Continuum Financial Planners Pty Ltd

Is my Will still fully valid and up to date?

noreply@blogger.com (continuum fp) — Wed, 01 Feb 2012 00:00:00 +0000

[NOTE: these comments are specifically relevant to the law as it applies in Queensland

How can an existing Will be rendered invalid?

A key document in any family’s estate planning is the Last Will and Testament of the family members. Because of its importance as part of the plan it is imperative that the Will be valid as at the date of death of a Testator. Some of the matters that render a Will (or at least parts if it) invalid follow:-

Marriage

If you marry after you have made a Will and the Will does not include a specific mention of the upcoming marriage, the Will is rendered totally invalid. (The lawyers term this ‘in contemplation of marriage’.)

This is only relevant to legal marriages. It does not apply to de facto marriages.

Divorce

Divorce does not automatically revoke a will, however it does automatically invalidates those clauses in a Will that refer to the former spouse. Any gift to the former spouse fails. Similarly, any appointment of the former spouse as say, the executor also fails.

This can result in the Will being either totally or partially invalid.

Out of date: the following may not render a Will to be invalid, but may result in beneficiary distributions contrary to what would have been preferred –

There are many events that could cause your Will to be ‘out of date’.

Consider the following:

Has anyone named in your Will died or changed their name?
Are the people you have appointed as either executor or guardian of any young children still available or your current preference; or indeed, have the children aged beyond needing a guardian?
Do you want to change your beneficiaries (e.g., are there new grandchildren to consider)?
Has your financial position changed (are there bequests that can no longer be met; or that will distort the final distribution of the estate); or has added wealth given rise to different considerations?
Are you interested in giving your beneficiaries more scope for minimising their tax or protecting your gift from their creditors or the Family Court?
Do you still own all assets mentioned in your Will, particularly those left as specific bequests?
Have tax laws changed in a way that could impact on your plans?

As with al ‘plans’, estate plans should be reviewed on a regular basis. We commend you to read all of our articles in this series and to consult with one of our experienced advisors to ensure your estate planning receives the attention needed to ensure your wishes can be provided appropriately. To make an appointment, call our office (on 07 3421 3456) or use the online Contact Us facility.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 13 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Testamentary Trust used for income splitting with young Children

noreply@blogger.com (continuum fp) — Wed, 25 Jan 2012 00:00:00 +0000

An Estate Planning strategy that has proven popular in modern practice is the use of the testamentary trust: one of the situations that have made this instrument popular is where young children (even grandchildren) are likely beneficiaries of the estate.

Of benefit:

For families with young children
Where extra income would be needed to support the surviving family members should a parent die
Where minimising tax is important.

How does it Work?

A testamentary trust is simply a trust established by someone’s Will, following their death
Rather than all the deceased’s assets being distributed by the executor upon death, some or all of the assets are held in trust for the benefit of a specific group of beneficiaries named in the Will (more than one testamentary trust can be established under a Will)
As current taxation laws stand¹, trust income distributed to children as beneficiaries of a testamentary trust, of any age, will be taxed at adult rates rather than the penalty rates that normally apply to minors’ unearned income
The trustee can have full discretion as to who receives trust income and capital; and if preferred, restrictions² can be written into the trust deed.

¹ We recommend seeking professional advice before relying on this aspect when considering your estate plan.
² Caution needs to be exercised when specifying ‘rules’ for testamentary trusts: Case Law shows that inequitable provisions can be overturned and set aside.

The experienced advisors at Continuum Financial Planners can assist you with preparation for the formation of your estate plan: for an appointment please call our office (on 07 3421 3456) or use our Contact Us facility.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 12 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

What is a Testamentary Trust?

noreply@blogger.com (continuum fp) — Wed, 18 Jan 2012 00:00:00 +0000

A testamentary trust is a trust established in someone’s will. It comes into existence only when the person dies. The following illustration shows the effect of including a testamentary trust in the estate plan.

Let’s assume that someone died at point A. The executor’s job involves finding all the assets, paying out any debts and usually, at point B, distributing what’s left to the beneficiaries.

If there is a testamentary trust, part or all of what’s left remains in the estate and is distributed later, at any time between point B and point C depending on the terms of the Will. [Under trust law, Point C could generally be up to 80 years from point A if a testamentary trust is utilised.]

NOTE: A Will can establish more than one testamentary trust.

Who controls the assets?

In the course of the estate planning exercise, the testator will be guided in the nomination (in the Will) of a person to act as trustee and consequently, to control the trust assets. Like any trust, a testamentary trust can be as flexible or as fixed as you like. The trustee can be given full discretion or no discretion as to who should receive income and capital from the trust and when they should receive it.

The trustee may be the same person who was appointed as executor and can also be a beneficiary. For example, a parent can establish a testamentary trust for each child’s inheritance. Each adult child can be the trustee of their own trust.

Why are they used?

Testamentary trusts can be used for a variety of purposes, eg.

Minimise tax impact on the estate – income tax and capital gains tax
Protecting spendthrift beneficiaries from themselves
Caring for children and the mentally disabled
Keep an inheritance out of the reach of the Family Law Court where the beneficiary is involved in a family law property dispute
Protecting inheritances from a beneficiary’s creditors
There may be some scope for avoiding an unintended loss by a beneficiary of their Government sourced pension or other benefit.

When liaising with the professional estate planning advisors, your financial planner at Continuum Financial Planners will assist you to ensure that appropriate use is made of such instruments – and that appropriate consideration is given to the appointment of trustees in the estate.

To make an appointment with one of our experienced team, call our office (on 07 3421 3456) or use the online Contact Us facility.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 11 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Options to Consider when Determining who should Receive your Superannuation Assets

noreply@blogger.com (continuum fp) — Wed, 11 Jan 2012 00:00:00 +0000

The measure of the success of an estate planning strategy will be the effectiveness by which the value of the assets, transfer from the testator to the beneficiaries of the estate. Following are some considerations of some of the options you might wish to consider when determining who should receive your superannuation assets (i.e., ‘the right hands’ – as mentioned in the first article in this series). The options actually open to you will be determined by the trust deed governing your particular fund.

Payment as a lump sum

Payments to ‘dependants’ are generally taxed far more favourably than payments to non–dependants.
Direct payment from the fund to the dependant avoids the super assets forming part of the estate. The payment will not be caught up if there is a delay in administering the estate. If the estate is challenged, the super assets may avoid being caught up in the challenge.
On the other hand, payments to the estate can be passed to a dependant in a testamentary trust. This can give the beneficiary the ability to tax plan and protect the inheritance from attack.
If you want your super assets to go to a former spouse or to a non–dependant (for tax purposes, such as an adult child), your benefit will have to be paid to your estate.
In some cases, a self managed superannuation fund can be used to pass benefits directly to the account of another fund member.

Pay as a Pension

If an allocated pension is paid to a minor, under current law the minor will have access to a lump sum at age 18 and will have to take a lump sum when they reach 25 years of age (unless permanently disabled).
If a pension is to be paid it will have to be a reversion from an existing pension. Taxation issues vary according to the circumstances of the pension and/ or the recipients.

