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Note from the editor

Sharon Teubes, Senior Legal Adviser, Business and Personal Solutions
August means various things for different people it is the last month of winter, in Gauteng it is the windy month and for some it is the start of the end of the year. Regardless of your personal thoughts around this month, it is also the month in which we celebrate women. Women are the mothers of the nation, the caregivers, the strength behind many successful men and increasingly becoming an economic force to be reckoned with. The increase of women in business has been significant and the influence they have cannot be underestimated. Therefore, this months Leverage will emphasise the importance of focusing on women and their financial planning needs. They are an important part of a financial advisers business, whether as clients in their personal capacity or as influencers when doing financial planning for families. From my side, I wish all our female readers a very happy Womens Month may you enjoy the financial independence that good financial planning will bring! Regards Sharon

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A celebration of Womens month

Empowering financial wellness through conscious choices

By Fleur Lerwill, Business Development Manager, Business Solutions
In a recent magazine, an article was published titled 12 things to spend money on. These 12 things included: A fabulous hairdo A sharp outfit Shoes that last (who can argue that!) Wellness. This element of wellness focuses on physical and mental wellness. It is a proven fact that exercise and healthy living, as an example, is great for reducing and managing stress thereby promoting overall wellness. A lack of exercise causes as many deaths as smoking. A third of all adults are not doing enough physical activity. However, promoting exercise and healthy living is no longer sufficient - there is a shift to warn people of the dire consequence linked to not exercising enough. Nowhere in the article were financial wellness mentioned and the impact that ones financial wellbeing can have on your physical and emotional health. This article will focus on the steps women should take to ensure financial wellness.

Do a financial reality check

The first step will be to rate the current financial wellness, which will indicate the effectiveness of the financial choices. The assistance of a financial adviser will determine whether the financial plan should be altered to ensure the desired outcome.

Exploring choices and how it influences behaviour

The following extract from an article written by Henry van Deventer in Cover magazine explains the differences in the ways men and women make decisions: How individuals make decisions is hugely dependent on what drives behaviour. Different people, based on their inherent characters or personalities are either more left or right brain oriented. The same is also true for genders. The different sides of the human brain drive behaviour in different ways. The left side of the brain is the analytical side which processes facts, figures and new information and does deductive reasoning.

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The right side of the brain is the intuitive side and is the relational, sensing, feeling and risk taking side of the brain. Women tend to be more right brain oriented, where men are more left-brain oriented. Women are not as egotistical and are less over confident when making decisions. Women will also likely be more consultative and gather a lot more information before making a decision instead of making a rash decisionThe empowerment of women has taught us some key lessons, namely that a man is no longer a financial plan to a woman. Research has shown that women are increasingly finding themselves as the primary provider for their family and households finances. Another report to take heed of when thinking of women and financial planning, is a report from Barclays Wealth and Ledbury Research that revealed that women worldwide are now responsible for up to 80% of household purchasing decisions. The report also revealed that women are increasingly rising to senior positions in their professions, managing companies or running their own businesses, and generally taking more control of financial decision-making. Therefore, it is vital that women start focusing on their role in the financial wellness of themselves and of their family and that they take decisive action or at least participate actively in the decisionmaking process. Even in instances where women decide to be stay-at-home mothers, it is vital to remain active in the financial planning. Ignorance should not be an excuse for bad choices which can cost the family its financial wellness.

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Planning for death

Some of the first questions that need to be asked include: How will the death of either one of the spouses/ parents affect the family? This is even more important in the case of a single-parent household. Is there sufficient financial protection to ensure the standard of living is maintained? Will the children be able to continue with the education path that they are on or will they be forced to settle for second best? The following consequences of death should be considered when doing financial planning: Assets and bank accounts are frozen until the estate can be wound up, which can be a serious problem if the main breadwinner dies Access to liquid funds by dependants can be restricted and limited It can result in bills not being paid eg school fees, medical aid, water and electricity It can result in services being disconnected and the family home being threatened Insurance policies on the life of the surviving spouse might be cancelled due to nonpayment.

spouse. Estate planning is a holistic exercise and involves the protection and distribution of assets to give implement to the wishes of the family and avoid/minimise costs and taxes associated with the finalising of an estate. Estate planning is a service which anticipates and arranges the disposal of the estate in the event of death while ensuring that it is also enjoyed during an individuals lifetime. As part of ones estate plan, consideration should also be given to the impact of disability and critical illness on financial wellbeing.

