Peter Vickers, Chartered Accountant
There comes a time in your life when you need to simplify your finances and organise your investments.
Or maybe you have a relative that needs help either because of old age or incapacity.
There are many employment opportunities around the world and people make various attachments to each other. Thus many people are now living far away from their families. When those family members have issues with their ability to manage their affairs this places strong strains on all family members. Using technology and the internet we have designed systems that the distant family member can ensure that their family is being cared for and that their finances and investments are also looked after. Using this technology you are also able to view what is happening on line without having to trust anyone.
Managing your share portfolio: The share market may be collapsing but investing in shares is still only one of two investment choices that most people have. Property is the other. In the past using paper based systems one could only handle a small number of holdings as these needed constant recording and monitoring. Now using the Chess system together with internet broking and investment recording software you can extend your portfolio and you can also carry extra holdings that are more speculative or require a longer time frame before selling. What is also important is that you record the cost of your portfolio as you need this to calculate any eventual capital gain. Over time your holdings will change due to “corporate actions” even if you are not a seller. If you have not systematically recorded your costs we have reconstructed that information for many investors.
Tax: With all the computers talking to each other, collecting all your information for the preparation of your tax return is now reasonably automated. However the tax laws are much more complicated and unless you get an expert to look over your affairs you are likely to make a mistake that will cost you money.
Simplification not required: Previously as people found they could not cope with managing their affairs they started selling off property, shares and their other investments and closing down their self managed super funds. They then had to put all their money on term deposit with financial institutions like banks. They were then at the mercy of low interest rates and then made foolish decisions when they chased higher returns. Again with the use of technology and the right set up this is no longer necessary. From capital gains tax point of view you no longer have to crystalise the gain but can pass this down to the next generation. It is a very satisfying feeling using the unrealised tax liability to invest and earn more income.
Superannuation and Transition to Retirement (TTR): Please keep this a secret! Superannuation pensions are a legal way of paying NO tax. Yes I said ZERO tax. Do not feel like a criminal about paying no tax. What you are doing is actually not drawing on the old age pension and thus not being a burden on the shrinking working population. There are various structures to do this in, like Self Managed Superannuation Funds, industry funds and retail funds run by financial institutions. You can also tailor your investments to mirror your view of the world. The old idea of taking a lump sum is dead. There are also various options on the level of your involvement in the management of these funds.
Preparing your affairs for others to look after: Do you want to leave a mess for our spouse or family to resolve? Yes one needs a will, a power of attorney and living will, also known as Advance Care Directive (ACD). However you also need to look at your investment structures. Your superannuation is outside your will. Is property in joint names or tenants in common? Who are the directors and shareholders of your companies? This is usually not an issue if your family is limited to mum, dad and two children. In this case too much regimentation can be more detrimental as freedom of action by your family is limited. However we now have a sizeable part of our population that are now termed as blended families and these just require extra thought and care. And the most important advice is: Do not attempt to rule from the grave! This makes lawyers and accountants very wealthy.
In the end all you need to do is go and talk to your accounting or legal advisor about what you want to happen.