The experienced advisors at Continuum Financial Planners can assist you with preparation for the formation of your estate plan: for an appointment please call our office (on 07 3421 3456) or use our Contact Us facility.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 10 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

What happens when the Trustee of a Self Managed Superannuation Fund (SMSF) Dies?

noreply@blogger.com (continuum fp) — Wed, 04 Jan 2012 00:00:00 +0000

The consequences of the death of a trustee, or indeed of a shareholder in a trustee company, can cause considerable problems if not carefully provisioned.

If your SMSF has a corporate trustee, does your Will specify who gets your shares in the trustee company?

This issue is of particular importance in the case of an SMSF that has four members, being say, a married couple and their two children. If the trustee of that SMSF is a corporate trustee with all four members as directors, then planning is required to ensure that potential problems arising on the death of one of the parents are avoided.

Subject to the provision of the Will, the death of one of the parents would leave the two children and the surviving parent as the member/directors, and so any two of the three survivors could then of course outnumber the other. Therefore, assuming all member/directors have equal voting rights, the two would then, in determining the distribution of the death benefits, be able to outvote the other (assuming there is no valid binding nomination).

This is just one of the serious issues that need to be considered when drafting an estate plan – and a clear reason why people with even moderately complex structures should seek professional assistance with their estate planning.

If individuals, do you have successor trustees nominated? If so, who?

The nomination of successor trustees is important when a fund has individuals as trustees. The retirement, resignation or death of an individual trustee may give rise to the need to transfer assets and arrange for bank account changes unlike a company which has perpetual succession.

Some SMSFs have a founder/appointer role vested in someone other than the members. This can be a powerful role as such a person may have the power to appoint or remove a trustee or vary the trust deed.

If successor trustees are to be nominated, the following issues should be addressed:

Age of the nominated successor (should be at least 18 years of age);
Whether the nominated successor is a disqualified person. An individual will be a disqualified person if the person has been convicted of an offence involving dishonesty, is an undischarged bankrupt or has been the subject to a civil penalty order under the Superannuation Industry Supervision (SIS) Act. A disqualified person cannot act as a trustee of a SMSF (of any other superannuation fund).

When planning the survivor arrangements in relation to the management and control of superannuation assets, the current views of the regulator (for SMSFs this is the ATO) need to be taken into account – particularly in so far as they relate to the treatment of income streams in place at the date of death.

Any successor trustee must still comply with the requirements of s17A of the SIS Act. However, a legal personal representative can act for a deceased person up to the time that his/her benefit commences to be paid by the fund.

[NOTE: the following comment applies to any corporate structure involved in the affairs of a testator -

The relevance of specifying in your Will, the recipient of your shares in a private company lies with the rights given to shareholders. The Corporations Law gives shareholders voting rights and allows them to vote out directors of the company (subject to any provision to the contrary in the constitution of the corporate trustee). Shareholders thus hold a considerable amount of power and therefore care must be taken to ensure that appropriate beneficiaries of the shares are chosen and included in your Will. The beneficiaries holding the shares will have the responsibility of appointing any new director to the (trustee) company (of the SMSF) who in turn would, along with any other directors of the company, exercise their rights and powers as a director as they see fit: and that may not necessarily be consistent with the strategies adopted by the deceased.]

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 9 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

noreply@blogger.com (continuum fp) — Thu, 29 Dec 2011 23:00:00 +0000

Private Health Insurance; Comprehensive Motor Vehicle Insurance; Compulsory Third Party Insurance; Travel Insurance; Public Liability Insurance; you’ve got the idea…we usually insure our ‘things’: why should we take it for granted that our family’s greatest asset – ourselves and our ability to bring home an income (or to perform the invaluable household tasks), will not create distress and concern if they are lost, or even impaired?

If you become ill or suffer an accident that takes you away from earning your usual income at the same rate as you currently enjoy, could you maintain your current lifestyle and continue to meet your ongoing commitments for the term of your disability?

If you or your ‘significant other’ suffers an accident or illness that is permanently disabling, could you sustain your current lifestyle and continue to meet your ongoing commitments for the term of your disability?

If you or your ‘significant other’ were to unexpectedly die earlier than at ‘normal life expectancy’, would the survivor and any financial dependants (children, aged parents etc) be able to fund an acceptable lifestyle and realise their potential?

Some serious considerations:

The event happens today: note the actions that will need to be taken

Accommodation/ care (in the event of accident or serious illness)
Transport
Food
Emotional support
Education
Debts to ‘service’
Health care
Funeral?

Financially what assets are available:

How liquid are they?
How quickly can they be accessed?
Will they realise reasonable value?
Whose name are they held in? (Can they be disposed of readily?)

Who needs to be considered:

Spouse/ ‘significant other’
Children
Aged parents
Business partners?

Having read the above, provide Yes/ No answers to the following questions:-

did you answer No to any of the three ‘If’ questions above?
did you have any concerns sparked by the ‘serious considerations’ tabulated above?

do you have concerns as to how to rectify any shortcomings in your planning in relation to these matters?

… and if you answer Yes to any of these three questions the experienced advisers at Continuum Financial Planners are ready to conduct a review of your situation: to arrange a meeting with one of them use the Contact Us facility on our website, or call on 07 3421 3456 – we will provide a prompt response.

[This is article 6 in a series of 6 Blogs: for other articles in the series refer to the catalogue of articles showing elsewhere on this page under Risk Insurance.]

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

What Happens to Assets owned by my Company when I Die?

noreply@blogger.com (continuum fp) — Wed, 28 Dec 2011 00:00:00 +0000

One of the puzzles for family members after a death is the treatment of the assets held in a company (that they have probably for some time, considered to be part of the family assets). It can be a difficult concept but the company’s assets do not form part of a deceased shareholder’s estate. They are not governed by the Will.

A company is a separate legal entity. The death of an individual shareholder, or a director or other officer of the company has no effect on the company’s continuing existence. Whilst the same estate may hold shares in a public company – say BHP Limited – and there is no expectation by beneficiaries that they will have any call on the assets of that company, the same approach should be taken to the assets in a closely-held (family) company.

Naturally, there will be some rearranging of share ownership (and where necessary, directorships, etc), but the company itself remains substantially unaffected.

Estate assets?

Your estate will, however, include the shares you owned in the company and any debts owed to you by the company.

They will be governed by the terms of your Will or the intestacy laws if you die without a Will.

During the estate administration period, your executor will be able to exercise any rights that attach to the shares. In some situations, careful choice of executor is needed to ensure the person gaining this temporary power does not exercise it in a way that could damage the interests of other parties.

In brief, the company continues to own its assets. You will need to choose the executor carefully so that, in the short term, the powers attaching to your shares in the company are not abused.

In the longer term, whoever ultimately receives your shares in the company will gain your interest in the company assets and exercise any decision-making rights you may have had consequential to that shareholding.

Estate Planning is an important exercise at the personal level and succession planning is also important at the corporate level – more particularly when more than one family is involved in the ownership and operations of a company. The experienced advisors at Continuum Financial Planners are available to guide you through the processes in each planning activity. For professional advice on these matters, call our office (on 07 3421 3456) or use the online Contact Us facility to arrange an appointment.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 8 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Who do you love?

noreply@blogger.com (continuum fp) — Fri, 23 Dec 2011 01:00:00 +0000

… and how can you protect them from serious financial hardship in the event of a long-term illness, injury or other ‘health-related’ event in your life giving rise to an inability for you to continue with normal income-earning activity?

