In the sixth and final installment of her investment 101 series, Sheryl Sutherland discusses the importance of portfolio monitoring and asset protection.

By Sheryl Sutherland

In my last article we looked at appropriate asset allocation for your age, risk profile and investment goals. Previous to that, I presented an overview of the different types of investments and considered the upside and downsides of the various asset classes.

Once you have implemented your financial plan, you need to assess your progress. This is step six: Portfolio valuations should be undertaken regularly – annually is a good time-frame. During a year your portfolio can fluctuate: dividends or interest may have accrued, inflow or outflow of cash may have caused the asset allocation to vary. For example, if the share market rises, the weighting in shares may rise above your predetermined range. This is a good time to re-examine your goals. Have they changed? Are you still on target to meet your existing goals? Re-examine your exit plan if you have one (and you should). Does it suit your current circumstances?

Step 7 - Protect your Estate

There comes a point in everyone’s life when preserving assets for a future generation or for charitable giving becomes as important as building those assets. Just as a sound financial plan helps you and your family during your lifetime, an estate plan can help provide for your loved ones after your death. Today estate planning is not only for the very wealthy – almost everyone can benefit from creating some type of plan.

First, discuss your estate and financial situation with your family. Assess, with your legal advisor, which form of property ownership is most suitable for you. Preparing a will is essential. A will is a legally executed document that states how your property is to be distributed after your death. A proper, enforceable will ensures that your assets are distributed according to your intentions. You should also appoint a guardian to oversee the interests of any minor children and an executor to administer your estate. If you die without a will the courts divide your assets according to the law. You should also consider arranging power of attorney in case of incompetence, a living will, organ donation and charitable giving.

Consider Personal Trusts

There is no doubt that personal trusts are useful legal vehicles that can assist with financial and estate planning.

Trusts can help to:

• Simplify the settlement of your estate.

• Avoid lengthy and expensive probate (a process whereby the courts issue a certificate clearing the way for the division of your assets according to your will).

• Protect your family’s assets.

• Preserve assets for heirs in accordance with your wishes.

• Ensure the uninterrupted management of assets should you die or become incapacitated.

• Use tax-free life insurance proceeds to pay tax, if estate tax is reintroduced.

If you decide to create a trust, select the trustee with care. A trustee must be able to provide prudent asset management, keep reports of the trust investments and distributions, prepare tax reports and serve as an impartial arbitrator in balancing the needs of all the trust’s beneficiaries.

Exit strategy

Any business owner should have a succession plan. This may mean that you sell the business, transfer it during your lifetime or you may leave it to someone in your will.

Consult a Professional

Developing an estate plan can be a complex task and errors may mean that your wishes will not be followed. The creation of wills and trusts should be left to your lawyer.

*Sheryl Sutherland is director of The Financial Strategies Group and co-author of Smart Money,  and author of Girls Just Want to Have Funds and Money, Money, Money, Ain't it Funny.