MAA700 – Estate Planning and Risk Management Strategies

Financial Planning

Statement of Advice

For Andrew and Samantha

Summary of my insurance recommendations and commissions

According to your current financial position, I must recommend Andrew to replace your total, and permanent disability (TPD) based insurance and retain their income for the life insurance and take out the Trauma insurance. While, on the other hand, for Samantha, I must recommend you to overcome the extra expense in order to take a proper superannuation fund for your lifetime. 

The tables below provide a summary of the products I recommend for you. For further information,

Recommended product overview: Andrew
 

What you both want

You both want such advice who majorly hit your basic needs. The age of Andrew is 44, while the age of Samantha is 43. They both are happily married, and they have three children. The health condition of both people is good and fit.  The income of Andrew and Samantha is effective. Andrew and Samantha now planning for real estate planning for future growth. They want a healthy wealth position in terms of a big home and other facilities. As you Andrew) also invest in bitcoin investment for future growth and higher profit. At the same time, Samantha also invested in the business as a partnership. 

This shows that you both have other sources of income as well. I want to advise you people that you can invest in healthy and profitable projects in future terms. You can invest in profitable projects or recommended products on your own, or you can appoint the firm and us as the fiduciary on your behalf. This would give positive results and help to increase sources of income. Finally, if you wish to appoint us as fiduciary, then you need to sign over an authority to proceed to the firm and firm appointed AFS licensee. In your case, it would be us.

What you should know about my advice

What my advice covers

My advise covers all the major problems covered by both of you in your financial statements. I will cover your current state planning where your all accounts currently rent premises for conducting its business. Currently, you do not contribute any money in a superannuation account for a pension fund. So Samantha, for you it’s a good decision, as you are working as an accountant in a firm. The major aim of my advice is to fulfil all the deficiencies that are faced by couples, like their children school fees, medical expense and other related ones. My advice will ensure that your future will be more secure and independent. I must recommend you a superannuation based contribution strategies in order to offset the effect of insurance premiums on your retirement benefits. In the current scenario, especially superannuation funds are favourable for Samantha and Traumatic insurance is more favorable for Andrew. While life insurance is indeed preferable for both of them.

What my advice does not cover

My advice also cover the strategies regarding a wider scope to protect the people from risks and give suggestions as accumulating sufficient wealth position. I have also analyzed your current profile in terms of debt obligation or liabilities. Currently, you have the liability of home mortgage of amount 420,000 with the interest rate of 4.7%. You had taken a loan of 420,000 for some purpose. Further, you have a liability of $20,000 on a caravan with an IR of 7.0%. Finally, you also have a liability of using credit card about $12,000 with the interest rate of 13.5%. To be sum up, you both have the liability of 452,000 with a specific interest rate. Further, the details of assets also indicate that you have various numbers of assets such as home, caravan, term and bank deposit, bitcoin, office furniture, cars as well as superannuation.

 Although, Andrew and Samantha do not contribute a single penny in superannuation account yet. However, you have superannuation account as an asset with an amount of $180,000.

As your financial advisor, I also analyze the market value of your assets as a PV. I analyze that various assets have high market value. It means that the market value of some assets is growth able. For instance, when you built the home in 2014, the worth was $505,000 now the market value of your home is 840,000 which is very significant. Similarly, the value of share portfolio when the investment was made in 2009 was 20,000 while now the value of share portfolio is 45,000. This means you have the option to invest your money in such a way that gives profit. 

Similarly, the market value of some assets decreased compares to a past value. Such as, the market value of the car is less than purchased value. At the same time, the value of contents, truck and tools have been decreased compared to purchase value. Therefore, I analyze your personal profile keenly, if there is any discrepancy you can check and revert it. 

The possible risks that you exposed off in current position and other detailed information are essential and important to be considered. One of the biggest and possible risk that can occur during the lifetime period anytime and anywhere. It is possible that either Andrew or Samantha seriously injured, and they would out of pocket medical expenses. This is one of the biggest and significant risks that you can face. Similarly, it is important to discuss that you do not have any private medical insurance also. Therefore, the risk of serious injury could be dangerous and may affect the capital requirement of both you. 

