Here Are 8 Steps For Wealth And Fiduciary Planning


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A structured wealth and fiduciary plan should not only deal with financial considerations, but also take into account legal principles and tax consequences, according to Angelique Visser, a national councillor of the the Fiduciary Institute of Southern Africa (Fisa) and a director of Baraza Wealth.

She sets out the eight basic steps for wealth and fiduciary planning:

Relationship status

If you are married, you have to make sure you understand the financial consequences of the marital regime that you have selected as this will form the foundation of your wealth plan.

Unmarried individuals who wish to formalise their relationship, should take advantage of the estate planning tax benefits before their marriage. She points out that most individuals are not aware of the benefits and forfeit them.

Set a budget and cash flow statement

A budget gives structure to a wealth plan. Although this is a basic step, very few people actually have a personal and/or family budget. A budget will not only assist you to determine what disposable income you will have available after all your monthly expenses, but also instill financial discipline to keep to your wealth plan.

If there are any changes in your personal and/or financial circumstances, the cash flow statement and budget will need to be reviewed to cater for the changes.

Reserve fund: save

As you are never sure what the future holds, it is always advisable to have a small reserve fund for rainy days.

The norm is to have cash available in a fund that will be able to cover your expenses for at least three to six months.

You could either keep funds in a money market account or pay extra funds into your home loan account, provided it will be available in a crisis. Personal circumstances will dictate what is best to do. For example, interest saved on your bond will be more than what would be earned in a savings account.

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Risk management

Check if you are on the right medical plan for your needs. You could either be at risk for not being on the appropriate plan or pay too much for something that you may not need. Additional funds could rather be used to pay off debt or be invested. Personal circumstances will, however, dictate again.

Medical shortfall (GAP) insurance may also be considered as medical aids often do not cover all the medical costs.

Regarding short-term insurance, you need determine whether you are under- or over-insured. Review premiums – any saving can boost your savings and investments.

As for death, disability, dread-disease or severe illness, establish what your requirements are to address income and capital needs. For instance, what about paying off your home loan and other debts in the event of disability or death?

You may need a financial adviser at this stage to do a full needs analysis and provide recommendations based on your personal circumstances.

Investment strategy

The next step is to formulate an investment strategy.

Here you will determine how much money you need to start investing to become financially independent. According to statistics only 6% of South Africans retire financially comfortable.

There are many tax benefits that you must take advantage of when you invest. Here too, you may need the help of a financial adviser as risks, asset classes and tax implications need to be considered.

Estate planning

This process involves the structuring of assets in the most tax effective way to ensure protection and preservation of assets from one generation to another.

This step also involves the drafting or reviewing of your will to ensure that it is aligned with your wealth plan. Life happens and a will is the bridge to pass your wealth to the next generation.

Aspects to consider include minor children (under 18) for whom a guardian needs to be appointed in your will. They are not allowed to receive their inheritance until they are 18 years old.

Their inheritance can either be reduced to cash and paid into the Guardian’s Fund, which is managed by the State, or you can set up a testamentary trust in which event the appointed trustee will manage the funds on behalf of your minor child.

During this time, the trustee will pay school fees and other costs as well as an amount to the guardian every month to look after the minor child.

A liquidity calculation has to be done in order to determine whether there will be enough cash to wind up your estate. According to statistics, more than 30% of all estates in SA do have cash shortfalls, which delay the finalisation of the estate.

This means the heir will, for example, have to pay off the bond before he or she can take transfer of a property or otherwise the executor will have to sell it.

It is possible for the heir to apply for a new bond, but it is possible that your heir may not qualify for a home loan.

Other costs to consider are executor’s fees, estate duty, capital gains tax, funeral costs, rates and taxes, transfer costs and levies.

Succession planning

If you have an interest in a business, you have to ensure that the business planning needs are addressed. The requirements will depend on the structure and type of business as some industries have unique characteristics.

Insurance and/or buy-and-sell-agreements may be a solution in some situations, but the day-to-day activities have to be discussed and a plan put in place in case you are not able to actively participate in the business due to health or death.

Action plan

Set goals and prioritise as it may not be possible to implement the entire strategy immediately.

Review and update the plan at least once a year or if there is a life event, for instance marriage, the birth of a baby, acquisition of a business interest or divorce that requires you to change it.



Source: Fin24



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