Funding your Estate or Succession Plan
In a majority of cases, a person’s estate vision cannot be fully achieved due to inadequate funds. Funding of your estate or succession plan by appropriate insurance programmes overcomes this dilemma through the following forms of protection.
This vital form of protection pays a tax free lump sum in the event of specified conditions. It allows you to focus on recovery rather than debt and has particular impact on resolving abnormal expenses, (including home modifications), preserving wealth and supplementing wealth creation strategies.
Trauma Insurance provides funds for:
- Debt resolution
- Meeting abnormal ( ie medical) costs
- Modifying your home
- Modifying your lifestyle
- Taking time out from work
- Boosting wealth creation strategies when long term income earning capacity is reduced.
Life insurance provides a lump sum in the event of death. Life insurance policies can be owned in such a way as to maximise the benefits of insurance proceeds and minimise tax implications. For example, life insurance owned by a superannuation fund can be tax deductible and provide tax effective income to dependants.
Recommendations in this regard depend upon whether or not investments are to be retained should either of you die or be disabled. As estate planning objectives are built around retaining wealth creation objectives and providing certainty, recommendations usually assume that existing strategies are retained.
If estate protection measures are adequate, investments can be retained to sustain wealth creation objectives and provision of a children’s legacy.
Note that in the event of the death of both of you, assets retained in your estate would be utilised as a children’s fund to support their needs under the direction of guardians.
Total & Permanent Disablement
Total & Permanent Disablement provides a lump sum in the event of you being disabled for six months and being able to provide medical evidence that you cannot return to work, either to your own occupation or to an occupation you are suited to by training or experience.
As with all insurances, care must be taken to ensure that your insurances meet your particular needs.
Income Protection Insurance
Income Protection Plans are designed to replace 75% of your income in the event of you being unable to work due to accident or illness.
As your income provides the basis to wealth creation, it is essential to ensure that your income is protected especially where margin lending is used to support wealth creation. The cost of income protection is normally tax deductible and the cover can be designed to suit your special needs and budget.
The benefits are indexed to the CPI. The cost depends upon such factors as your occupation and the chosen waiting period. The waiting period is the upfront period during which no payment is made (similar to an excess). Many policies for professional and managerial occupations pay benefits during the waiting period if you are hospitalised or confined to bed at home under medical supervision.
This type of protection is an essential element of business financial planning, especially for small businesses where cash flow is largely dependent upon the skills of one person.
Even where substantial assets exist, income protection is important to protect against the dissolution of those assets to preserve quality of life.
The cost of income protection is tax deductible to the business or against the personal income of the policy owner/insured.