Secondly, the personal profile and current position of both of you indicate that Samantha, other than accountant job, made a 50% partnership with ‘All accounts accountants’ with her friend. She starts a partnership with her friend from university. You made an investment in business and business has made a consistent 45% profit on turnover over the past seven years. Obviously, you invest in the business and form a partnership with her in order to make a profit. One of the possible risk that you can face is lost in the investment business. It could be possible that the partnership faces a loss due to external factor, and you fail to make a profit. The external factors that may affect the investment return could be decreased in sales, lack in meeting the demands of customers, inflation and some other factors like that. I will further explain how these risk can be solved out.

Additionally, I examine that you (Andrew) also made an investment in bitcoin. You made an investment in bitcoin to consider as a healthy account. One of the possible risks could be that Andrew can face a loss in bitcoin investment. This possible risk can affect the capital requirement. You both also are liable to pay liabilities like home mortgage loan, credit card obligation as well as loan on the caravan. Another primary and possible risk could be high-interest rate

Therefore, these possible risks can affect economic as well as your financial position. These issues can be resolved through different strategies.

About you: Andrew and Samantha

Personal details

Employment details

The average salary tax in Australia is near about 10%. The salary of both of you after tax is greater than the expenses. The expected life expectancy of Andrew and Samantha is given below,

My advice

Insurance needs: Andrew

Life insurance

Total $524000  The total is the subtotal minus total superannuation 

($100,000). This is because it is assumed that your 

superannuation benefit will be available if/when you die.

Trauma insurance

Total $235,000  This is the total of all trauma insurance required to meet 

Andrew’s needs.  

Total and permanent disability (TPD) insurance

Insurance needs: Samantha

Total superannuation (pension) insurance

Invest in profitable and healthy projectsI want to give a piece of advice that you both should try to cut expenses and increase the sources of income. For this purpose, you both can cut your additional expenses. For instance, you and Andrew can cut the holidays and entertainment expenses. I analyze your persona expenses which have amount 20,000. This holiday and entertainment expense could be reduced; in this way, the total expenses would be cut. Here, the cover for the recommendation of reducing the expenses is given below. I also want to advise both of you to protect the income as a whole. The income can be protected to invest in a healthy and profitable project. For instance, you both should invest in such healthy projects that make a profit. Moreover, you can invest in such business I that are capital investments projects. The capital investment projects could be railways, roads, and other investment project. This would significantly be helpful to increase the earning ways and reduce the expenses. Now, the cover for the protection of total income is given below, 

 Find other sources of income 

When you focus on investing healthy projects, you will get profit, and high profit will help to make savings. Therefore, this would be a healthy and significant recommendation regarding wealthy future and to prevent the losses. I also want to recommend both of you to invest in such projects where you get fixed profit on monthly, quarterly or yearly basis. This would help you to make saving, spending and investment planning. The primary reason to give recommendations and significant advice is to prevent you from losses. Making a healthy and profitable investment is essential for every investor (Epstein & Yuthas, 2017). As a financial advisor, the reason behind this advice is to allow you to make a safe investment. As detailed in the previous section, the cover for both of you should be extensive as he is the larger contributor to household income. This is my essential duty to provide you with the best recommendation and essential advice according to your current wealthy position). The advice provided is based on the financial situations in the previous section, which provides detailed cash flow and financial modelling in the event of any untoward incident to anyone of you.

Consequences of my advice

In previous sections, I analyse your current positions and overall profile.  I analyze from your current profile situation that you ( Samantha ) hold a life insurance policy as well as TPD cover under the superannuation. Although Samantha does contribute any money in a superannuation account.

Comparison of features and definitions of replacement and existing insurance products

The top merits of your life insurance policy are the advantage of protection as well as no worries. As, dying with no life insurance can create various sorts of emotional and financial resources problems for those people who leave behind (MacArtney, Broom, Kirby, Good, Wootton, & Adams, 2016). There is also a great benefit of cash flow value. Apart from the return and policies, the life insurance policies do not have a cash value. It means that the cash value grows as a tax-deferred. There are also various policies offered as a tax-free withdrawal as well as policy loans. In short, the merits of a life insurance policy are significant. On the other hand, the against points regarding life insurance policy that you hold are a risk of opportunity cost, lack of trust and credibility and stuck in limbo. Some superannuation contribution strategies are more suitable for both of you. It is because the expense rate is much higher than the net income value. According to the above products, your future will be more secure. 

