or a notice deposit at a major South African bank keeps the capital safe and earning while you work through the planning. The pressure to “do something” with a windfall is strongest in the first few weeks, and that is exactly when costly mistakes happen. Resist it.

During this period, focus on three things.

First, get clarity on your tax position. If the lump sum came from a business sale, your accountant should already have calculated the capital gains tax (CGT). If it came from an estate, understand what, if anything, was triggered at the deceased’s side before you received the funds. You need to know whether tax is still owing, and if so, how much.

Second, review your existing portfolio. A R20 million lump sum changes your overall asset allocation immediately. If you already hold retirement annuity funds, preservation funds, or a living annuity, the new capital shifts the proportions you hold in each asset class, your effective offshore allocation, and your liquidity profile. These need to be reassessed together, not in isolation.

Third, think about income needs. Do you need this capital to generate income now, or is it a growth pot that supplements existing income? The answer determines everything from which structures you use to how much you invest offshore.

If you are within ten years of retiring, or already retired, the decisions you make in these 90 days connect directly to your retirement income plan. The guide on how to prepare for retirement in South Africa covers the broader framework you should be working within.

The Tax You Have Already Paid Determines Where You Start

The starting point for investing a large lump sum is not which fund to pick. It’s understanding the tax you have already paid or still owe, because that determines how much capital you actually have to invest.

The tax treatment differs significantly depending on whether your lump sum came from a business sale or an inheritance.

From a business sale: The proceeds will typically trigger capital gains tax. For an individual, 40% of the capital gain is included in taxable income (the inclusion rate), and you are then taxed at your marginal rate on that included amount. At the top marginal rate of 45%, the effective maximum CGT rate is 18%. There are various exclusions and the annual exclusion applies, but at R20 million in proceeds, CGT is a material cost. Your accountant should have modelled this before transfer.

From an inheritance: In South Africa, inheritances are generally not taxed in the hands of the beneficiary. The estate duty (currently 20% on the dutiable estate up to R30 million and 25% above that, after the R3.5 million abatement) is paid by the estate before distribution. The after-estate-duty amount you receive is typically clean capital.

This distinction matters practically. If you have sold a business and still owe CGT, you need to reserve that amount in a liquid vehicle before deploying the rest. If you received an inheritance, you may have a cleaner position, although the deceased’s estate may have sold assets and triggered CGT at their level.

Either way, the decision about where to invest offshore and how to structure it carries its own estate duty consequences. The full picture on offshore investing structures and estate duty for South African retirees covers the mechanics in detail.

Which Investment Structures to Use and in What Order

With the tax position clear, the next decision is which investment structures to use for the R20 million and in what sequence. Sequencing matters, because each structure has different tax treatment, contribution limits, liquidity constraints, and estate implications.

Here is how to think about the order.

Retirement annuity (RA), if you are still earning an income

A retirement annuity is a tax-advantaged savings vehicle for retirement. Contributions up to 27.5% of the higher of taxable income or remuneration (capped at R350,000 per year) are deductible from taxable income. If you have sold a business and still have taxable income in the year of sale, maximising your RA contribution in that year can reduce the tax bite materially. The funds grow tax-free within the RA, and the investment is governed by Regulation 28, which limits offshore exposure to 45% and sets maximums for other asset classes.

Tax-free savings account (TFSA)

The annual contribution limit is R36,000 and the lifetime limit is R500,000. At R20 million, the TFSA is a small but valuable slice: returns on it (interest, dividends, and capital gains) are entirely tax-free, forever. Max it out and hold your highest-growth assets there.

Endowment

An endowment (also called a life wrapper) taxes income and capital gains at a fixed 30% rate within the policy. If your marginal income tax rate exceeds 30%, an endowment is more tax-efficient than investing in your own name. It also has estate planning benefits because it can be nominated to a beneficiary outside the estate. The trade-off is a five-year illiquidity period.

Investments in your own name

The remainder sits in a discretionary investment, typically a multi-asset unit trust portfolio, either directly or via a linked investment services provider (LISP) platform. This is where flexibility lives. You can draw capital at any time, change funds, and adjust your portfolio as your circumstances change.

One distinction worth clarifying: unit trusts and exchange-traded funds (ETFs) are not interchangeable. A unit trust is an actively managed or passively managed fund that pools investor capital and is priced once daily. An ETF is a fund that trades on an exchange throughout the day, typically tracks an index, and has a different cost structure. Both can sit inside any of the structures above, including your discretionary investment account. The choice between them is a portfolio construction decision, not a structure decision.

