Add to your resolutions: review financial planning and make changes where necessary
by Gaylene Schweitzer, Vice President / Compliance Officer, Scott Valley Bank
We approach the holiday season with anticipation of spending time with family and friends to celebrate and reflect together on the experiences that have touched our lives during the year. It is a time to re-connect and a time which grants license to take a short break from the mundane responsibilities that govern our lives. As the holidays progress and the New Year approaches, we are astonished anew that another year has passed without our notice. We resolve to enjoy the time of celebration and then to review our priorities and unfinished business as we move into the New Year and create our annual list of resolutions.
The top ten New Yearís resolutions for 2014 included losing weight, volunteering to help others, quit smoking, further education, find a better job, save money, improve fitness, eat healthy food, manage stress, manage debt, take a trip, recycle and to drink less alcohol. Resolving to review personal financial, retirement, tax, estate and business continuity planning objectives to make sure our affairs are in order did not merit an entry on the list.
It is not the objective of this article to offer legal or tax advice as I am not duly licensed or proficient in either profession. The objective rather is to suggest the value in adding an entry to your list of resolutions to review your financial planning objectives and to make changes where necessary.
I have spent the greater part of my career working in banking compliance, operations and branch management and spent a few intervening years working as an investment advisor and financial planner. As such, I have had the opportunity to review the merits of the financial planning process (whether it be formal or informal) from inception through implementation. Often, individuals equate the need to create a financial plan with the size of their estate and fail to understand that the planning process includes much more.
The examples and discussion that follow are illustrative in nature from the perspectives of a financial planner and a banker.
From a financial planning perspective, business owners consult with their legal and tax advisors to draft the formation documents that govern the legal structure of their enterprise and then often fail to have them periodically reviewed and amended as their business grows or changes. From a bankerís perspective, complete and accurate formation documents are required to open an account or apply for credit.
From a financial planning perspective, individuals often consult with their legal and tax advisors to draft formal trust documents to manage their assets through life with the intent to seamlessly transition their estate to their beneficiaries. From a bankerís perspective, disheartening consequences can occur if the customer fails to title their accounts in accordance with the direction provided in their trust documents.
From a financial planning perspective, individuals with smaller estates will utilize the various account ownership structuring options available to meet their planning objectives. From a bankerís perspective, disheartening consequences can occur if the customer fails to revise their account ownership structure concurrent with changes in their personal circumstances such as marriage, divorce, remarriage, death, incompetency, etc.
From a financial planning perspective, resolving to review your personal financial, retirement, tax, estate and business planning documents on a periodic basis is imperative. From a bankerís perspective, resolving to review the manner in which your accounts are titled on a periodic basis is equally imperative. From your familyís perspective, planning for their security is the most imperative of all.
Throughout the life cycle of an account, the bank could be required to comply with legal process requests, to facilitate changes in account ownership or authority, to participate in resolving disputes, estate settlements or instances when fraud or identity theft are present.
From all perspectives, it is important to ensure that your bank accounts are titled according to the directions and the legal documents that you have provided. Often, inattention to this aspect of the financial planning process can result in disheartening consequences during periods of extreme emotional distress or family emergency.
I have had the opportunity during the course of my professional life to participate in the positive aspects of both the formal and informal financial planning process and to experience first hand the consequences of inattention and failure to act when personal circumstances change. On a personal level, I have had the opportunity to work with family members and friends when events unfold in accordance with their financial plan and with managing the consequences for those who have failed to adequately plan where the outcomes in terms of legal costs can be significant and the outcomes in terms of emotional costs immeasurable.
If you are a participant in the New Yearís resolution tradition, consider adding an entry to your list for next year to review the disposition of your personal financial affairs. If you do not participate in the tradition you can still consider the same.
At the end of the day, if we lose weight, quit smoking, improve fitness, eat healthy food, drink less alcohol, manage stress and reduce debt, we might just live longer and accumulate more assets that will require us to develop and execute a financial plan!