Insurance is often used in this process but are you properly prepared with estate planning issues to avoid the situation that we were recently confronted with: see details below.

Case Study

Take our example family: starting at ‘Mum and Dad’ level, includes three children, two of whom are married; and the other, a son who was married but has recently lost his wife to Cancer, is a sole parent to a young school-aged child. Mum and Dad are in their late-60s and have been retired for around eighteen months: the two married children each have two children who are either in day-care or school whilst the parents are in full-time paid employment.

Because the financial position of this widower-son was not protected by adequate insurance on his wife’s life, senior Mum and Dad are now called upon to assist with the before- and after-school care of the grandchild who has lost his mother: they have chosen to postpone their further retirement travel plans for a year or so whilst matters settle down within the family.

What will be the situation if a serious illness, accident or other debilitating event strikes another member of the family?

We can imagine a number of possible scenarios, but apart from the emotional upheaval – and practical lifestyle changes – it would be a whole lot better for all concerned if a family conference were to resolve firstly, an understanding – and agreement – of what the respective Wills and family-care wishes of each member might be; and secondly, an insurance plan to ensure financial burdens are not added to the concerns. Family members who take over the care for children will be better equipped to do so if there is financial support from such planning.

A helpful insurance plan will include Life Insurance that pays a lump sum on the death of the insured; TPD Insurance that pays a lump sum should the insured become disabled (in satisfaction of the relevant policy definition); Trauma Insurance that pays a lump sum on diagnosis of certain illnesses; and Income Protection/ Salary Continuance Insurance that pays monthly benefits on the loss of work-time through illness or accident – and at levels calculated to meet the sort of costs that need to be covered for each event.

To minimise the financial stress that one of the perceived events might cause in your family, arrange a meeting with one of our experienced financial planners: currently there is no cost to you of such a meeting – but those whom you love most will appreciate your time and effort should a claim occasion arise. We will help you with ensuring an appropriate Estate Plan and/ or insurance protection to keep the financial ‘balance’ in order. Use the Contact Us facility on our website for prompt attention: or call our office on 073421 3456.

[This is article 5 in a series of 6 Blogs: for other articles in the series refer to the catalogue of articles showing elsewhere on this page under Risk Insurance.]

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Estate Planning and Family Loans

noreply@blogger.com (continuum fp) — Wed, 21 Dec 2011 00:00:00 +0000

Consider:

Trust is not enough

Deirdre, a mother of four, living in Wollongong New South Wales loved all of her children equally: but the youngest, Barry, seemed to need more help than the others to make a go of things. When he wanted to buy a house, she loaned him the deposit of $25,000. Deirdre mentioned the loan to her eldest son, Charles. When Deirdre died Charles asked Barry what he was going to do about repaying the loan. Barry said that it was a gift from Mum and he did not have to repay it.

It is important that loans of money or property between family members and friends be properly documented. Failure to do so can lead to disputes which could last for decades.

Have you made a loan?

If you have loaned any money or property to anyone, then you should consider what you want to happen to that loan after you die:

Do you want it paid back? If so, upon what terms?
Do you want to forgive it?

Have you borrowed any money or property?

If you owe money or have some property on loan, then you should tell your executors how they should handle the repayment, or return of that property.

Documenting a loan

Documenting a loan does not need to be complicated. A few lines setting out the details of the amount of loan or the item of property and the terms of repayment or return are sufficient. In some States, stamp duty may be payable on the loan agreement. The document should be signed and dated by both the borrower and the lender.

As part of the preparation of the information to refer to a legal adviser (specialist estate planner) your experienced advisor at Continuum Financial Planners can help you to establish all of the relevant factors (including the status of documentation of various financial arrangements): to arrange a meeting, call our office (on 07 3421 3456) or use the online Contact Us facility.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 7 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

The Risk of not securing affordability

noreply@blogger.com (continuum fp) — Fri, 16 Dec 2011 01:00:00 +0000

The affordability of homes in Australia has steadily declined over recent years. Serious concerns hover over the community when home loan serviceability for a significant number of Australian home-owners is under threat.

Home loan servicing (the ability to pay the home mortgage commitment) may not seem a problem while there is a regular income flowing into the household (one with sufficient surplus after meeting essentials, discretionary spending on the children and providing for anticipated emergencies), however the security of the family home in the event of an accident or significant change in health status of a primary income earner is not adequately protected in most Australian homes.

The July 2011 Press Release from AMP highlights the plight of many households in Australia.

A fairly sobering experience is to sit down and discuss with your partner what events should take place should the moment arise (and it is just a moment in many cases) wherein you become significantly disabled – or worse meet an untimely death. The step by step issues that need to be dealt with are harrowing enough: throw in the emotional turmoil; a couple of dependent children (or aged parents) – and a financial crisis might start to emerge.

Your wealth protection strategy should take into account the need for access to liquidity to meet bills to be paid, normal household costs, debts to service (including the mortgage) – and now added medical (and/ or funeral)costs. Waiting for a property to sell in such a situation may not provide funds quickly enough.

Continuum Financial Planners has published a number of articles highlighting the need for adequate personal risk protection through life insurance products. These products include Life (Death), Total and Permanent Disability, Critical Illness and Income Protection insurance policies: and each plays a role in ensuring that the financial turmoil that follows with events such as referenced above is able to be managed.

During the course of a short, no commitment appointment with one of our experienced advisors we can establish with you the appropriate level of protection required to keep your family – and their home – financially secure in the event of your untimely demise, succumbing to serious illness or being involved in a serious accident. For your peace of mind – and because like us, you care – Contact Us to arrange to set your record straight.

[This is article 4 in a series of 5 Blogs: for other articles in the series refer to the catalogue of articles showing elsewhere on this page under Risk Insurance.]

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Capital Gains Tax can cause an imbalance between beneficiaries

noreply@blogger.com (continuum fp) — Wed, 14 Dec 2011 00:00:00 +0000

Beware, there may be a potential capital gains tax (CGT) problem in your estate plan.

Thorough estate planning should take into account the possibility that a CGT liability could crystallise on the sale of an asset – such as shares or an investment property, being left to your beneficiaries.

Unfortunately, under current legislation, the bequest of two identically valued assets (one acquired before and the other after 20 September 1985) to two different beneficiaries may net entirely different benefit outcomes after tax is accounted for.

It is often more tax efficient to gift an asset with a CGT liability to a beneficiary with a low marginal tax rate and the CGT free asset to the beneficiary with the higher marginal tax rate. Whilst such a solution may not sit comfortably in your estate planning, it is important that the after tax value of a gift to a beneficiary be considered.

Options to consider in resolving this issue are:

Allocate specific gifts having taken CGT into account. (This can be difficult where market-related assets are involved, as the status of markets at the time of death may be considerably different from that at the time of estate planning preparation.)
Investigate whether your Will can be appropriately drafted so that your executor has clear instructions as to your beneficiaries’ respective share of your estate, after taking CGT and other taxes into account - but give discretion as to whom is to receive particular assets.

Consider:

Claire owns two very similar investment properties.
She wants to leave one to Damien and the other to Ernie, they are currently worth roughly the same amount.
However, Claire has held one longer than the other and the two properties carry very different unrealised capital gains.
If Damien and Ernie were to dispose of their inheritance it is unlikely that the net amounts would be the same.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 6 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Don’t risk the unknown

noreply@blogger.com (continuum fp) — Fri, 09 Dec 2011 00:00:00 +0000

One of the greatest ambitions for all generations is to achieve financial independence and security: this goal is held by most at an individual and family level. As a nation Australians are worryingly under-insured - both for events that are almost inevitable; as well as one that is in fact inevitable!