The for and against points regarding life insurance policy indicates that that life insurance policy can give benefits as well some disadvantages (Chetty, et al., 2016). However, the life insurance policy can give a lot of benefits. I want to advise you people that you can invest in healthy and profitable projects in future terms. You can invest in profitable projects or recommended products on your own, or you can appoint the firm and us as the fiduciary on your behalf. This would give positive results and help to increase sources of income. Finally, if you wish to appoint us as fiduciary, then you need to sign over an authority to proceed to the firm and firm appointed AFS licensee. In your case, it would be us. Note that premiums paid on income protection insurance are generally tax-deductible. However, it should also be noted that payments received under income protection insurance are generally assessable as taxable income

Part B

Digital assets

Today, people live in the digital world, and it means the digital assets are the primary sources of capital. (Haraway & Goodeve, 2018). Photos in the smartphones store to movies stream, the documents that store in the clouds. Most of the people thousands of times are attracting digital assets. Digital assets mean the digital contents that are stored in the digital form. These digital contents include the photos, videos, images, files, documents that store in the clouds, spreadsheets, slides and text and MP3 logo, trademark and bank accounts. 

Digital assets are different content that store in the digital form (Parise, Guinan, & Kafka, 2016). The digitally owned something by a person is known as the digital assets.  These digital assets are not present in the physical form means these assets are not the form of tangible assets. 

But some document stored in the storage device such as files that store into the computer(Merlinone.com, 2019). 

The digital assets are the legal ownership of the company that owned (Bryan, Rafferty, & Wigan, 2017).  Fort instance, if the company deposits its amount $200,000 in the bank account, then the bank account is the digital assets of the person that deposit the amount. If a company purchase a software license to use, then it is the digital asset since the company owns the assets (Perzanowski, 2017). the digital assets also have copyright law. Similarly, a singer has the copyrights of its digital contents. The other person who purchases the song or video of that person cannot allow to copy the content, distribute or sell the contents of the singer. 

The digital assets can easily be copy and share (Fanning & Centers, 2016). Therefore, there is a need to assign legal rights, and law for the ownership of digital assets like the United States government made the kea for the copyright of the digital assets. There U.S copyright act 1998, protect the digital assets of the company or any individuals(Techterms.com, 2019). 

Some of the digital assets are stored in the form of the binary like in one and zeros form (Michels & Millard, 2019). The different binary numbers are used to store different files or digital assets like file, documents, images, videos, images, and applications. 

In the above case of Andrew and Samantha, they have different digital assets. They have contents, bank account, term deposit account and superannuation account in the bank. These are the digital assets of the Andrews and Samantha, and they have legal rights to use these assets. These assets are the property of Andrew and Samantha. These assets are transferable to the others with the proper legal documentation. The digital assets have the worth as other tangible assets.

Legal Representation

A legal representative is a person that is appointed to represent and execute the function by the approval of the court (Kohn & Koss, 2016). The legal representative is legally bound to perform certain functions. The legal representative has different responsibilities for collecting, managing, and execution of the data that is given him by the authority or a person (Ancker, Witteman, Hafeez, Provencher, Van de Graaf, & Wei, 2015). The legal representative hired for digital assets management. The legal representative must collect all the digital assets from the decedent, analyses and execute these digital assets properly. The legal representative has to evaluate the worth of the digital assets in the market (Rlklegal.com, 2019). 

In the above scenario, Andrew and Samantha have a legal representative of digital assets. If the legal representative discharge from duty from these assets and if either Andrew or Samantha pass away or disabled in any incident. Different challenges can be faced in discharging from the fiduciary duty. The first challenge for the legal representative could be the proper documentation for transferring the assets to Andrew or Samantha after become disable or passing on of them. After the death of any owner of the assets, the legal representative firstly collects the assets of that person, pay debt or tax return file if any and these assets are directed to the decedent. 

The legal representative also has different challenges like the improper transmission of the rights to another partner like Andrew and Samantha if anyone of them become disabling or died. The proper transformation of assets creates the problems for the legal representative because there is a need for proper signing process of the disable or dying person. But that person is unable or has no existence in signing the process.  The other challenges that face of legal representative that the other partner that alive or present in good condition restricts the legal representative don’t pay the tax that creates the problems for the representative (William C. Hussey, 2017). 

