During our recent Annual Business Information Seminar, Justin Kelly and Richard O’Neill of Zurich Life gave excellent presentations highlighting the importance of good Business Protection planning and Succession Planning.
Francis Russell of our office concluded the Seminar with an interesting presentation giving some good case studies of how we have assisted our clients put good Business Protection and Succession plans in place.
In his first example regarding Succession Planning, Francis outlined the potential problem in passing on assets to next of kin and their inability to pay what may be a substantial tax bill. To avoid having to sell assets, take out a personal loan or remortgage, forward planning by putting in place a life assurance plan which will pay out the proceeds of the expected tax bill is essential. The traditional method of affecting such a life assurance plan would be a whole of life plan. However such plans can be very expensive and an alternative might be to affect a convertible term assurance plan. This gives the option to continue the plan by converting to a new plan after the original term. The plan premium will of course increase as the life assured ages. However it is generally a more affordable solution. Having said that it is not a Section 72 plan (which as a life plan to cover inheritance tax liability is exempt from tax) therefore the proceeds will have to be added to the overall assets of the estate and the life cover required amount altered to meet the expected tax bill.
Such a plan has the advantage of being able to be altered/rewritten using the convertible option to meet any change in requirements for example property values alter, CAT rates vary and/or clients net worth changes.
Francis also focused on maximising pension benefits.
He went through a case study showing how a 66 year old company director with a company salary of €80,000 and a fund value of €350,000 (and 20 years service) can access as much cash as he can, outside the traditional routes.
Francis also highlighted an area which has come to our attention in recent years, as a result of employees taking redundancy packages. Of the options offered to employees, a maximum lump sum may be achieved but at the expense of waiving the tax free lump sum at retirement. Care needs to be taken here in advising employees the best course of action and the consequences of taking the maximum redundancy package.
This concluded what was a very well received and informative Seminar.
If you have any further queries on any of the areas covered in the Seminar, we would be delighted to hear from you. We can be contacted at 053 9233640.