Are you a Key Person?

Key-person insurance is Protection for your business

How would your organisation cope if something happened to a key person?

Unexpected events can play havoc not only with people’s lives but also with businesses.

However, business owners are often so busy they don’t stop to consider the true cost of the loss of a key employee, business partner or even themselves.  Eeeek!

The knock-on effects may include disruption to other staff, missed opportunities, delays or penalties for late delivery of projects, lost revenue, increased expenses, significant costs to find and train a suitable replacement, loan repayment and even loss of the business.  Ouch!

What is key-person insurance?

Key-person insurance protects a business’s financial position against the significant impact of a traumatic event such as the death or disablement of a key person.

A key person may be an employee, owner or an individual whose contribution to the business is significant.

This cover is not a specific kind of insurance but the application of life insurance to protect against key-person risk. It can be used with buy/sell life insurance (also known as business succession insurance) which covers the change of ownership if an owner dies or becomes incapacitated.

The benefits

Often a cash injection to an affected business may keep a bad situation from becoming worse or even catastrophic. The insurance proceeds may be used to:

  • minimise or eliminate the potential loss of revenue, sales or profits
  • help cover the often significant costs of finding or training a replacement
  • service or repay any debts that are called in
  • cover the impact of a writedown in the goodwill of the business
  • provide needed liquidity
  • help keep staff and maintain essential supplier relationships.

Are there alternatives?

A business may have other strategies to help manage their risks, including asset sales, promoting staff or reallocating workloads even temporarily, using profits, borrowing more, or drawing down existing loan facilities.

However, insurance is the only practical alternative where a business doesn’t have the capacity to cover its risks.

If you want to know more and see if it can apply to your business, why not give me a call? 07 5593 0855.

Planning a holiday? Here are some tips

With the summer holidays now behind us, it’s not too late to do your financial planning for the next holidays – or 2019. Here’s how to minimise your financial stress for a well-deserved break.

Plan ahead

OK, at the risk of sounding like Captain Obvious, the earlier you start planning, the more money you can save. And when it comes to peak travelling times such as December, typically the earlier you book your flights and accommodation the better your account balance will be.

Create a budget

Whether you choose Bali, Barcelona, Brazil or the bush, create a budget. Account for expenses such as flights, petrol, food and activities, such as visiting museums or a spa. Research activities at your destination and see if you can book early – or if there’s some great free ones. The more you can book and pay for beforehand, the less you’ll need to worry about overspending. 

I’m counting down until my 25th Wedding Anniversary next year and we’ve always dreamed of a trip around the Greek Islands.  I’m already in overdrive looking at airfares and cruises… extensions and adventures.  And ok, it’s dearer than any trip we’ve ever done, but hey! how many make it to their 25th?  That’s got to be worth a splurge!

Start saving

When you’ve worked out how much you will need, start saving. Even putting a small amount aside each week can add up, so you could enjoy some amazing experiences you may not have thought you could afford. A good tip is to open a high-interest savings account and set up an automatic transfer on your payday.  Alternately, offset the funds against your mortgage to save interest on your loan and draw them back as needed.

I also use a travel money card that I transfer my spending money into each week as I’m preparing for a trip.  It means I average in to the account depending on what the dollar/euro/ringgit/pound/kwatcha is doing on the day and means I have funds available in the local currency when I travel.

Hunt for bargains

There are lots of useful websites that compare deals on everything from flights to tours. Sometimes, a package deal is more effective – make sure to research well.

Just make sure you turn on private browsing when researching online. Warning!! Some travel sites track users and raise prices on the things you are researching if you return repeatedly.  (The cheek!)  I’m a bit of a fan of Trip Advisor and have made a few bookings via booking.com for hotels and Viator for adventures.

And don’t worry if you have left things to the last minute – there’s a website for that too: lastminute.com.au.

While you’re on holiday…

It can be easy to splurge – you’re on holidays after all. But to avoid spending the rest of your life paying it off, keep track of your finances while you’re away.  And seriously, do you really need that Sombrero and yard glass?

Set yourself a daily spending limit – or use a travel app to help you stay on track.

But if that’s too much of a buzzkill, you can transfer the exact amount you’ll need into a bank account just for your holiday. This may help you stay out of your other accounts unless it’s absolutely necessary.

Talk to your adviser

Your adviser may help you create a financial plan tailored to help you achieve the holiday you want.