For a comprehensive view on investing offshore from South Africa: structures and tax, which also affects structure choice, see the dedicated guide.

How Much to Hold Offshore and How to Get the Money Out

For a R20 million portfolio in South Africa, meaningful offshore allocation is not optional. It’s a basic requirement for currency and market diversification. A reasonable starting point for most investors at this scale is 30% to 45% offshore, depending on existing South African exposure and income needs.

I need to address a common confusion directly: holding a South African unit trust that invests in global equities is not the same as holding offshore assets. It provides international market exposure, but the asset remains in South Africa, priced in rands, and subject to South African tax and estate duty. True offshore investing means externalising capital to a foreign-domiciled account or structure.

South African individuals may externalise up to R10 million per calendar year using their single discretionary allowance. No tax clearance is needed for amounts up to R1 million; tax clearance is required above that threshold, though the R10 million annual limit applies. On a R20 million lump sum, you may be able to externalise R10 million in year one and the remaining amount in subsequent years, subject to your tax residency and SARB requirements.

Offshore assets can be held directly in a foreign-domiciled account, through a South African rand-denominated offshore fund, or through an offshore endowment. Each has different cost, estate duty, and liquidity characteristics.

For the full mechanics, see offshore investing for South African retirees: a practical guide. If you require Shari’ah-compliant offshore options, the overview of Shari’ah investment funds and strategies covers what is available locally and offshore.

Generating a Sustainable Monthly Income from R20 Million

A R20 million portfolio can generate substantial monthly income, but sustainability depends on drawdown rate, asset allocation, and inflation.

A drawdown rate of 5% per year on R20 million produces R1 million per year, or approximately R83,000 per month before tax. That is meaningful income. At 4%, you draw R800,000 per year (roughly R67,000 per month). Most financial planning research suggests that drawdown rates below 5% give a portfolio a strong probability of lasting 25 to 30 years, assuming a balanced growth-oriented portfolio. Rates above 6% carry more depletion risk, particularly in a poor early-return sequence.

Many people who receive a large lump sum ask which investments generate monthly income in South Africa. The honest answer is that income can come from multiple sources: interest from fixed deposits and money market funds, dividend income from equity unit trusts or ETFs, rental income from property, and structured income drawdowns from endowments or living annuities. The mix depends on your tax position, because interest income is taxed at your marginal rate, while qualified dividends attract a 20% dividends tax at source, and capital returns from an endowment may be more tax-efficient for high-income earners.

Inflation is the silent risk. An income of R83,000 per month today needs to grow each year to maintain purchasing power. Build an inflation escalation assumption into your income plan from day one.

For context on how interest rates affect your income portfolio, see what South African interest rates mean for your income portfolio. For how the structure of a living annuity interacts with drawdown, the guide on how a living annuity drawdown works for South African retirees is useful background.

Comparing the Main Asset Classes for a Large Lump Sum

No single asset class is right for the full R20 million. The decision is about allocation across asset classes with different roles in the portfolio.

A note on unit trusts versus ETFs, because the confusion comes up often: both appear in the equities row above, but they are not the same product. A unit trust is priced once daily and may be actively or passively managed. An ETF trades on an exchange like a share and is typically passively managed. Both can hold the same underlying equities. The choice between them is a cost, tax, and trading-frequency question, not a question of which asset class you are accessing.

For how to think about asset allocation shifts as you approach retirement, the retirement planning guide covers the shift from growth to income-oriented allocation in practical terms.

Should You Put Any of the R20 Million into Property?

Direct property can play a role in a large portfolio, but it should not be the default answer for a R20 million lump sum.

Historically, South African residential and commercial property has provided some inflation protection over very long periods. Past performance is not a guarantee of future results, and the correlation between property values and inflation has varied considerably by era and location.

The practical constraints are more pressing. Direct property is illiquid. If you need to access capital in a hurry, you cannot sell half a flat. It also concentrates risk: a single property in a single suburb exposes a large portion of your capital to one micro-market. The ongoing costs (rates, levies, maintenance, vacant periods, estate agent fees on eventual sale) reduce net return meaningfully.

Listed property (REITs on the JSE) solves the liquidity problem and provides diversification across multiple properties and tenants, but it trades with equity-like volatility and does not behave like bricks and mortar.

