Monthly Archives: January 2017

Heartache that could have been avoided

divorced-couple

Case Study

Michael & Tanya were separated with two beautiful children (aged 19 and 14 years old).  Despite being separated they still had a very healthy friendship and were both committed to helping each other out and worked well in bringing up their children.  The eldest child was in the 3rd year of his plumbing apprenticeship and lived with two mates in the next town whilst the 14 year old lived with Tanya.

Tanya worked part time and lived in their primary residence whilst Michael was living in the couple’s investment property only a few blocks away.  Michael was very fit and jogged regularly, however after a morning run he suffered a major heart attack and to the complete shock of everyone passed away.  Unfortunately, there was no Estate Planning in place – Michael and Tanya had discussed the issue many times but had never got around to actually putting any steps in place.

Michael’s superannuation fund carried with it a life insurance policy so, including his superannuation account the total payment was around $800,000.  This was contested by Michael’s family (who still held Tanya responsible for the separation) and after 10 months the trustee of the fund determined that they would pay the benefit direct to the two children equally.  As the eldest child was a non-dependent his pay out was burdened with a significant tax bill of around $90,000.

Further to all of this, as the two houses were owned by Michael and Tanya as joint tenants the ownership of both properties reverted to Tanya on death automatically.

All in all, no one was happy with the overall outcome and this only added to the personal stress and heartache that everyone was suffering as a result of Michael’s sudden passing.  So much of this could have been avoided with some advice and planning.

What Could Have Been Done?
Binding Death Benefit Nominations (BDBN) – if a BDBN had been in place Michael could have specified who would receive the funds from his superannuation payment.  A super trustee is obliged to follow the instructions of the BDBN so the trustee would not be required to make a determination but rather just follow the instructions.

Life Insurance – the life insurance policy could have been established outside of super and the payment be directed to the benefit of the eldest son.  In turn this would have given Michael the ability to direct a greater proportion of his superannuation benefit to his 14 year old.  This would have meant that the $800,000 would have been taxed at a much lower rate as payments from a life insurance policy held outside of super and payments to a financial dependent from a superannuation fund are both tax free payments.

Property Ownership – the properties could both have been held as “Tenants-in-Common” rather than “Joint Tenants”.  Michael’s share of each property would then have formed part of his estate and a valid Will could have been prepared to define who would be entitled to the benefit attached to each property.

Moral of the Story
Whilst everyone agrees that good Estate Planning is important far too many people don’t get around to sorting out their estate planning.  Yes, it takes time, effort and some quality advice and the preferred combination is to have your lawyer, financial planner and accountant all aware of your intentions.

Michael & Tanya’s situation is real and could have been avoided – if you are one of the many Australian’s who haven’t addressed their Estate Planning needs, don’t become a Case Study.  Commit to completing this task and then take it one step at a time.  Like anything worth doing, there will be times when the task seems too daunting but, when you get through those challenges, you can sleep safe in the knowledge that you have showed true care and commitment to the most important people in your life.

If you would like to learn more about how you can make sure your family is protected, register your interest for our FREE “Is your retirement plan measuring up?” seminar, where we will discuss this topic and more.

When: Thursday 16th February 2017
Where: Sunbury Football Club
Time: 7.30am
Cost: FREE
Register your interest NOW

click-here
General advice disclaimer – General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product
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The importance of planning ahead

brother-and-sister

Case Study
Peter and Kelly have been blessed with two children, Dominic and Kathy.  Kathy has special needs and will always be financially dependent.  Dominic has recently finished university and is about to commence full time employment as a nurse.

Peter and Kelly understand that if they are to pass away suddenly, they will need to plan for Kathy’s future financial situation.  In the event that they both pass away they have set up a testamentary trust.  A testamentary trust would provide Kathy with a tax free income stream for life, while Dominic would receive a lump sum from his parent’s estate.

The trust also means that Dominic will help Kathy where he can but doesn’t have the burden of worrying about how to invest funds and provide the income that Kathy needs for the rest of her life.

If you would like to learn more about how you can make sure your family is protected, register your interest for our FREE “Is your retirement plan measuring up?” seminar, where we will discuss this topic and more.

When: Thursday 16th February, 2017
Where: Sunbury Football Club
Time: 7.30am
Cost: FREE
Register your interest NOW

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Solid relationship ensures a positive result

retirement-plan

Case Study

The current situation.
Our clients Shane & Peggy are married and both retired.  They have been clients for around 5 years.  Next year Shane turns 65 and Peggy is currently 60 – both Shane and Peggy are permanently retired.  Shane has a number of health issues and he is keen to explore options that may entitle him to an Age Pension when he turns 65 for the benefit of the Health Care Card so even $1 of pension would be of great benefit.  However, Shane is feeling that he is about to be “punished” for being such a good saver during his working career and putting money away into his superannuation fund as his assets now exceed his ability to obtain any form of pension and therefore any Health Care Benefits.

Shane & Peggy have been utilising the services of the McMahon Osborne Wealth Management team to invest their superannuation and each year undertake an annual review of their financial position.  In the most recent discussion Shane and Peggy discussed their concern and were resigned to the fact that they had no options regarding the pension.  However, as part of the ongoing service we asked if they would like us to explore any options available and they agreed but remained sceptical of what may pan out.

What we did.
Given there is an age difference of around 4 years between Shane & Peggy we created a plan that combined a re-contribution strategy and re-balancing strategy for the assets of Shane & Peggy.  This meant withdrawing part of Shane’s superannuation out of their SMSF to the joint bank account of Shane & Peggy and then contributing that money back into their SMSF from the joint bank account of Shane & Peggy, but as a contribution on behalf of Peggy.

The funds in Peggy’s superannuation account were left as an “Accumulation Account” which is excluded from the assets test for the age pension for residents under the age of 65.  This meant that the total assets assessed by Centrelink were reduced by around $300,000 when the eligibility for Age Pension is tested.

The result.
Whilst Shane was really only after $1 of pension so he could avail himself to the benefits of a Health Care Card, this strategy implementation meant that over the next five years the following benefits are now a reality:

· Shane will receive a Health Care Card from the age of 65 to reduce the costs associated with his long standing health issues

· On current estimates, Shane will receive pension payments of $91,466 over the next 5 years

By considering the whole picture of the personal circumstances of Shane & Peggy as part of an annual review, this opportunity became available with the difference in ages between spouses being the key that unlocked such huge potential.  This is an example of why Wealth Management and Financial Planning should never be a one off transaction – it was the ongoing relationship and review that brought up the problem and concern and then gave the opportunity.

If you would like to learn more about your options for a successful retirement register your interest for our FREE “Is your retirement plan measuring up?” seminar, where we will discuss this topic and more.

When: Thursday 16th February 2017
Where: Sunbury Football Club
Time: 7.30am
Cost: FREE
Register your interest NOW

click-here

General advice disclaimer – General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

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