I’d love to help and as a travel junkie myself, may even have a few tips for you… so give me a call today to reach your financial goals for your holiday.

Create a great financial new year

New Year’s resolutions are easy to make but often hard to keep. But there are real benefits to making financial resolutions. Here are some helpful suggestions to get you started.

Chances are by now, you’ve forgotten what you wanted to achieve last New Year’s Eve, but a new financial year is also a great time to reset.

Get back to basics

If you find it near-impossible to reach your financial goals, you may need to revisit the basics: sticking to a budget. Does temptation usually unravel all your good saving intentions? Consider opening a locked savings account that you can’t deduct money from for a period of time, and automatically transfer funds into it each payday.  Automating everything in your life that can be is truly a gift!

Plan for large purchases

Whether you need a new fridge or are considering placing a deposit on a home, the earlier you start planning for these purchases, the more manageable they become.

If you know you’ll need a new item in 6 months that costs $1,000,  that means you need to set aside around $40 per week to make it happen… that’s a few sneaky coffees that may need to go!

Set up an investment plan

If you’re considering investing this year (instead of someday,) developing a sound investment plan is essential for your success. This may include working with your financial adviser to identify clear financial targets, calculate how much you can afford to invest and determine how much risk you’re willing to take on. 

If you’d like to have a small nest egg before you sit down with someone, again, automate the process so every week you’re setting aside an amount to put towards that portfolio.  Everyone started somewhere!

Review insurance policies

Knowing you are properly insured provides peace of mind if your circumstances change unexpectedly. But identifying appropriate insurance policies and levels of coverage for your unique situation can be difficult – and getting it wrong is risky… as you’ll likely find at claim time. This is why it’s important to regularly review your insurance policies with your financial adviser, especially if your situation changes.

You may be able to find that funding via various structures frees up cash flow to invest in personal insurances you may not have otherwise been able to afford.  Good advice is worth every cent!

Check your super

If you have multiple superannuation accounts – or have forgotten where your super is – you’re not alone. According to the Australian Taxation Office, there’s $18 billion of lost super waiting to be claimed nationally.1

Effectively managing your super is vital for building your retirement nest egg. Contact your financial adviser who may help you manage your super.  It’s also worth seeing what insurances are covered in your fund so you aren’t paying extra for cover you don’t need.

Set retirement goals

The earlier you set clear goals for your retirement, the more options you’ll have. Work out what assets you have – from your home to superannuation – and review your current spending patterns, then determine your goals for retirement and what lifestyle you’d like to enjoy. This will help you calculate how much you’ll need.

Remember, we’re now living a lot longer, which means our money may now need to last 30 years in retirement, or we may choose to work longer.  Our health is also an issue that needs consideration as we age and this too will impact our retirement years.

Create an estate plan

Estate planning involves more than writing a will. It outlines what you want done with your documents, contacts, debts, bills and assets, making the process easier for your beneficiaries after you’ve passed away.

Whatever your financial New Financial Years’ resolution may be, seeking professional advice may help you make it reality this year.

 

Note:
1 The Sydney Morning Herald, 2017, ‘Almost $18b in lost super waiting to be claimed’. Accessible at:

http://www.smh.com.au/money/super-and-funds/tax-office-holds-records-of-almost-18-billion-in-lost-super-20170920-gylo3z.html

A money-wise wedding

Creating a budget for the big day

Whether you’re planning a large, luxurious, lavish and luscious wedding or a small, intimate affair, smart budgeting could help free you from financial worries, so you can enjoy your special day even more.

Following these steps may help ensure no one’s worried about debt on the honeymoon.  And remember, even if you only plan on doing the walk down the aisle once, it’s just a day… and the rest of your life is what it’s all about.

Starting with massive debt and stress about money is a less than ideal way to continue your life together.

1. Plan early

Given that the average (is there such a thing?) Australian wedding costs $36,200[1], the sooner you start saving, the sooner your dream wedding can become a reality.  (I hope your parents are all over this stat!)

The day after the engagement is fine… tho some do start even before that… like while you’re watching the latest episode of Batchelor in Paradise and dreaming about finding Mr or Mrs Right.

2. Create a budget

Take stock of your income and calculate the maximum you can afford to spend on the wedding – and your ideal cost scenario. Will your parents be pitching in and what can you expect from them?