For most investors at this scale, direct property makes sense only if it generates rental income that fits the overall income plan and only if it represents a modest proportion of the total portfolio. For guidance on how to think about property and liquidity in a large retirement portfolio, the offshore and estate planning guide covers the liquidity dimension in the context of estate duty.

Shari’ah-Compliant Options for a Large Lump Sum

If you require your investments to comply with Shari’ah principles, the full range of structures described above is available in compliant formats. This is not a narrow option or a compromise.

South Africa has a well-developed Shari’ah-compliant investment market. You can access local and offshore equity funds screened for Shari’ah compliance, sukuk (Islamic bonds) as an alternative to conventional fixed income, Shari’ah-compliant money market funds, and offshore Shari’ah-compliant unit trusts. Endowments and living annuities can be structured in compliant formats.

The returns on Shari’ah-compliant funds have historically been broadly comparable to their conventional equivalents over longer periods, though short-term differences arise from sector exclusions (alcohol, tobacco, conventional banking). Investors should understand this trade-off honestly rather than being told that compliant investing costs nothing in return.

There is no reason for a Shari’ah-observant investor to accept a lesser financial plan. The planning principles are identical: tax efficiency, structure, drawdown, offshore allocation, and estate impact. For a detailed overview of what is available, see Shari’ah investment funds and strategies explained.

Frequently Asked Questions

What is the best investment approach for a lump sum in South Africa?

The best approach is to work through five decisions in order: clarify your tax position, choose the right structures (RA, TFSA, endowment, own name), determine your offshore allocation, set a sustainable drawdown rate, and consider how the assets pass to your estate. No single product is the answer. The structure and sequencing matter more than fund selection.

How can someone invest money offshore from South Africa?

South African individuals can externalise up to R10 million per calendar year using their single discretionary allowance. Capital can be held in a foreign-domiciled account, through a rand-denominated offshore fund, or via an offshore endowment. Each option has different cost, tax, and estate duty implications, and the right choice depends on your circumstances.

Which investments generate monthly income in South Africa?

Monthly income can come from interest on fixed deposits or money market funds, dividends from equity unit trusts or ETFs, rental income from property, or structured drawdowns from endowments or living annuities. The tax treatment differs across each source, so the optimal mix depends on your marginal tax rate and overall income plan. For context on interest rate trends, see what to expect from South African interest rates.

What are Shari’ah-compliant investment options in South Africa?

South Africa offers Shari’ah-compliant equity funds, sukuk, money market funds, and offshore compliant unit trusts. Living annuities, endowments, and discretionary portfolios can all be structured in Shari’ah-compliant formats. Returns have historically been broadly comparable to conventional equivalents over long periods, with some short-term variation due to sector exclusions.

How does inflation protection work for investment capital?

Inflation protection in a portfolio comes from holding assets whose returns tend to grow over time: equities, listed property, and inflation-linked bonds. No asset class guarantees inflation protection, and the degree of protection depends on the time horizon and the specific assets held. Building an income escalation assumption into your drawdown plan is the practical way to manage this risk.

What retirement investment options exist in South Africa?

South African investors can save for retirement through retirement annuities, preservation funds (for transferring out of employer funds), and pension or provident funds through an employer. In retirement, capital is typically converted into a living annuity (where you stay invested and draw an income) or a life annuity (which provides a guaranteed income for life in exchange for your capital). Many retirees use a combination of both.

What role should direct property play in a R20 million portfolio?

Direct property should only feature if it generates rental income that fits your income plan and represents a modest portion of your total portfolio. It is illiquid and concentrates risk. Listed property (REITs) offers liquidity and diversification but behaves more like equities. For most investors at this scale, diversified financial assets are more suitable than direct property ownership.

Getting the Decisions Right from the Start

The most important thing to understand about investing R20 million is that the decisions are interconnected. Getting one wrong can cost more than a poor fund choice ever would.

The five decisions to work through, in order, are:

1. What is your tax position, and what do you still owe?
2. Which structures should you fill, and in what sequence?
3. How much capital should go offshore, and through which vehicle?
4. What is a sustainable monthly income, and how will it keep pace with inflation?
5. How do these assets eventually pass to your family, and what does that mean for liquidity and estate duty?

For a broader planning framework, the guide on preparing for retirement: the complete guide for South Africans is a useful starting point.

This article is general information and not personal financial advice. Your specific tax position, family circumstances, existing portfolio, and income needs all affect which approach is right for you. To work through these decisions in detail, please get in touch for a private consultation.