Cash Flow Analysis1

Obtain a Detailed Understanding of Your Finances

When planning for lifetime gifting, taxes, retirement and your estate, a detailed balance sheet and cash-flow analysis are critical to the ongoing process.

Your balance sheet includes a list of everything you own (assets) minus what you owe (liabilities) to determine your net worth. Assets include cash, investment and retirement accounts, stock options, annuities, cash value in contracts of life insurance and real estate. Liabilities are debts, such as your mortgage and credit card balance.

Your cash-flow analysis compares your current and future income sources (inflows) to your spending needs and goals (outflows). When inflows fail to cover outflows, selling assets may be necessary.

Keep in mind the various income sources to consider in your analysis:

  • Recurring salary
  • Rental income
  • One-off consulting fees
  • Future recurring Social Security benefits
  • Expected one-off inheritances

Your spending needs and goals could include these when defining your outflows:

  • Groceries
  • Vehicle maintenance
  • Travel and vacation expenses
  • Childcare
  • Future college education funding goals
  • Home or other large purchase goals
  • Charitable gifting

If you need help starting this analysis, use our worksheet to list your assets, liabilities, and current and future income and expenses.

An Essential Planning Component

A detailed cash-flow analysis defines your current financial standing and reveals whether you're on track to reach your long-term spending goals. Through this process, you will establish a budget, determine how much you are currently spending, how much you need to save, and what assets you may need to sell in order to meet your financial obligations and live comfortably in retirement.

Additionally, you’ll discover your gifting capacity through annual exclusion gifting, as well as the use of other gifting strategies. Most sophisticated, effective wealth transfer strategies, such as sales to defective grantor trusts, depend entirely on a detailed cash-flow analysis, and most high net-worth families fail to implement sophisticated transfer tax strategies due to lack of a detailed budget and cash-flow plan.

At City National, our planning group follows a disciplined, 6-step process that facilitates a detailed cash-flow analysis that leads to tailored, flexible strategies you and your advisors can utilize when managing your lifestyle needs and your wealth transfer objectives.

Investment and Insurance Products:
• Are Not insured by the FDIC or any other federal government agency
• Are Not deposits of or guaranteed by a Bank or any Bank Affiliate
• May Lose Value
  1. City National Bank its affiliates and subsidiaries, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations. You should consult with your other advisors on the tax, accounting and legal implications of actions you may take based on any strategies presented taking into account your own particular circumstances.