Personal risk insurance is known by that name because we use insurance policies to protect against the financial consequences of the following events –

Death (term life);
Total and Permanent Disablement (TPD);
Trauma (Critical Illness); and
Income Protection (and/ or Business Expenses).

As has been highlighted in earlier articles in this series of Blogs, events giving rise to claims under these different types of insurance can – and usually do – arise without warning: industrial accidents; road accidents; natural disasters; sporting and recreational accidents; illnesses; diseases often strike both without warning and when least expected!

Elsewhere in our published material are descriptions of what each of the policies covers, how they ‘work’ and how to determine the appropriate level of cover required in your circumstances.

Don’t put financial independence at risk – neither yours nor your family’s: Contact us for a review of the adequacy of your protection against the above events that can arise when you are least prepared to deal with them.

[This is article 3 in a series of 6 Blogs: for other articles in the series refer to the catalogue of articles showing elsewhere on this page under Risk Insurance.]

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Business Credit – What Happens when a Principal Dies?

noreply@blogger.com (continuum fp) — Wed, 07 Dec 2011 00:00:00 +0000

Estate Planning is critically important when a business is involved: even more so if that business involves members of unrelated families.

Businesses need capital to function. This capital will most often initially come from the business principals and where circumstances allow, partly from a commercial lender such as a bank. As the business matures, capital will be generated from the ongoing operations of the enterprise.

If a business principal dies, their estate and/or the business’ bank will want to know they will get their money. If these ‘creditors’ are not satisfied their loan is secure, they may call in the debt. The cashflow consequence of such an event can be devastating for a business. It can also decimate the assets that would have been available to the deceased principal’s family; or at the very least, the timing of the family receiving their value for the deceased’s share of the business may be protracted.

Unfortunatley, many business principals fail to plan for their own, possibly untimely death - or for the death of a fellow principal.

What should be done?

Make sure you are absolutely clear on the extent and nature of all business debt.
Accurately document all loans.
Document the immediate reponses to the following:

If I died – what would happen?
If my business partner died – what would happen?

If necessary, sufficient personal life insurance cover should be taken on the business principals to cover all business debt.

The experienced advisors at Continuum Financial Planners are available to work with you to ensure that both your personal estate plan and your business succession plan are appropriate to fulfil your wishes. For an appointment to consider your particular circumstances and needs, call us (on 07 3421 3456) or Contact Us through our online facility.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 5 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Life (Death) Insurance: Why don’t our Mums get it?

noreply@blogger.com (continuum fp) — Fri, 02 Dec 2011 00:00:00 +0000

“FACING dirty nappies, the dentist or a pap smear is better than the reality of getting life insurance for many Australian mums, a survey has found.”

An article published in news.com.au/money early in 2011 gave details of some research by Lonergan’s that showed some disturbing statistics: amongst women who are Mums -

62% do not have Life Insurance protection
83% say their untimely death would put a severe financial burden on their family
85% are frustrated by the time involved to apply for protection, the apparent cost of it – and it seems over-complicated.

Guys, you owe it to your family to deal with this matter – you will benefit in the long run if a claim event arises!

In simple terms, Life Insurance is there to provide a lump sum to the beneficiary of the policy in the event of the death of the life insured. In emotional terms, that should be translated to peace of mind for the ‘survivor beneficiaries’ that whilst they will grieve the loss of their carer/ provider, their financial position will be one less matter to worry about. In practical terms, it means that there is money available to deal with a number of issues that arise at a time when beneficiaries can be feeling quite fragile: adequate life protection should take into account –

Funeral costs;
Mortgage debt;
Credit card and/ or ‘other’ debt;
Residual health costs;
Emergency contingency;
Lifestyle costs;
Future education expenses; and
Future income needs.

Securing the protection can be simple:

Provided that all relevant information is properly provided (and that there are no impediments that preclude protection being available), a policy application can be completed from as short a time as around 20-minutes or, in more detailed circumstances, shouldn’t take more than an hour or so.

What complicates it if it’s that simple?

Inadequate record of the health of direct family members;
uncertainty about which of the items listed above to cover – and for how much (after taking into account existing financial resources as to value and their liquidity);
not answering health questions properly, then being uncovered when the underwriter makes the relevant health checks; and
not knowing who to have as the registered owner of the policy,

- but all of these matters can be resolved.

They become a lot easier to deal with if the main objective is kept clearly in focus: providing the best financial situation as you can for those whom you love and who are dependant on you!

The advisers at Continuum Financial Planners Pty Ltd have had good success in getting insurance written for even some of the more difficult applicants: we are persistent in our pursuit of the Underwriters to ensure the due consideration is given to every applicant: we would be delighted to work with you to find the peace of mind for you and your family that is afforded through a well designed insurance plan. Please contact us to arrange a meeting with one of us.

[This is article 2 in a series of 6 Blogs: for other articles in the series refer to the catalogue of articles showing elsewhere on this page under Risk Insurance.]

Binding Superannuation Death Benefit Nominations

noreply@blogger.com (continuum fp) — Wed, 30 Nov 2011 00:00:00 +0000

Superannuation fund trustees are faced with two types of nomination when required to pay a death benefit:

Discretionary (non–binding) death benefit nomination; and
Binding death benefit nomination.

Discretionary Nominations

A non-binding nomination of beneficiaries by a superannuation account holder leaves the trustee of the superannuation fund in a position where they must determine who, from the potential range of beneficiaries of the former member, will receive the death benefits available under the account.

To make this determination, trustees will generally be guided by any applicable legislation, or in certain circumstances, may be directed by a Court as to who should receive those benefits. In either of those cases, the ultimate beneficiary/ ies may not be the person/ people envisaged by the member to so benefit.

Binding Nominations
[Whether your particular fund allows for binding nominations will depend on the terms of the trust deed governing your fund.]

A death benefit will be binding on the trustees if:

The nomination form includes the name of each person(s), or class(es) of person (eg spouse), and the allocation of the death benefit amongst nominees is clear;
Each death benefit nominee is a legal personal representative or dependant of the member;
The nomination form is dated and signed by the member in the presence of two adult witnesses, neither of whom is a nominee named in the notice;
The nomination form contains a declaration by the witnesses, stating that the member has signed and dated the nomination form in their presence; and
The nomination is valid.

What must a member do to confirm, amend or revoke their nomination?

A death benefit nomination is confirmed by giving a written notice to the trustee signed and dated by the member. It can also be amended or revoked by giving a written notice to the trustee signed and dated by the member, but the notice must be witnessed in the same manner as a new nomination.

IMPORTANT NOTE: Most trustees require that a Binding Death Benefit Nomination be renewed on a triennium basis: it should be prepared and signed (as outlined above) within 3 years of each anniversary.

Consider:

To ensure that Graeme’s superannuation benefits were paid partly to his new wife, Helga, and partly to his young children on his death, he put in place a binding nomination.
When Graeme died, his nomination was binding on the trustee.
In using a binding nomination, Graeme was able to ensure that his ex–wife was not able to access any of his superannuation.
Helga and Graeme’s children are taken care of and will not be inconvenienced by any delays in settling Graeme’s estate.

