Trust Ownership Agreement

It avoids Capital Gains Tax with respect to the Insurance Proceeds in the case of both Death and Non-Death Benefits;
It can distribute the Insurance Proceeds to a number of different Recipients (not just the Life Insured or their Estate);
It can aggregate different Business and Personal Cover onto one Policy with respect to each Life Insured; and
When the Life Insured’s needs change, it might only be necessary to change the allocation of the Sum Insured in the Agreement (rather than changing the different Policies with the Insurance Company).

CGT Exemptions

The Clover Law Business Insurance Trust Agreement ensures that the CGT implications with respect to every component of the Policy are adequately addressed by a legal agreement.

Underneath the "roof" of a standard Clover Law Agreement, the Life Insured is the "Beneficial Owner" of the Policy.

As a result, the Agreement obtains a CGT exemption with respect to both Death and Non-Death Benefits.

Please click here to read about the CGT implications of Trust Ownership.

(N.B. under any method of ownership, there might still be CGT payable with respect to the Sale Price of the Equity.)

ATO Ruling

Click here to read about the Tax Implications of the Clover Law Business Insurance Trust Agreement.

Directions to Trustee

Because the Life Insured is the Beneficial Owner of the Policy, it is entitled to direct the Trustee (or Legal Owner) how to distribute the Insurance Proceeds on behalf of the Life Insured.

For example, the Life Insured may direct the Trustee to pay:

the Purchase Price to the appropriate Vendor (including a company or family trust);
any Debt Reduction Cover to the appropriate Creditor;
any other Key Person Cover to the Business (or the Continuing Proprietors); and
any Personal Cover to the Life Insured, their Estate, a Nominated Recipient or a Self-Managed Superannuation Fund

Analogy with Wills

This process is similar to the administration of a Will where the Executor:

holds the assets of the Estate as Trustee; and
distributes the assets of the Estate to one or more Beneficiaries in accordance with the directions of the Testator in the Will.

A Trust Ownership Agreement is in effect a "Business Family Will".

"List of Cheques"

The process is also similar to the situation where a customer of a Bank signs a cheque that directs the Bank to pay funds to the payee or presenter of the cheque.

In a commercial sense, the money belongs to the customer, but the customer directs the Bank what to do with it.

A Trust Ownership Agreement effectively constitutes a "list of cheques" that must be distributed by the Trustee upon the occurrence of an Insured Event.

In a sense, when the Agreement is signed, a number of cheques are signed and placed in separate envelopes on the shelf.

If an Insured Event occurs, the cheques are posted off to the Nominated Recipients.

The amounts of the cheques are pre-agreed when all of the parties are alive.

As the needs of the parties change, they simply pre-agree up-to-date amounts.

One Policy Strategy

Instead of having separate Policies for Buy/Sell Insurance, Key Person Insurance and Personal Insurance, a Trust Ownership Agreement is the most appropriate vehicle to aggregate different cover onto one Policy (the “One Policy Strategy”).

This creates greater flexibility and ability to deal with changing needs.

In effect, a Business Insurance Trust Agreement is a legal engine for a "One Page, One Policy Succession Plan".

A "Business Family Will"

Many people describe a Buy/Sell Agreement as a "Business Will".

This is only partly true in the case of Self-Ownership Buy/Sell Agreements.

In reality, a Business Insurance Trust Agreement is a better example of a Business Will or a "Business Family Will".

Click here to read how a Business Insurance Trust Agreement operates like a "Business Family Will".

Changing Needs

Click here to read about how the Agreement deals with the changing needs of the Business and Lives Insured.

"Horses for Courses"

Click here to read a response to the view that a Business Insurance Trust Agreement might not be appropriate for some Businesses, because their Buy/Sell or Succession Planning needs are relatively "simple".

Client Summary of Agreement

Click here to see a brief Summary of the purpose and effect of the Agreement.

Benefits of a Business Insurance Trust Agreement

Click here to see a summary of the benefits of a Business Insurance Trust Agreement.

Choice of Trustee

Click here to read about your choice of Trustee.

One, Two and Three Policy Succession Plan Worksheets

Click on the following links to see a Risk Analysis Worksheet completed for:

a Simple Succession Plan held on One Policy pursuant to the terms of a Self-Ownership Business Succession Agreement;
a Complete Succession Plan held on One Policy pursuant to the terms of a Business Insurance Trust Agreement; and
a Complete Succession Plan held on Two or Three Policies pursuant to the terms of a Hybrid Business Insurance Trust Agreement.

Fixed Legal Fees

The Fixed Fee charged by Clover Law depends on the choice of Agreement.

Click here to see the current Fees for all Agreements and Services.

These Fees apply subject to the Legal Fee Policy.

Adviser Tip

Trust Ownership can do everything that Self-Ownership can do, but Self-Ownership can't do everything that Trust Ownership can do.

See more Adviser Tips

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