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Publications and Documents

 

Business Succession Planning:

Business Succession Planning

Need for Succession Plan

Need for Asset or Buy/Sell Strategy

Need for Liability or Key Person Strategy

Negotiating a Succession Plan

 

Simple Succession Plan:

Simple Succession Plan

 

Complete Succession Plan:

Complete Succession Plan

Strategy

Financial Needs

Insurance Funding

Retirement Funding

 

One Page Strategy:

One Page Strategy

Asset Needs

Liability Needs

Personal Needs

Who Pays the Premiums?

Valuing the Business

Simplifying the Valuation Issue

Equity vs. Loan Capital

 

One Policy Strategy:

One Policy Strategy

Flexibility

Dual Role of Personal Cover

Dual Role of Debt Red'n Cover

Security & Tax-Effectiveness

Cost Savings

Pre-Agreed Purchase Price

Apportionment of Premiums

Methods of Aggregation

 

Multiple Policy Approach:

Multiple Policy Approach

Super Fund Ownership

Tax Disadvantages

Cost Disadvantages

Other Disadvantages

Geared Premium Funding

Super Buy/Sell

 

One Page, Two Policy Strategy:

One Page, Two Policy Strategy

 

Other Issues:

Tax Deductibility

Inadequate Insurance Proceeds

Vendor Finance

Changing Needs

Future Growth of Equity

Trauma Buy/Sell Strategy

 

Sole Proprietors and Families:

Sole Proprietors and Families

Overview

Family Ownership

Sale Strategies

Third Party Buy/Sell Strategies

Estate Equalisation Strategies

Family Buy/Sell Strategies

Second Generation Strategies

Debt Reduction Strategies

 

 

 

The "One Page, Two Policy Strategy”

 

In some cases, the Business might wish to obtain the benefit of a "One Page Succession Plan".

However, it might not wish to use the One Policy Strategy.

Super Fund Ownership of Buy/Sell and/or Personal CoverCover

The Lives Insured might require some of the Buy/Sell or Personal Cover to be owned by a Public Offer Super Fund or Self-Managed Super Fund, where considered appropriate by the Adviser and Business.

The purpose of the Superannuation strategy would be to obtain a tax deduction with respect to some of the Premium.

The Superannuation strategy is limited to the Buy/Sell and Personal Cover.

It is not appropriate to hold Key Person or Debt Reduction Cover in the Superannuation environment, because it would breach the "sole purpose test".

Self-Ownership of Buy/Sell and Personal Cover

Alternatively, they might require:

  • the Buy/Sell or Personal Cover to be owned by the Life Insured or a Related Party of each Life Insured; and

  • the Debt Reduction or Key Person Cover to be owned by the Business (as Trustee).

One Page, Two Policy Succession Plan

In these cases, the Hybrid Insurance Trust Agreement can be used to document a “One Page, Two Policy Succession Plan”.

 

Two Policies

Therefore, these strategies effectively require at least two Policies:

  • one Policy owned by the Business (as Trustee) with respect to the Key Person or Debt Reduction Cover; and

  • one Policy owned by the Public Offer Super Fund, Self-Managed Super Fund or Life Insured with respect to the balance of the Cover.

 

Possible Third Policy for TPD and Trauma Cover

Where Super Fund Ownership is required, it might also be necessary to obtain a third Policy, if Own Occupation TPD and/or Trauma Cover is required for any Buy/Sell or Personal Needs.

 

Super Fund Ownership

Click here to read about the implications of Super Fund Ownership.

Click here to read about Super Fund Ownership of Buy/Sell Cover.

 

Hybrid Agreement

In these cases, a Hybrid (or Multiple Policy Owner) Agreement will enable the cover for each Life Insured to be split between two or more separate Policies owned by different parties:

  • the Purchase Price and/or Personal Cover might be owned by the Life Insured (or Super Fund, where appropriate); and

  • the Debt Reduction or Key Person Cover might be owned by the Business (on the terms of the current tax-effective Trust Structure).

This version of the Agreement would reduce some of the security concerns about the use of a Non-Arm's Length Trustee, because in most cases the intended Recipient of the benefit of the Insurance Proceeds will be the Policy Owner.

 

Complete Succession Two or Three Policy Worksheet

Click here to see a Risk Analysis Worksheet completed for a Complete Succession Plan held on Two or Three Policies pursuant to the terms of a Hybrid Business Insurance Trust Agreement.

 

 

Copyright: Ian Gray Solicitor

 

 

Adviser Tip

Traditionally, Advisers have arranged a separate Policy for each separate need, often owned by different Policy Owners.

After a few years, nobody knows what Cover they have, what it's for, whether it's for the right amount or whether the Insurance Proceeds will be paid to the right Recipient.

See more Adviser Tips.

Current Marketing Schedule

 

Current Marketing Schedule

Ian Gray travels to most capital cities regularly throughout the year and is available for Meetings.

Please click here to see his availability in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Please contact us to arrange an appointment or teleconference.