For more information about Binding Death Benefit Nominations we recommend that you consult with your adviser at Continuum Financial Planners: a review of the estate planning considerations will be given and where applicable, we can assist you to enact an appropriate strategy. Call us (on 07 3421 3456) or use the online Contact Us facility to arrange a meeting.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 4 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Personal Risk Management – are you adequately insured?

noreply@blogger.com (continuum fp) — Fri, 25 Nov 2011 00:00:00 +0000

[This is the first of a series of Blob posts about personal risk insurance – commonly referred to as Life Insurance (although it actually covers off a number of risks potentially experienced throughout our lifetime). The series will be posted over consecutive weeks: this is post 1 of 6 items.]

What is personal risk management?

We’ll try a reality scenario as a starter:

It is 6:00 am. You hear your spouse stir from the bed and, in the usual routine, changes into some exercise gear and quietly heads out the door. In this case it is the main family income earner who has gone out. At age 49, this morning exercise routine was regular and helped keep fit for the rigours of the day’s activity at a professional office.

It is now 7:00 am and you notice that your spouse hasn’t returned. When the phone rings at 7:30 am to advise you that your spouse has been taken by Ambulance to Hospital and is being admitted to Intensive Care after suffering a major stroke, your mind clouds and you look quite concerned as you try to understand what you have just heard, process it – and then relate it to your two children (who you had been preparing to get away to school for the day).

After the concern for the well-being of your spouse has settled, early thoughts are going to be about your financial position;

The children have a few years of school left to pay for;
The house has a mortgage – mainly because of investments made;
Your spouse is the primary income earner;
Will modifications be required at home (for any continuing disability); and
How will the ongoing household – and perhaps additional medical - costs be funded?

You have been working to a strategic financial plan and have accumulated reasonable assets, but they are still subject to borrowings – and the success of the plan requires ongoing servicing of the debt as well as further contributions.
The good news is that your financial planner has implemented his recommendation and you have all of the relevant insurances in place – and for the appropriate amount of cover.

Wealth management is a critical requirement for those of us who seek financial independence in preparation for eventual retirement. Financial planning is all about wealth management and protection – and the peace of mind that goes with those outcomes. There are a number of phases in the wealth management process – taking stock of what financial resources are available; evaluating the cashflow surplus that can contribute to further accumulation; investing wisely according to our timeframe, goals and investor risk aversion profile – and having a back-up position for the possibility that any or all of this ‘could go wrong’.

A well-constructed financial plan comprises two critical elements – wealth creation and wealth preservation (wealth protection). Wealth creation is the accumulation of financial assets (wealth) and is premised on a range of assumptions and factors: including that you will have continued good health (ability to continue to earn and generate the surplus cashflow for investment) and anticipate living to a ‘projected’ age (giving you the investment timeframe to manage).

Wealth preservation is an important strategy for those who have financial dependants – whether family or business partners – who will find the challenges of adverse circumstances emotionally challenging, without having to deal with extreme financial difficulties. It is the process of shoring up the accumulating wealth so as to not expose your ‘nest egg’ to unpredictable, untimely, insurable circumstances.

Personal risk management is transferring the risk that your health may not prevail (and/ or that you may meet an untimely demise) to another party – an insurer. Appropriate risk insurance policies will facilitate you meeting your long-term financial and lifestyle objectives in spite of such events.

Why have personal risk insurance?
Personal risk insurance is important to relieve you and your family of the financial burdens associated with the loss of income if an event occurs such as death or permanent/temporary disablement. It provides peace of mind that you and your family are financially secure by providing an ongoing income source, debt repayment, a replacement housekeeper/nanny while your children are young, and possible funds to meet your children's future education needs.

Why should a professional assess my risk insurance needs?
Given the complex nature of risk management, professional assistance should be enlisted to ensure that the correct type and amount of insurance is established. The type and amount of risk insurance will depend upon your personal financial circumstances and objectives, lifestyle needs, number of dependants, your age and other factors particular to your own situation.

What types of insurance are available?
The types of insurance policies available include:

[Refer to our website for a description as to what each of the various types of insurance policy is meant to cover; and how each of them is useful in protecting your planning. They are linked for your convenience.]

Why participate in ongoing reviews?
As your wealth grows as a result of the implementation of your financial plan and your personal circumstances change, your need for insurance cover may decline or increase over time. Therefore, it is beneficial to periodically review your insurance cover.

Contact Us
Experienced advisers at Continuum Financial Planners can assist you determine your needs for personal risk insurance protection: please contact us for prompt attention to arranging a meeting to consider your particular situation – use the above link, or call our office on 073421 3456.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Estate Planning and Asset Protection

noreply@blogger.com (continuum fp) — Wed, 23 Nov 2011 00:00:00 +0000

Most people are more than happy to receive an inheritance. However, for those beneficiaries who have put in place asset protection strategies; or those who could be facing bankruptcy (imminently or at any time in the future); or those who have afflictions or some disabilities, this can cause a problem.

Consider this:

Ann owned and ran a high profile interior decoration company.
She had deliberately ensured that most of her assets were in her husband’s (Brian’s) name. At least this way, if the business went bad, their home and investments would be protected.
When Ann’s parents died, she received the family beach house in her name.
Though the business was doing well, its future success was not guaranteed.
To protect the beach house from a possible loss through bankruptcy occasioned by failure of her business, she transferred it to a trust – and paid $36,000 stamp duty. This expense could have been avoided if Ann’s parents had included a testamentary trust in their Wills.

People in financially high risk occupations such as professionals, business owners and company executives, will often prefer not to receive inherited assets in their own name.

Estate Planning would arrange for appropriate provisions (such as a testamentary trust) to be included in the wills of people likely to leave assets to beneficiaries in like circumstances.

Through a relationship with an experienced financial planner at Continuum Financial Planners you could ensure that your benefactors are appropriately advised as to how to ensure that their intentions on your behalf are wisely provided: call us (on 07 3421 3456), or use the online Contact Us facility to arrange a meeting.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 3 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Teaching children ‘money’

noreply@blogger.com (Warwick) — Fri, 18 Nov 2011 01:00:00 +0000

Children are not sent out on to the sporting field to compete without considerable training and preparation; they are not expected to perform in orchestras without training and practice; many will not get to do either of these things – but many more will be expected to perform well in the management of their financial resources: and at a high level of performance.

The lack of financial education within all systems in this country (and not just in the formal primary/ secondary school curricula) is appalling – and we encourage parents from all financial backgrounds to take an active role in coaching their children in ‘the ways of money’.

There are many articles written – and a general community awareness that we are an aging population; and that the consequence of this is that over the next couple of decades significant wealth will transfer from ‘the baby boomers’ to subsequent generations. Through carefully orchestrated estate planning, provision is being made by many families to ensure that the accumulated wealth is ultimately passed on ‘to the right people, in the right amounts and at the right time’: what is not so apparent, is that little is being done to educate the ultimate beneficiaries in the appropriate management and use of the transferred wealth.

