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Analyzing Your Financial Status and Goals

The Importance of Annual Reviews

Look back at the last year of your life – how many things have changed?  Major life changes can have a significant effect on a financial portfolio and savings plan.  Marriage, divorce, birth and death can change the needs originally established with your financial advisor.  Other events such as illness and job change will also impact decisions made and the future outcome of those decisions.  In addition to the changes experienced in personal life, things like inflation, tax laws, fluctuating tax rates and the state of the economy can also have a significant impact on a financial or estate plan.  Changes in life necessitate a review of financial and legal documents; even without significant changes, this should be done annually. 

Any time a significant event is experienced, it is always a good idea to schedule a meeting with your financial advisor and legal advisor to see if such changes have an impact on any of your insurances policies, investments or legal documents.  Life changes can impact the following:

  • Beneficiary designations for life insurance or annuity policies
  • Beneficiaries named in wills or trust documents
  • Titles of property such as real estate and investment accounts
  • Positioning of assets to best meet financial needs and goals

Personal budget matters should also be addressed annually.  Paying attention and managing your money effectively will help to maximize your flow of income.  Many people realize too late that they should have managed their money a bit more closely, especially in retirement, as their expenses increase and their budget decreases.  Reviewing your financial plan to meet your current income needs and prepare for those of the future is an important part of the annual review process.

Here is an example of how changes in life can affect your portfolio.  Mr. Wilson is a retired, 70-year-old man who owns real estate that has experienced substantial appreciation in value over the last several years.  Many years before, Mr. Wilson didn’t have to worry with estate taxes problems, but now that his real estate holding are worth more than $2 million, he realizes that he must put a plan in place to protect his estate from taxes that could be due upon his death.  He wants his grandchildren to inherit the real estate and he doesn’t want them to be forced to sell the real estate in order to pay the estate taxes.  In addition to the estate tax problem, Mr. Wilson recently became a grandfather two more times.  A few years ago when his estate plan was first established, these two were not included; he now wants to make certain that these grandchildren will be beneficiaries of his estate. 

Due to the life changes Mr. Wilson has experienced, he needs to review not only his financial plan, but also his estate plan in order to pass his real estate holding on to his grandchildren in a tax efficient manner.  Mr. Wilson has been diligent in communication with his financial advisor in order to provide him information on his life as well as obtain information on tax and regulation changes.  He annually addresses all financial matters and concerns in order to put the whole picture in perspective.

If it has been more than one year since you last met with your financial and legal advisor, make an appointment today.  Create a list of the changes that have taken place in your life and contact your advisors to see if those changes, or other recent developments, necessitate updating your financial or estate plans. 


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