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FINANCIAL PLANNING Protect your legacy for your loved ones Lesego Monareng Financial Planner, Private Wealth Management At its core, estate planning is about the legacy that you leave behind. Will that legacy be one of conflict, confusion and cost, or a process that positively extends the impact of your life? You don’t have to plan to fail your family; you just have to fail to plan. The two main principles to consider when planning your legacy are: 1. Wealth protection of goals An unexpected event such as death means a loss of income, which can be a heavy financial burden on your dependants. This potential loss of income can be covered by a risk policy. You and your financial planner must discuss the amount of risk cover you need to ensure that the gap between your assets, liabilities and future expenses are well covered. This is particularly crucial where you are the breadwinner or have minor dependants. It is important to review this regularly as your life and circumstances change. 2. Estate Planning Estate planning is an integral part of any good financial plan. We all want to leave a lasting legacy to protect our loved ones and inspire the younger generation to reach even higher. Your financial planner can assist you with these difficult discussions to protect your WEALTH. Inherited wealth can be a burden if it was not carefully planned. Good planning will empower you and your future generations to preserve your wealth. It involves making plans for the transfer of your estate after death. Your net estate will include your personal assets, business assets and all other investment assets (excl. retirement assets) less all liabilities, taxes and any other valid financial claims. A good estate plan will provide adequate guidance on the management of your assets upon your death. This process will also reduce estate costs you may not have considered. Ongoing planning for the liquidity needs of an estate and the management of immovable property is another essential element. In the case of minors inheriting immovable property, the maintenance, rental income and other matters have to be discussed. It is important to identify expenses such as income tax, capital gains tax, executor’s fees and claims upon death. Personal estates that are valued in excess of the estate duty abatement (R3.5 million for individuals and R7 million between spouses) will have significant estate duty taxes. These costs can compromise the preservation of your wealth for the next generation. Your assets and investments will grow over time exceeding debt and future financial commitments and reducing your need for risk cover. The ultimate goal of financial planning is to reach financial independence where you can live from your assets. See diagram below. Your financial planner can assist you with these difficult discussions to create, protect and transfer your wealth. [ DEBT & FINANCIAL COMMITMENTS ] Benjamin Franklin said: “In this world nothing can be said to be certain, except death and taxes.” These certainties are part of life. Nobody likes to think that they will eventually die, but it is important to plan for this event. Dealing with the death of a loved one is hard enough. Not knowing what to do with someone’s finances after the person has passed away puts an additional burden on a grieving family. l Financia Point of ence end ep ind E LIFET IM EF S VI IRE WALL N LIN IO PRO [ AGE ] PWM CONNECT: 2015