‘Children set to inherit (significant) wealth as (young) adults need knowledge and experience to make decisions that inevitably accompany such an inheritance. Many parents find themselves worried as the moment of wealth transfer approaches for a child unprepared to manage (significant) assets, and regretful they did not provide the financial education their child needed.’1

In Joline Godfrey’s article (referenced below) from which the above paragraph has been extracted, the following table suggests the skills that we need to be able to pass on to (teach) our children:

TEN FINANCIAL SKILLS EVERY CHILD NEEDS The basic skills every child needs to master by the age of 18 include:
1.	How to save
2.	How to keep track of money
3.	How to get paid what you’re worth
4.	How to spend wisely
5.	How to talk about money
6.	How to live on a budget
7.	How to invest
8.	How to exercise an entrepreneurial spirit
9.	How to handle credit
10.	How to use money to change the world
From ‘Raising Financially Fit Kids’, by Joline Godfrey, CEO, Independent Means Inc.

These particular skills are more or less relevant depending on the relative financial position of different families: in all cases, the core of what is listed here is relevant and will stand your children in good stead if you can achieve them. [We encourage you to read the article in full and have provided the link to it below.]

Preparing Children for a Life of Wealth, by Joline Godfrey, CEO, Independent Means Inc.

The experienced financial advisers at Continuum Financial Planners are passionate about the financial education of clients and their families. We actively promote professional estate planning strategies and seek to follow them up with family meetings at which the ultimate beneficiaries are able to be briefed as to why the plan has been structured as it is – and to encourage preparation for a continuation of the wealth management plans that gave rise to the estate.

If we can be of assistance with planning your families preparation for these new financial responsibilities, please call us (on 07 3421 3456), or engage us through our online Contact Us facility.

[The genesis for the above article came from an article1 from the Northern Trust blogsite: Insights on… Children and Wealth - Preparing Children for a Life of Wealth, written by Joline Godfrey, CEO, Independent Means Inc. In acknowledging the source we trust that our interpretation has not detracted from the importance of her message – which we understand and support.]

The Need for Flexibility and Choice in Modern Wills

noreply@blogger.com (continuum fp) — Wed, 16 Nov 2011 00:00:00 +0000

Most traditional Wills do little else but pass assets to the nominated beneficiaries.

The trouble with this traditional approach in estates where there are substantial assets – or where there are beneficiaries with particular circumstances or needs – is that it leaves beneficiaries with virtually no flexibility or choice in what they can do with the assets they inherit.

By including provision for a simple testamentary trust in the Will, the value of the gift may be enhanced. The flexibility provided under a Trust structure can facilitate beneficiaries making the most of opportunities – and avoid unintended pitfalls.

The flexibility provided under a testamentary trust in the Will may facilitate for to:

Minimise income tax
Minimise Capital Gains Tax
Keep an inheritance out of the reach of the Family Court during a property dispute with a former spouse
Protect the inheritance from a trustee in bankruptcy
In limited situations, avoid an unintended loss of Centrelink or Veterans Affairs entitlements.

A well drafted Will can give the beneficiaries the flexibility to choose how their gift from you is to be treated.

If you would like to consider the aspects of such planning that might benefit your family, contact Continuum Financial Planners and arrange a consultation with one of our experienced financial planners who will help you to establish a robust estate plan for your estate – and for the benefit of your intended beneficiaries.

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 2 of 13 articles.

The information contained in this article is general in nature and does not take into account personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Intergenerational Wealth Training

noreply@blogger.com (continuum fp) — Fri, 11 Nov 2011 01:00:00 +0000

Preparing ourselves – or indeed other members of our family – to be able to deal with wealth is a task that requires at least skill and discipline. Ability will follow if these attributes are assiduously followed. Financial education in Australia has been sadly, omitted from our curriculum for far too long – and so self-education has been left to the individual, has been ad hoc or random at best and in many instances, a failure.

Parents often feel that they should shelter their children from the perils of financial woes until those same children start to make inappropriate financial decisions based on what they have learned by perception, financial practices of the parents. The statistical probability of these children making wise and effective financial decisions without experiencing numerous setbacks is incredibly low.

As the ‘baby boomers’ approach the inevitable time when they pass the wealth accumulated over a lifetime, on to their families it is critical that they take measures to ensure that they are prepared for the responsibility of managing that inheritance wisely and effectively: they may not have the same opportunities to accumulate wealth as did this generation! It is also a sad fact of life that many will be aware of – that when people who are not used to dealing with significant sums of money find themselves ‘suddenly’ landed with the responsibility of dealing with wealth, they lose most if not all, of it within a short period of time.

The explanation we hear for this phenomenon is that they continue to live the way they did when they had little money – what came their way, they spent (even though often on necessities) and rarely had the opportunity to save and invest.

Even children in families who have the privilege of comfortable wealth (and beyond) should not be denied direct financial education – and particularly not on the basis that ‘ they are set for life, they’ll never have to worry about money!’. The ability to prioritise and to understand their ‘life’s purpose’ will strengthen the financial education outcomes for all children (or those beginning the journey to understanding and properly managing, wealth).

To tackle the financial education project, as for any substantial project, planning is essential: goals need to be set; resources need to be identified and sourced; and an action plan established. [An effective action plan has measurable mileposts and achievable timeframes.]

Goals

The Table below sets out some key goals to aspire to when embarking on this project.

FINANCIAL TRAINING GOALS Effective financial training for family members should involve three important goals:
1.	To help them achieve a (financially) purposeful life;
2.	To give them the tools for (financial) self protection; and
3.	To help them become active participants in the family’s ultra-long-term financial plan.

Resources

The resources required to achieve these goals will vary according to individual family circumstances – as will the ready access to those resources. Certainly there are texts that are available, financial journals – and even some articles/ columns in the financial sections of newspapers; but critically important in the process will be mentoring from people who have demonstrated financial wisdom. For the human resources required, turn to trusted friends (perhaps with long-established investment portfolios, or long-term own-business operators); and professional people with whom you establish relationships – such as bank managers, accountants, financial planners. (These people will either provide direct mentoring or perhaps introduce you to people who can fill that role for your family.)

Action Plan

Depending on the ages and financial circumstances of the family members being trained in your project, it is important that each part of the learning is measured, tested and practised.

If at all possible, setting up a ‘game’ to exercise the required skills is useful in that it provides practical exposure and experience to the process. Whether using real money or an assumed portfolio, hold ‘board meetings’ to determine what is the financial challenge, determine the outcomes, set some time constraints and implement the decisions taken: then meet on a scheduled basis to meaningfully consider the processes, the market activity that is influencing the outcomes and how the risks were adequately identified – and the strategy to deal with any adverse effects.

Always provide feedback to the ‘student’ – praise where it is warranted; guidance where the plan is going astray; and comfort when there is a failure. [Remember that there are some aspects of financial life that we can control and the rest require us to exercise skill at recognising the potential risks – and to put in place risk management strategies to minimise the consequences.]

Continuum Financial Planners Pty Ltd is a privately owned small business that is concerned with ensuring that resources are available to their clients (and to anybody seeking to learn more about wealth management and protection). We achieve this in two key ways.

numerous articles are posted on our website and on our blog that deal with investments, superannuation, retirement matters, insurances and other financially-focused topics; and;
our client relationships are based around ongoing adviser services, packaged under agreed service arrangements negotiated (and priced under a ‘flat fee’ basis, reviewed annually) according to the services selected and the financial complexity of the client’s affairs.

