Your 2023 financial planning checklist

Financial Planning checklist

The decision around your investment and retirement assets will be one of the biggest decisions you’ll have to make. However, investments are only one aspect of financial planning. A comprehensive financial plan should include a succession file that focuses on the orderly and cost-efficient distribution of assets on your death. A good financial adviser will ensure that all the below items on the checklist have been dealt with. 

1. Create a succession file which will include every document discussed below.  Let family know where to find the file in the event of your death. 
2. Create a list of your assets and liabilities that you have and include savings, investments, retirement assets (e.g. Retirement Annuities), policies (e.g. life cover), bank and credit-card accounts. 
3. Update your and your spouse’s Wills. When someone dies, somebody has to wrap up that person’s life administratively, and this can be a bureaucratic nightmare. This needn’t be the case if you are well organised. Draw up a Will if you haven’t yet. In order to avoid family conflict, make sure that your family is well aware of all your wishes with regards to which assets you bequeath to whom. Work with a professional to make sure that not only the assets are protected, but should anything happen to you and your spouse your minor children will go to the correct guardian. Check that the guardian is comfortable accepting this position. 
4. Include a Testamentary Trust clause in your Will for minor children if you do not want their inheritance to go into the Guardian’s Fund administered by the Master of the High Court. This is a State-controlled savings account.  You can specify that the Trust terminates once your children are able to manage large sums of money (for example 25 or 30 years of age). In the meantime, your nominated trustees will be responsible for managing the money and paying out expenses to minor children. Choose your trustees carefully and choose more than one. Include a professional trustee who will be fair and impartial.
5. Beware of the implications of being a residual heir or making someone a residual heir. It can sometimes lead to a disastrous outcome.  
6. Include the following in your Estate planning: 
   • Power of Attorney – which designates someone to act on your behalf in business, personal and legal matters should you or your spouse become incapacitated.
   • Living Will – which outlines in advance what actions you’d like taken regarding your health should you no longer be able to make those decisions yourself.
   • A list of important contact name and numbers required in case of death.
   • Passwords – make sure that someone you trust knows where to find your passwords to access your computer and phone as well as cryptocurrency wallets and social media accounts.
   • For ease of administration of the estate ensure that you have title deeds, Natis documents, firearm license, birth certificates, ID’s and passports etc.
7. Review your estate plan taking into account all death expenses such as capital gains tax, repayment of loan accounts, estate duty and executors fees. Check that there is sufficient liquidity in both your and your spouse’s estate.
8. Check your and your spouse’s beneficiary nominations. When you name a beneficiary, you are designating who should receive the assets in the event of death. This is a basic financial task you’ll have to return to as your life changes.
9. Multi-generational households. You may find yourself caring for an aging parent or grandparent. Preparing to financially care for your loved ones, both young and old, requires careful planning which may include ensuring that you are able to help pay for costs associated with nursing home care, home health care or assisted living facilities down the road.
10. Ensure that you and your spouse have sufficient life and disability cover. 
11.  Business
    • Buy and Sell agreements Check that it does not conflict with the Will or trust deed (if you have one). Check that business partners have the means to pay out to the estate (of which you or your family are a beneficiary). Assess the need for other business cover, such as Keyman and Contingent Liability cover.
    • Make sure you have Company documents eg CoR 14.1 and 39 or CK2, shareholders agreements
12.  If you are selling or have sold a business,make sure that you have cancelled all suretyships which would continue to bind you. Be careful of signing sureties for children, nieces, nephews or grandchildren as it could come back to haunt you well into your retirement. 
13. Make sure that your trust deed has been reviewed recently to ensure it does not fall foul of any legal, tax or other legislative changes.  
14. Make a budget, keep track of all your expenses and where appropriate pay off debt.
15. Create an emergency fund by ensuring that you. Create provision for at least 6 months’ worth of expenses.
16. Have you created an independent capital source should something happen to your business? You cannot always rely on the sale of your business to fund your retirement.
17. Retirement planning Do you and your spouse have a clear vision of your life in retirement? Are you confident you will be able to retire when you want and in the lifestyle, you want? 
18. Retirement goals. Spend some time carefully thinking about what income and future expenses you will require once you no longer own the business. Include items such as annual offshore holidays to visit future grandchildren, vehicle replacements, weddings, children/ grandchildren’s education. Get your financial adviser to calculate what capital is required to sustain your goals. Start planning for retirement and allocate specific assets to “Retirement Lifestyle Capital” which will provide for all your stated goals and objectives (this should be invested to produce as predictable a return as possible). The balance of assets or capital should be earmarked as “Surplus Capital” and one can adopt a separate strategy for greater growth. This could be invested offshore. Check that your portfolio is correctly balanced belween local and offshore assets. 
19. Have you taken future inflation into account? Is your portfolio geared towards beating local inflation? Have you escalated your future medical aid goal at a higher rate than inflation? 
20. Be proactive in your tax planning Make sure that you are using the correct investment vehicles to prevent paying unnecessary tax. Apart from the usual tax it includes estate duty and capital gains tax. The correct investment vehicle will also save on executors fees.
21. Work with your financial adviser to ensure that the above is included in your financial planhis would need to be modified over the years. Make sure that your financial adviser has a CFP qualification as well as the financial IQ to deal with high level planning requirements. Not all advisers are able to do this.

Make sure that either you or your financial adviser has the necessary expertise, qualification and financial IQ to deal with high level planning requirements that will add value, not only to investments but also retirement, tax and estate planning needs.

For any further information, please contact us on 031 832 4555 or via email on admin@stonewm.co.za