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Publications and Documents:
Adviser Tips:
Adviser Updates:
Individual Updates (Most Recent First): Adverse ATO Advice on Super Buy/Sell Cover Partnership and Trust Loan Accounts Effect of Debt Reduction Cover on Buy/Sell Cover Tax Treatment of Self-Ownership Agreements Vested and Indefeasible Interest Simplifying the Valuation Issue Simple or Complete Succession?
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"Horses for Courses"
Many Insurance Companies, Advisers and Industry Consultants question whether the Clover Law Business Insurance Trust Agreement is suitable for all Businesses. They justify and advocate alternative strategies and structures on the basis of a "Horses for Courses" argument.
Facility Agreement One of the most important characteristics of a Clover Law Business Insurance Trust Agreement is that it is a Facility Agreement. It is a roof or umbrella over the legal, commercial and insurance arrangements between the Proprietors of a Business. It recognises that the Proprietors might only have some of the relevant needs at any point in time. However, it also recognises that these needs might change over time and that the insurance arrangements might need to change as the underlying needs change. A Succession Plan is a dynamic and ever-changing strategy. It is not a "set and forget strategy". As a result, it doesn't matter how simple or sophisticated the needs of a Business might be initially. The most important issue is the ability of the Succession Plan and the Agreement to facilitate predictable or likely changes in need over time. The One Page, One Policy Strategy recognises that the aggregate needs of the Life Insured might remain the same indefinitely, what might change over time is the "mix" or "colour" of the Cover.
Self-Ownership and a Simple Succession Plan Self-Ownership of the Buy/Sell Cover is an adequate strategy for a Simple Succession Plan. It focuses on the Sale Price of the Life Insured's Equity in the Business. It also requires the Insurance Proceeds to be paid to the Life Insured (or their Estate), whether or not they are the actual owner of the Equity in the Business.
When is a Simple Succession Plan Appropriate? Ultimately, a Simple Succession Plan (documented by a Self-Ownership Buy/Sell Agreement) is therefore most suited to a Business with the following characteristics:
When is a Complete Succession Plan Appropriate? In all other circumstances, a Business Insurance Trust Agreement is an appropriate "Horse for the Course". It is designed to document a Complete Succession Plan, precisely because it creates a "Facility" that can be changed as the needs of the Lives Insured change. Its flexibility makes it a "Horse for all Courses", as well as a "Horse for any Course".
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Adviser Tip The One Page Strategy is designed to help you simplify Succession Planning. It helps you understand your needs, it helps you quantify them, it helps you cost them, and it helps you prioritise them.
Please contact us to arrange a meeting or teleconference.
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