We offer an initial meeting with prospective clients on a ‘no commitment, no cost’ basis. To arrange a meeting with one of our experienced financial planners please call our office (on 07 3421 3456) or use our online Contact Us facility.

[The genesis for the above article came from an article from the Northern Trust blogsite: Insights on… Children and Wealth - Preparing Children for a Life of Wealth, written by Joline Godfrey, CEO, Independent Means Inc. In acknowledging the source we trust that our interpretation has not detracted from the importance of her message – which we understand and support.]

Introduction to Estate Planning

noreply@blogger.com (continuum fp) — Wed, 09 Nov 2011 00:30:00 +0000

This series of Blogs – Estate Planning – is based on a publication originally produced by AMP. We have taken the critical elements, modified them where we felt necessary based on experiences at our practice (and others related to us by legal professionals in this area of law), checked that they are up-to-date at time of publication – and publish them now as a resource for use by our clients and ‘followers’. This is article 1 of 13 articles.

Estate planning is a critical element of any business or personal financial plan. It is one that is little understood and is too often relegated to ‘finalised’ just on the basis of having a Will and, in some cases, Enduring Powers of Attorney (EPAs) in place.

An effective estate plan not only has the potential to save money but it can also avoid unnecessary hardship and trauma for the people left behind.

Conventional wisdom has it that there are three key components to any effective estate plan:

The right funds: Will there be sufficient funds in your estate planning to meet your objectives?
The right hands: There is no point in ensuring ‘the right funds’ if they do not go where you want them to or if control of those assets passes to a person(s) who don’t manage them in an appropriate way.
The right time: Timing will also be a consideration e.g. will all potential beneficiaries be old enough and therefore hopefully mature enough to manage their inheritance; and will the funds be available at a time required to meet ‘estate liabilities’ and obligations (such as bequests)?

Pitfalls in estate planning can be avoided if identified in time; and opportunities may be available to enhance your estate’s position and value to your beneficiaries.

Preparation of a good, well structured estate plan requires at least an analysis of your financial position and supporting resources, together with information on assets held – and the structures under which they are held.

Continuum Financial Planners Pty Ltd offers a service to clients to assist them prepare the detailed information required for consideration by the estate planning specialists to provide you with an estate plan appropriate to your present and known circumstances. We will also liaise with you to appoint that professional if you don’t already have such an adviser.

Further articles in this Blog series will help you to understand some of the issues and implications to be dealt with – and to prepare you and your family to understand the final plan when drafted.

From Deep Panic to Hope – lessons to learn

noreply@blogger.com (continuum fp) — Mon, 31 Oct 2011 05:44:00 +0000

Over the six weeks following early-September, the US Stock Market Dow Jones Index has risen over 19%! ‘Well done’ to those investors who stuck with their portfolio when the roller coaster ride of August/ September 2011 started – especially our clients who heeded our special advice.

The following chart shows the investment cycle of undisciplined investors: and according to survey results, these people more often end up with less than 40% of the final outcome achieved by disciplined investors working to a well-structured strategic plan appropriate to their circumstances.

The reader is invited to make their own call as to the likely outcome for investments made at various points in the cycle. However, it should be obvious to all reading this chart that when making any acquisition, less gain is to be made when you buy at ‘the highs of the market’. ‘Buying at the highs’ and ‘selling at the lows’ – which fits the emotional pattern above – is exactly contrary to the strategy that will make a portfolio grow.

Where do you think we are in this cycle now?

Whilst the above chart is more relevant to short-term decision-making, the lessons for the long-term investor should also be obvious:

Timing markets is difficult – and so buying in over a series of investment tranches (deposits) will remove some of the effect of the risk
If you agree that we are somewhere in the range from ‘deep panic’ to ‘hope’ – now will be as good a time as you are likely to encounter in the hunt for Value in the acquisition of further investment assets.

Regular followers of our Blogs and website articles (eNewsletter articles) will be aware that we have published several articles relating to these topics. Please consider a Search at http://www.continuumfp.com.au/ for articles about investing, market timing, dollar cost averaging and ‘happy investing’ to accompany this Blog.

We would appreciate your comments and will respond to any questions or concerns: follow us on Twitter; Like us on Facebook; and take the RSS feed for our Blogposts.

Investment Principles 101 (or Core Wealth Management principles)

noreply@blogger.com (continuum fp) — Wed, 19 Oct 2011 00:00:00 +0000

Call it simplistic, even call it naïve – but at the end of the day, when investors place surplus funds there are some key issues that they are looking for: security, return and liquidity. We make the case that investors looking at the current market could do well to settle their emotions and take advantage of what might be perceived as a ‘buying opportunity’ (an under-pricing of a number of asset classes), mainly influenced by traders (who have a very different set of criteria driving their buy-sell decisions).

If it is that simple for investors they should be looking at the key elements to each of those identified characteristics to determine their investment timing; and what they should invest into. (Whilst it is a critical element in constructing an investment portfolio, diversification of a portfolio is a significant topic that has been covered in articles prepared by Continuum Financial Planners in the past and can be found in the Articles library on our website, using the search function – see http://www.continuumfp.com.au/.)

Security

Whilst not an exhaustive expose on this matter, the key concept of security is to be satisfied that the capital that is being invested is going to be preserved, if not throughout the period of the investment, at least by the time the investment is to be realised. For many investors, the goal is to benefit from capital gain in the process – and a gain greater than:

The inflation experienced during the term of the investment;
The calculated risk factor in making the investment;
Any funding costs (where gearing is involved in the investment); and
The tax consequences arising from the investment (both by way of revenue and any taxable capital gain).

Return

The return that investors expect from their investments varies from each individual’s perspective – and it is not sufficient to say that we expect ‘the highest possible return’. Targeting a % return from an investment is important, but the need for a young wealth accumulator to have income will be less concentrated than that for a retiree – even if they are investing in the same asset class. (To some extent the structure under which the asset is held will create the variation required, but that is more relevant to the return to the investor, than the return ‘on the investment’.)

Bearing in mind the factors mentioned above in relation to Security, the return on an investment (aka, the Yield) is dependant on the price paid for the investment asset so that –

If a 10-year Bond is issued with a 5% p.a. quarterly coupon at an issue price of $100, the yield at date of issue can be said to be 5% (ignoring the quarterly cashflow effect that actually raises that rate of return marginally);
Assuming that some time after the issue, other investors develop the view that interest rates are going to rise - say by 1% - then they would only be prepared to buy that Bond from an original investor for around $99; and vice versa
If the anticipation was that the interest rates were likely to fall, the new investor would be prepared to pay the holder of one of these Bonds around $101.

In its simplest analogy, the price investors are prepared to pay for an asset is determined by their expectations regarding a return on their investment. Whilst a Bond as described above might be a gilt-edged issuance (with minimal risk – usually referred to as ‘risk-free’), similar principles apply to all investment assets, with the main variable being the requirement for a higher return to compensate for the fact that the asset may not provide a consistent return; and/ or carries a risk of capital loss.

As we have stated on many previous occasions, sentiment is a significant driver of investment decisions: people ‘like’ a particular type of company; or they ‘like’ property; they sometimes ‘fear’ that a recession is coming; they may ‘be concerned’ that they are going to ‘miss the boat’ on the ‘rising tide’; or they might ‘be concerned’ for the security of their jobs/ businesses – all of these are (some of) the emotions that influence what investors are prepared to invest into; and when they want to invest (or dis-invest).