The importance of a will a vital choice

Everyone needs a will even in cases of limited assets. If a person dies without a will, the Intestate Succession Act will apply and prescribe the distribution of assets. The following are important reasons for having a valid, up to date will: The testators wishes will be known An executor will be appointed to ensure the effective administration of the estate Guardians can be appointed for minor children A testamentary trust can be created for minor children.

The list goes on...

Most, if not all the above risks, can be addressed and planned for by doing an estate plan for each

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Access to information
In addition to an estate plan and the will, it is important that the surviving family have access to all the necessary information to make the administrative process following the death as easy as possible. It is best to have an easily accessible file or folder that contains all the important documents. The following must be included in this file: The original will Contact details of the executor of the will Details of the guardians of minor children (make sure to discuss the guardianship with the potential guardians to ensure they accept the nomination) Contact details of the financial adviser A list with all insurance policies with a summary of the main benefits on each policy A list of all assets including account numbers, registration documents where necessary, institution details and contact details of relevant individuals A list of all liabilities, account numbers, contact details of the institutions involved Income tax data should be retained tax number, etc Concise details of any offshore assets.

The impact of divorce on financial wellness

When a person gets married, it is generally not with the prospect of divorce in mind. However, in South Africa one in three marriages ends in the divorce court. Therefore, it is important to consider the impact of divorce on financial wellness. The entire financial plan must be re-assessed and the following points should be focused on: 1. The impact of the divorce on the will. After a divorce, there is a three months period in which a person should amend the will. If the will is not amended after the three-month period, it is assumed the will is in the form it was intended to be. If the will still nominates the ex-spouse as the beneficiary of the estate, that wish will be upheld. Should the person die during the first three months after the date of the divorce, it will always be assumed that the ex-spouse is pre-deceased, thereby ignoring the ex-spouse as an heir. 2. Evaluate the impact on the overall estate plan. The initial estate plan was probably based on the fact that the majority of assets would go to the surviving spouse on death which would result in those assets being free of estate duty and Capital Gains Tax. This will obviously change in the case of a divorce and the result could be that the entire estate (in excess of the R3 500 000 abatement) becomes

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subject to estate duty and some assets subject to Capital Gains Tax. This will affect the estate liquidity requirements which can affect the net amount available for the beneficiaries. 3. Review and alter the beneficiary nominations on all life insurance policies, investments (where relevant) and group benefits. 4. Consider the impact of the divorce on retirement planning. When married, a womens retirement plan generally forms part of a bigger, joint retirement plan, often leaving the actual planning to the spouse. After divorce, it is very important that responsibility is taken for personal retirement planning to ensure financial wellness. 5. Ensure that minor children are provided for on the death of either parent, taking any maintenance orders into account. 6. Ensure that a maintenance order in a persons favour can be continued upon the ex-spouses death or disability. 7. Review life insurance policies to ensure there are sufficient funds to settle any estate costs and debts and to assist in the maintenance of minor children. Provisions for disability should also be reviewed and special attention should be given to the impact critical illnesses on financial wellness.

Retirement planning an ongoing choice

Most people anticipate a carefree retirement, however, very few realise this dream as they fail to plan effectively. Research shows that, out of every 100 South Africans who work, the situation at age 65 would probably be as follows: 49 will be dependent on the state or family 29 would be deceased 12 will be bankrupt Five will still be working Four will be able to retire comfortably One will be wealthy. There are two main reasons for this. Firstly, most people ignore the prospect of retirement and hopes for the best and secondly many people have unrealistic expectations regarding retirement and cannot fulfil their lifestyle after retirement, mainly due to a lack of effective planning.

Some reality checks during retirement planning are:

Income after retirement is usually less than anticipated The effect of inflation over time is not taken into account during the planning phase and also post retirement Expenditure after retirement does not decrease as expected

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There is a general misconception of how much is enough One retirement fund will generally not provide sufficiently for retirement; Outstanding debt at retirement is not taken into account Medical expenses will probably be substantially higher after retirement The effect of tax at retirement is often ignored Most people start to save towards retirement too late, which make it impossible to meet the required capital needs. Remember the following (assuming a retirement age of 60): At the age of 30, there are 360 paydays until retirement At the age of 35, there are 300 paydays until retirement At the age of 40, there are 240 paydays until retirement At the age of 45, there are 180 paydays until retirement At the age of 50, there are 120 paydays until retirement At the age of 55, there are 60 paydays until retirement Another way of proving this point - if a person needs R1 000 000 retirement capital at the age of 60 (assuming a growth rate of 10% per annum), the monthly savings amount required is as follows: Starting at the age of 30 R442 Starting at the age of 35 R754 Starting at the age of 40 R1 317 Starting at the age of 45 R2 413 Starting at the age of 50 R4 882 Starting at the age of 55 R12 913 The above numbers speak for themselves.