Knowing what you can spend in each area means that you’re all over it when negotiating with suppliers.  If you don’t have room to move, you can play hard-ball or find someone else who is willing to come to the party.

No-one will remember if you had the world’s largest bouquet or the best tablecloths or the food you serve (unless the oysters are dodgy,) it’s all about celebrating your love and new life.

3. Talk to your family

If you’re part of the bride’s or groom’s family and want to contribute, let them know. You could contribute a set figure or fund a specific part of the ceremony, such as the flowers, drinks (very brave move!) or venue.

If you’ve got friends in the right places, make sure you include them in your planning.  Chances are, they may also know some others who are happy to help.

4. Prioritise

What must you have at the wedding and what can you compromise on? For example, do you want a live band but aren’t fussed about fancy table decorations?  Do you want the Disney fairytale carriage experience, or your mate’s EH Holden will do the trick?  Agreeing on your priorities up front can help you clarify which aspects to save for and which to downplay or skip altogether.

Do you want the amazing Vera Wang frock that you can rock on the day and hang in the cupboard for the rest of your life and drag from home to home; or would you rather spend it on the honeymoon or save for a housing deposit?  Life’s full of compromises!

5. Start a spreadsheet… if you must!

Once you have an idea of your budget and priorities, it’s time to dive into the details.  OK, not everyone loves this part, but it is really necessary!

If you’re an excel nerd, use a spreadsheet to list a maximum cost for every wedding-related item from bouquet to band and compare it with vendors’ quotes. Don’t forget to take into account hidden costs like insurance, corkage and the marriage licence or celebrant as well as costs related to the rehearsal dinner and honeymoon.

Otherwise, a wedding planning notebook is fine… as long as you have something to track it all in.

6. Stay accountable

Avoid blowing out your budget by keeping your spreadsheet (or Kikki K notebook) up to date, setting up a wedding-expenses-only bank account, and sticking to your guns as far as your limits and priorities are concerned.

If you’ve created your budget and despair of affording your dream wedding any time soon, don’t worry. Here are some tips to help you reign in your costs.

  • Limit your guest list to your favourite people: At $100 per head, every 10 guests cost you $1,000.
  • Think outside the box when picking a wedding venue: A park, garden, art gallery or friend’s house may be more affordable than a hotel, and the natural ambience can save you money on decorations.
  • Book an out-of-season wedding: It can be cheaper to schedule a wedding in winter, on a week night or a Sunday morning.
  • Keep your menu simple: Stick with the specialties of the season and region, consider canapes or buffets over three-course meals, and ask for house spirits (not top-shelf varieties) or beer and wine.
  • Investigate hiring over buying: If there’s some items you don’t need forever, like suits or gowns it may be worth hiring for the day and giving back.  No dry-cleaning necessary!

Call in an expert

While you may call upon a wedding planner to help you organise your special day, a financial planner may be just as important.

A professional financial adviser may help you create and stick to your budget as well as stay accountable – so you can focus on the important things, like celebrating with the people you love!

If all that just sounds too hard, run off to the Registry office and have a party when you make the announcement!

And hey!  Congratulations!!

 

[1] Australian Securities and Investments Commission, ‘How much can a wedding cost?’. MoneySmart. Available at: https://www.moneysmart.gov.au/managing-your-money/budgeting/simple-ways-to-save-money/how-much-can-a-wedding-cost

Protect your assets from expensive mistakes

Protecting yourself from frivolous creditors and lawsuits is becoming an increasingly common concern. Here we outline some of the ways you can insulate your assets.

Check your insurances

Liability insurance is a must if you want to safeguard your assets in the event that you need to pay compensation. Lawsuits can arise for a range of reasons – from personal injury to financial loss resulting from any products or services you provide.

You can choose from three key types of cover – public liability insurance, professional indemnity insurance and product liability insurance. Seek advice from your financial adviser or insurance broker to determine which, if any, of these are suitable for you.

Separate business and personal assets

If you are a business owner and your family home is held in your name, it may be at risk from bankruptcy or litigation procedures.

One way to protect your home is to give majority ownership of the home to a person who is not an owner of the business, typically a spouse. The business owner generally retains some interest in the home, however, to ensure the asset is not dealt with without his or her authority. It is also important that the spouse does not having any dealings in the business, for example guaranteeing loans. You should also know that the trustee in bankruptcy will consider other factors to determine the bankrupt’s interest in the house and if you transfer your home to your spouse for no consideration or for less than its value, before bankruptcy, the trustee in bankruptcy can in some cases reverse the transaction.