Liquidity

This characteristic of any investment asset is important to most investors because at the end of the day, money is the exchange mechanism we use to take the value from one prioritized goal to another: if at present the need for funds to meet expenses are comfortably able to be met from current income, there is no need to divert investment assets for that purpose. There may arise a position where either cash is required for an expense (recurrent or capital), or that an investment asset that is judged as being more suitable to meet strategic objectives has been identified – in which circumstances, the investment assets held need to be ‘converted’. In these latter circumstances, it is important to the investor that there is an ability to liquidate the asset held, in favour of the higher prioritized purpose.

A simple set of examples follows:

Cash in a ‘bank-style’ savings account is immediately liquid (and in any amount up to the account balance, as required);
Direct Shares (equities) in a Listed Corporation are usually saleable and converted to cash (liquidity) within a few days – usually referred to as T+3 (and can be sold down – with some ‘small parcel’ constraints – in amounts required to satisfy the need);
Direct Property will usually need to progress through a sales program that might result, fairly typically in Queensland at least, in a contract with a 30-day settlement period – but subject to ‘inspections’, finance availability for the purchaser and sometimes, the sale by the purchaser of other property: and with no ability to control the proportion of the investment to be sold/ liquidated).

Buying Opportunity

We have referred above to a number of articles that appear in the Article Library on our website: a number of those articles also refer to an investment strategy known as ‘dollar-cost-averaging’. If after reading articles such as we have led with above, investors sought an opportunity to take the contrarian approach and re-enter the market while it is priced at current levels, they might be well advised to consider making the move over a pre-determined period of time with a number of tranches of similar value.

If you are interested in taking advice in relation to your investment goals and determining whether now is an appropriate time in your situation to take advantage of such a buying opportunity, please contact us, Continuum Financial planners to arrange an obligation-free meeting with one of our experienced wealth management advisers. [To assist in your decision in this regard you might also look at Who We Are, our Client Value Proposition and our Fee for Service statements.]

The information contained in this article is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Rules of successful investing

noreply@blogger.com (continuum fp) — Mon, 10 Oct 2011 00:30:00 +0000

Rules were created for a number of reasons we could all speculate on, but one of the reasons has been to provide for an orderly conduct of our lives in a relatively safe environment.

The following rules from the manager of a ‘managed fund’ in New York are easily applied to our local environment and to investors who rely on fund managers to do the hard ‘stock picking’ work. (Where relevant, we have shown some commentary to fit the ‘managed fund’ model.):

“Some Golden Rules

Investing is fun, exciting, and dangerous if you don’t do any work.
Behind every stock is a company. Find out what it’s doing. [Behind every managed fund is an investment team. Find out how they operate with their client-entrusted funds.]
Often, there is no correlation between the success of a company’s operation and the success of its stock over a few months or even a few years. In the long term, there is a 100 percent correlation between the success of the company and the success of its stock. The disparity is the key to making money: it pays to be patient, and to own successful companies. [Speaking to ‘investors’ – who should hold investments for a number of years; rather than to ‘traders’ who tend to move with the ‘excitement’ of the market on a short-term trading cycle.]
Long shots almost always miss the mark. [Even traders need to be very vigilant.]
Never invest in a company [managed fund] without understanding its finances [features as to size, capacity, style and method, team longevity etc]. The biggest losses in stocks come from companies with poor balance sheets. Always look at the balance sheet to see if a company is solvent before you risk your money on it.
With small companies, you’re better off to wait until they turn a profit before you invest.
A stock-material decline is as routine as a January blizzard in Colorado. If you’re prepared, it can’t hurt you. A decline is a great opportunity to pick up the bargains left behind by investors who are fleeing the storm in panic.
Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and stock mutual funds [managed funds in Australia] altogether.
Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the company in which you’ve invested.
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
In the long run, a portfolio of well-chosen stocks and/or equity mutual funds will always out-perform a portfolio of bonds or a money-market account. In the long run, a portfolio of poorly chosen stocks won’t out perform the money left under the mattress.”

[Extracted from ‘Beating the Street’ by Peter Lynch – a former Investment Director at Fidelity in New York.]

Whilst the above is not exhaustive (and we hope, not exhausting) the rules are a good indicator of some of the regular activity undertaken at Continuum Financial Planners to select and monitor the managed funds into which we recommend our investor clients commit and continue to keep, their money.

We seek to bring peace of mind to our clients through our diligent processes - for the near-, medium- and longer-terms. We encourage clients to contact us whenever they have needs or concerns regarding their investments and/ or financial situation: we also encourage them to spread the word about our professionalism, our caring and our supportive role, to family, friends and colleagues.

Please either call Kathy on 07 3421 3456 (or use the Contact Us link on our website) to arrange meeting with one of our experienced financial planners.

The information contained in this article is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.

Strategic wealth management

noreply@blogger.com (continuum fp) — Thu, 06 Oct 2011 22:55:00 +0000

We have most heard the expression that ‘he who makes no mistakes, makes nothing at all’; and another, ‘if you fail to plan, you plan to fail’; and again, the reminder that you rarely set out on a motor journey without having a roadmap (even if in your mind) as to how to get there. You know where this is going so let’s not beat about the bush: having a plan, based on individual factors and with a clear strategy; and implemented/ actioned without waver will always give a better outcome than stumbling along from one hurdle to the next.

The simplest of all investment strategies was taught to us as school-aged children: open the school bank account and deposit a regular amount on every school banking day – and how great was the pleasure when at the end of the year, the accumulation of the deposits made and the interest compounded was regarded quite correctly as something that we would not have had, if it weren’t for the undying commitment to that process.

Most strategic investment planning is based on long-term outlooks (i.e., more than 5 years) and in many cases the plan takes us unto terms in excess of 20 years (embracing a latter period in retirement).

Even a simple ‘regular savings plan (with/ without ‘gearing’) is very well worth considering while you contemplate your financial independence into the future.

The following extract ‘Beating the Street’ by Peter Lynch – a former Investment Director at Fidelity in New York contains the significance of this strategy (Note – these calculations were made back in 1993, but logic suggests they will still be relevant today):

“The following calculations, strengthen the argument for investing on a schedule. If you put $1,000 in the S&P 500 index on January 31, 1940, and left it there for 52 years, you’d now have $333,793.30 in your account.

If you added $1,000 to your initial outlay every January 31 throughout those same 52 years, your $52,000 investment would now be worth $3,554,227. If you had the courage to add another $1,000 every time the dropped 10 percent or more (this happened 31 times in 52 years), your $83,000 investment would now be worth $6,295,000.

There are substantial rewards for adopting a regular income of investing and following it no matter what, and additional rewards for buying more shares when investors are scared into selling.”

If you – or any of your family, friends or colleagues – have some long-term goals about which there is any uncertainty as to the ability to attain them, Contact Us (or call Kathy on 07 3421 3456) to arrange a meeting with one of the experienced financial advisers at Continuum Financial Planners.

The information contained in this article is general in nature and does not take into account your personal circumstances, financial needs or objectives. Before acting on any information, you should consider the appropriateness of it and the relevant product having regard to your objectives, financial situation and needs. In particular, you should seek the appropriate financial advice and read the relevant Product Disclosure Statement or other offer document prior to acquiring any financial product.