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Conclusion
It is still a very common reality that women perceive their husbands as their financial plan, they do not take an active role in the planning process and have no input regarding the final decisions. This is a very dangerous situation to be in, as women tend to outlive men, thereby increasing the financial needs after retirement. The divorce statistics suggest that each person should really have his and her own financial plan, complementing each other, but existing independently from each other. This is a sure step to acquiring financial wellness.

Dont be afraid of death, be afraid of an unlived life. You dont have to live forever. You just have to live. *Natalie Babbit, Tuck Everlasting
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Intestate succession
By Sharon Teubes Senior Legal Adviser, Business Solutions
Intestate succession will apply if a person dies without a valid will. In terms of the Intestate Succession Act, the division of assets can be summarised as follows: Children include illegitimate children and adopted children. An adopted child is seen as a descendant of his/her adoptive parents.

Survived by a spouse but no descendants

If there is only a spouse and no children, the surviving spouse will inherit the entire estate even if there are parents and siblings that are alive. The new definition of a spouse that applies to the Income Tax Act and the Estate Duty Act, does not apply to the Intestate Succession Act. In terms of recent case law, spouse will include a spouse married in or out of community of property, marriages concluded in terms of Muslim or Hindu rites, common law marriages, partners in a civil union and same-sex persons in a permanent union.

Survived by a spouse and descendants

If both the spouse and the children survive the deceased, the spouse will be entitled to the greatest of: R125 000 or A childs share, calculated by taking the

total estate divided by the number of children plus the spouse. (If there are four children the estate will be divided by five and the spouse will receive one fifth of the estate) This is in addition to any portion of the estate the spouse may get due to the marriage regime that applies. If they are married in community of property, he/she will get half of the communal estate and the remaining half of the deceased will be divided as indicated above. (The same principal will apply if they are married by way of an ante-nuptial contract with the inclusion of the accrual.)

Survived by no spouse but descendants

If there are surviving children, the children will inherit the estate divided among them in equal shares.

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Survived by no spouse or descendants

In this case, the deceaseds surviving parents will inherit. Where a parent is deceased already, that parents descendants will be entitled to that parents portion of the estate. If there are no descendants, then the living parent will inherit the entire estate. Where there are no living parents or descendants, the estates will go to the closest blood relative(s).

Survived by no blood relations

Where there are no living blood relatives that can be traced for a period of 30 years, the estate will become the property of the State. During that time, it will be held in the Guardians Fund where anybody able to prove blood relation can claim the benefit. Therefore, it is important for each and every person to have a valid will that is updated continuously to secure their wishes and intentions.

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FULCRUM
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The Fulcrum Team (Business and Personal Solutions) is a select group of financial planning specialists in the Momentum Retail Insurance Division. Every member of the team is a qualified legal adviser and most have been admitted as Certified Financial Planner professionals. They Senior Legal Adviser: Sharon Teubes e-mail: sharon.teubes@momentum.co.za offer expert financial planning advice and support services to users of the Fulcrum BNA and Fulcrum for Individuals software packages. If you are not a Fulcrum user and would like more information about our products and services, please contact your Momentum Marketing Adviser. Head: Business and Personal Solutions: Bertie Nel e-mail: bertie.nel@momentum.co.za

Business development managers:

Name Emile Hofmeyr Fritz Beukes Paul Nell Fleur Lerwill Monique Johnson Shivashni Bhogal Vacant Nico Matthee Ron Heymans Region Bosveld and Centurion Tshwarane and Mpumalanga Woodmead, Houghton, Eastern Cape Cape Town, Boland and Tygervalley Free State and Northcliff Nexus,Durban, Midcoast and Westriding RBS and JBS Oryx and West Rand East Rand and Pretoria 082 710 7837 076 423 7870 nico.matthee@momentum.co.za rone.heymans@momentum.co.za Contact no. 082 043 2746 082 469 4004 082 777 1004 082 880 6010 082 560 5177 083 799 3111 E-mail address emile.hofmeyr@momentum.co.za fbeukes@momentum.co.za paul.nel@momentum.co.za fleur.lerwill@momentum.co.za monique.johnson@momentum.co.za shivashni.bhogal@momentum.co.za

Leverage is published monthly and is distributed to financial planners, who are registered users of Fulcrum BNA and/or Fulcrum for Individuals. The information contained in this publication is of a general nature and is not intended as advice to any person. Momentum Group (Pty) Ltd and its employees shall not be held liable for any damages resulting from your reliance on the contents. The contents of this publication may not be reproduced in any manner without our written consent.

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