So there is a different solution to these challenges the legal representative should adopt to overcome these risks. To overcome the documentation challenge that faces by the legal reprehensive, the legal representative should take initially, all the documents that necessary after the death of the person or after the disability of the person. The person makes a document in which transferable tern and condition mention and the fee of legal representative also mention and sign it from the Andrews and Samantha for proper documentation before the start of an agreement. Through this solution, the legal representative could proper documentation after any incident occur? 

The other issue of proper singing is also overcome with the help of initial documentation. All the term and condition should be mention of transferable the assets to their and proper signing process should be done before the start of an agreement. For overcome the challenges of the tax, the legal representative has to pay the tax before transmission of the assets. For this purpose, an agreement should be a sign in which legal representative have the authority for the investment and paying the tax and debt on their behalf of the person. This agreement should be sign by both Andrew and Samantha before the agreement. The legal representative makes two copies of this agreement. The legal representative should keep one copy for further procedures. Through this solution, the legal representative can overcome the challenges due to the discharging of fiduciary duty(Athey, 2010).

References

Ancker, J. S., Witteman, H. O., Hafeez, B., Provencher, T., Van de Graaf, M., & Wei, E. (2015). The invisible work of personal health information management among people with multiple chronic conditions: qualitative interview study among patients and providers. Journal of medical Internet research, 17(6), e137. 

Athey, J. (2010, February 4). Overcoming Digital Asset Management Challenges. Retrieved from https://www.widen.com/blog/overcoming-digital-asset-management-challenges

Bryan, D., Rafferty, M., & Wigan, D. (2017). Capital unchained: finance, intangible assets and the double life of capital in the offshore world. Review of International Political Economy, 24(1), , 56-86.

Chetty, R., Stepner, M., Abraham, S., Lin, S., Scuderi, B., Turner, N., & Cutler, D. (2016). The association between income and life expectancy in the United States, 2001-2014. Jama, 315(16), , 1750-1766.

Epstein, M. J., & Yuthas, K. (2017). . Measuring and improving social impacts: A guide for nonprofits, companies and impact investors. Routledge.

Fanning, K., & Centers, D. P. (2016). Blockchain and its coming impact on financial services. Journal of Corporate Accounting & Finance, 27(5), , 53-57.

Haraway, D. J., & Goodeve, T. (2018). Modest_Witness@ Second_Millennium. FemaleMan_Meets_OncoMouse: feminism and technoscience. . routledge.

Kohn, N. A., & Koss, C. (2016). Lawyers for Legal Ghosts: The Legality and Ethics of Representing Persons Subject to Guardianship. Wash. L. Rev., 91,, 581.

MacArtney, J. I., Broom, A., Kirby, E., Good, P., Wootton, J., & Adams, J. (2016). Locating care at the end of life: burden, vulnerability, and the practical accomplishment of dying. Sociology of health & illness, 38(3), , 479-492.

Merlinone.com. (2019). What Exactly is a Digital Asset & How to Get the Most Value from Them? Retrieved from https://merlinone.com/what-is-a-digital-asset/

Michels, J. D., & Millard, C. (2019). Mind the Gap: The Status of Digital Files Under Property Law. Queen Mary School of Law Legal Studies Research Paper, (317). 

Parise, S., Guinan, P. J., & Kafka, R. (2016). Solving the crisis of immediacy: How digital technology can transform the customer experience. . Business Horizons, 59(4), , 411-420.

Perzanowski, A. (2017). You Buy It, You Break It: A Comment on Dispersing the Cloud. Wash. & Lee L. Rev., 74, 527. 

Rlklegal.com. (2019). Challenges of Serving as a Nevada Personal Representative. Retrieved from https://www.rlklegal.com/challenges-personal-representative-nevada/

Techterms.com. (2019, August 10). Digital Asset. Retrieved from https://techterms.com/definition/digital_asset

William C. Hussey. (2017). Personal Representatives and Fiduciaries: Executors, Administrators and Trustees and Their Duties. Retrieved from https://www.whiteandwilliams.com/resources-alerts-Personal-Representatives-and-Fiduciaries-Executors-Administrators-and-Trustees-and-Their-Duties.html