Create a trust

Trusts can be beneficial asset protection strategies, as you are transferring ownership of an asset away from yourself and into a legal structure, so the asset is not yours to lose in the event you are sued.

Anthony Lieu, Lawyer at Legal Vision, says trusts also provide a degree of flexibility.

“Just as each family is different, each discretionary or family trust is also different. Trusts generally take their rules and operation from the trust deed, so each trust will have to abide by a different set of rules,” Lieu says.

Summary

Structuring your assets the right way is one of the most important things you can do to protect your hard-earned wealth. As these strategies can be complex, always seek the help of a qualified professional such as your financial planner, lawyer or accountant.

We’d love to assist and can also help you find the right professionals to help.

Do you have a valid will?

Creating a valid will is one of the most important things you can do to protect your loved ones.

Here we explain how to go about it.

1. Seek legal advice

While DIY will kits can seem like an easy and inexpensive way to make a will, they can be fraught with pitfalls.

Your affairs are probably more complex than you think – your family home, other properties, business assets, superannuation, investments and personal belongings.  You may be surprised to learn that not all assets are covered as standard in a Will and stay outside of your estate.  Having a properly drawn up will helps to determine who gets what and can save your family time and stress when you are gone.  And not all assets are automatically included in your estate and may need separate provision made to ensure their distribution.

Your lawyer or financial planner will also be able to provide insights into how to best structure your will, both to protect assets and to minimise tax. Examples include setting up a testamentary trust to provide for minors or protecting your estate from creditors.

2. Safeguard your children’s future

Probably one of the most important reasons to make a will is to ensure any dependent children are well cared for should the worst happen.

Sydney wills, probate and estate specialist, Graeme Heckenburg of Heckenberg Lawyers, says generally parents should make separate rather than joint wills, as they are likely to die at different times.

Heckenburg says a will should also appoint a guardian to take care of the day to day living and housing arrangements for the children and a trustee to execute the will and make any financial decisions. This can be one person or two different people.

“If you don’t appoint a guardian and there are young children, ultimately the decision will be made by the Guardianship Tribunal [in NSW]. If the guardianship is contested, the matter could even end up in the Supreme Court,” he says.

If you have adult children, you also need to consider their circumstances.  If they’re caught up in a divorce or bankruptcy issues, any inheritance can form part of their assets, which may not be what you wish.

Vulnerable adult children also need to be considered as receiving a large lump sum may not be in their best interests either.

3. Keep your will updated

Once you have made a will, don’t leave it in a drawer gathering dust.

Circumstances change over time, and often quickly, so ensure your will reflects your current situation, particularly if your spouse has died, you have married, re-married or divorced or you have become a parent or step-parent.

We’d love to help or put in touch with our legal experts who can assist with your estate planning.

Running a Small Business? Make sure you are properly insured

Running a small business is hard work. The last thing you need is to lose it all because of poor insurance choices.

Do your homework

First you need to work out what needs to be covered. There are the obvious things such as plant and equipment, the less obvious things such as public liability, professional indemnity, and finally protecting the financial performance and position of the business on the sudden loss of a key person.

Policies should cover a wide range of eventualities and each business should have a policy package specifically geared to its needs.

People are the most important assets, and the success of the business may hinge on key personnel.

Business expense insurance can cover certain fixed business expenses, and key-person insurance can protect the financial performance in the event of a key person or business owner dies, is permanently disabled or suffers a traumatic event.

Insufficient coverage

Owners risk losing control of their companies, serious financial losses, and complex partnership problems by being uninsured, or underinsuring against something going wrong.

Having the wrong kind of insurance is equally risky and ultimately a waste of money, which is why it’s necessary to seek advice on the right insurance for your business.

It’s also important to regularly review and update your insurance, especially when your business grows or changes.

There is always tax

You do not have to pay capital gains tax (GST) on a business insurance settlement, provided you tell the insurer before making the claim what proportion of the premium you can claim GST credits for, which will be the part that relates to business purposes.

But remember, your accountant should assess all taxation matters.

Working together with your financial adviser to determine what insurances can be put in place is an important consideration when running a business.

The Insurance Council of Australia, http://www.understandinsurance.com.au, and the Australian Taxation Office, www.ato.gov.au, have more information.