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Category Life Insurance

Financial advice for the new year – Save, Invest, Protect

13 January 2020 Capital Legacy

As we usher in the New Year, our thoughts inevitably turn to finances. Everyone has a plan. Even no planning — worst-case scenario — is a plan. So, what will you do differently this year to make sure you’re in an even better situation next time round in 2021? But even more to the point, what will it take to ensure your family is not left in a worse situation if you happen to die.

There are two steps. First, make a plan, which includes the unpleasant scenario of your possible demise. As CEO of Capital Legacy Alex Simeonides says, “We all know the importance of building up our savings and of making sure our investments are optimised but are we doing enough in our planning to protect them, especially after we die?”

We all know that savings can be eaten up by unexpected mishaps or that our investments are always to some extent at risk. A popular solution to protect your savings is to set aside an “emergency fund”, ideally worth approximately three to four months of expenses. This can take a long time to achieve, however, and many people may find they are playing catch-up most of the year.

Simeonides says he started Capital Legacy after working as a financial advisor and seeing clients with substantial savings and sound investments being hit hard solely through poor estate planning. But Capital Legacy went beyond simply providing clients with a will and then executing it.

“People are eager to buy life policies, but very few people take the additional step to set up something that protects those policies and pay-outs,” he said. “We needed to make clients see that protecting their assets after they had died was as important as their savings and investment strategies for their bright future.”

The solution was to include an insurance policy, such as the Legacy Protection Plan?, which covered all the administrative costs of the estate. Simeonides estimates such costs could be more than 30% of the value of an estate. Then there are other monthly bills and expenses to be met by the surviving members of the family.

“Remarkably, few clients understand the extent of the costs involved,” he said. “And suddenly they are faced with executor fees, usually a maximum of 3.5% plus VAT of the value of your estate,” he explained.

The second part of your New Year financial plan is to do a stock-take on all your assets. Start with the big things, such as the current value of your property and your car, etc. Then go through your funds, such as savings, shares, and life insurance policies payable to your estate after death. Once that exercise is done, work out all your liabilities (taxes, etc.,) and long-term debts (mortgage, car bond, etc.), deduct from your assets, and you are left with your current net worth. Don’t forget to factor in capital gains tax (CGT), which is a maximum of 18%, if necessary.

It's worth remembering you should monitor your portfolio regularly and take into consideration matters such as your investment mix, diversification, and tax-efficient versus tax-advantaged accounts. Make sure your financial advisor understands your estate planning needs.

Simeonides says one of the harsh surprises of death is the amount of cash required at short notice to cover numerous immediate expenses.

“The Legacy Protection Plan? comprises three elements,” he explained, “starting with the indemnification portion which cover executor, conveyance, and testamentary trust fees. All this is accompanied by an immediate cash benefit to your beneficiary, depending on the amount of cover you have selected, and the third element is options.

The Plan comes with numerous flexible options, regardless of your medical condition, including for those who are over 60.

The main element, though, say Simeonides is the combination of legal, professional, and insurance expertise and innovative digital technology, which allows Capital Legacy to offer substantial cover at very reasonable rates. The Legacy Protection Plan? is an insurance policy to accompany your will and covers the all the administrative legal fees (Executor, Conveyance Attorney fees and Testamentary Trust fees) and other costs, such as Master’s Fees, advertising costs, monthly bills, etc.

“We cover the administration of winding up your estate and for the on-going administration of your testamentary trust, should you leave one,” he explains.

So, when making plans to secure your financial future, make sure it’s protected for those who may have to face it without you.

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