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CASE STUDY 1:Kate and Jared

LO1: Explain the initial and ongoing financial planning advice you provide to clients regarding estate management issues.

(a)   An explanation of your role as an adviser

It is important for the clients to agree on our services before we provide our services to the clients. There should be agreed upon the terms between clients and advisor including the fee for these advisory services. It should be decided at initial meeting and signed by client and advisor before preparation of any advice document. By signing the agreement we make us client to consider the advisor authoritative to steps forward with the preparation of the advice (INITIAL AND ONGOING SERVICE GUIDE).

(b)   The information you will need from the clients and why you need that information

Client information sheet is required to provide the advisor with basic information related to client’s assets, family and liabilities. This information sheet should include names, addresses, SSN, phone numbers, marital information, citizenship names of children and birthdates, deceased children, grandchildren, determine if the clients are going to inherit additional assets, retirement information, existing wills, powers of appointment, buy-sell agreements with their partners, whether their property is community property or separate property,whether there is a marital agreement, who the clients want to act as their executors, trustees, guardians, powers of attorney, etc.

Retirement information is needed because it affects the type of estate planning required.

Asset and liability information are required to find out size of estate (whether it is a taxable estate or it is large enough or problematical for you to deal with it, what kind of assets we are handling, transfer of assets would be easy, complex or need any help from another attorney who has expertise in dealing with special assets such as intellectual property or airplanes, are the assets liquid enough to pay estate taxes and debts or do they require more liquidity?)

This information is needed so that we can spend time in discussing our client’s particular needs in the meeting.

(c)    An explanation of the various steps in the advice process

The various steps in the advice process to our clients are following:

  1. 1.      Communication of our analysis with our client

This step include whatever estate planning we find out that our client required we communicate our analysis with our clients and get them to agree so that we can prepare the suggested plan.

  1. 2.      Engagement letter

Once we suggesta plan of action we prepare then an engagement letter detailing exactly what we will and will not be doing, the charges of our services and due date of our payment.

Conflict of interest letter for couples which is to resolve the conflicts before there is a difficulty is also included in this step.

  1. 3.      Internal checklist

Internal checklist of things we will do and utilize it as a guide to ensure that we have completed that what we agreed upon to complete.

  1. 4.      Drafting docs

Letter to client to review and comment are issued in this step.

  1. 5.      Final meeting with clients

This step includes

  • Execution of documents.
  • Need of legal representative


(d)   The services you will provide

Our adviser network is capable of clearly communication of both initial and ongoing services being offered and a breakdown fees and how payment of these those services iscalculated.

(e)    The costs involved

Our remuneration covers following costs

  • Research
  • Plan preparation
  • Implementation

(f)    What steps can the clients take if they have any concerns about your advice

Once we have presented our advice to our client he can agree to continue with the implementation of all, part or none of our recommendations. Most of the time our client wants tocontinue with all or some of our recommendations and in those cases we make sure that the “Authority to Proceed” is signed with the client before any of the recommendations are implemented.

Alternatively, if the client does not want to implement any of our recommendations we do not need to complete this agreement. (INITIAL AND ONGOING SERVICE GUIDE).


LO2: Evaluate the initial and ongoing estate planning and succession risks faced by clients.


CASE STUDY 2:RurOil Pty Ltd

LO4: Evaluate the range of strategies and potential solutions related to business successionplanning including rural circumstances.

Range of strategies for succession planning is

  • Will
  • Trust
  • Life Insurance

1)    Will

Will is one of the most important documents for the people, who are responsible for the monetary well being of others or who are concerned about what happen to their property when they die.

2)    Trust

A trust is a legal tool that can be used to transfer and manage property. To establish a trust, property is transferred from the settlor (the person who creates the trust) to another person (known as the trustee) with the understanding that the recipient will hold the property or use it in some way as directed by the settlor.

3)    Life Insurance

Life insurance provides three basic functions. The first and foremost purpose is to supply funds to dependent when a parent dies. The second purpose is to provide the funds to fulfill the cash needs to settle an estate. Thirdly it is used as savings for retirement. The two common types of insurance are

  • Term insurance
  • Whole life insurance

It is recommended that Henry, Leonard and Nicholas should use whole life insurance policy. In this policy each partner should pay the premium and name himself as a beneficiary. When a partner dies, the other partners will have enough funds to buy the late partner’s share of the business. Premiums are not tax deductable and income is free from income tax (Tauer & Grossman, April 2002).

LO6: Devise the initial and ongoing advice to clients on policy ownership, policy management and beneficiary nomination.

(i)                 insured amounts

A common rule of thumb for insured amount is six times the yearly income of the family(Tauer & Grossman, April 2002).

. So in this case insured amount should be 6 times of the $110,000 or $660,000 worth of insurance coverage.

TPD also provide the benefit of $700,000 to pay the debt and any medical expense to Leonard.

(ii)               specific product recommendations

Leonard will use liability and life insurance product. Credit insurance product will be used to protect the $270,000 he borrowed from his parent in law. The credit insurance is used to pay the debt and save ones business from bankruptcy.

(iii)             ownershipand beneficiary recommendations

With buyout agreement in insurance, the partnership itself owns the policy and pays the premium and named itself as a beneficiary. It is recommended in ownership and beneficiary that separate provision should be written in buy sell agreement.

Leonard’s wife should own the policy and be the beneficiary in liability and life insurance.Leonard’s parent in law should own the policy and be the beneficiary in credit insurance.

(iv)             justifications for your recommendations

A partner may be ready to collect payments for his share over a number of years at retirement.

It is desirable to settle payment quickly at death.

(v)               disclosures

It is necessary for Leonard to disclose all the material facts with the issuers

(Dagatan, 2011).

LO5: Apply underwriting and claims concepts to client situations.

Assume that a buy-sell arrangement is set up under a trust model and the recommendedlevels of cover are put in place for Henry. Five years later, Henry survives a heart attackbut isforced to leave the business due to ill health. Explain what factors will influence thebuy-sellsettlement and receipt of proceeds by Henry when a claim is made on his trauma policy.

Due to ill-health Henry will be unable to pay further premium and buy sell agreement will be terminated and his partnership will be dissolved. Henry ill health is responsible for his dissolution from the business and he will be retired and he will claim payments for his shares over a number of shares.

LO3: Evaluate the range of strategies and potential solutions to manage clients’ personal risks.

(a) Outline one (1) advantage for Nicholas in arranging life insurance through his SMSF.

Nicholas can benefit from life insurance because Life insurance generates a lump sum of cash to fund his self-managed super fund because Nicholas likes being in control and enjoys playing the share market almost as much as he enjoys outdoor adventure.

(b) Outline your recommendation to Henry for his $500,000 life policy.

Henry should cancel his life policy of $500,000 because currently Samantha is beneficiary of this policy and will take the proceeds when Henry will die. But as Henry wants a full custody of his child graham so he should start up new insurance policy with beneficiary name of his child.

(c) Recommend an insurance product(s) for Leonard to protect the $270,000 he borrowed fromhis parents-in-law. Explain who should own the policy(ies) and be the beneficiary(ies) of thepolicy(ies), and why.

Leonard will use credit insurance product to protect the $270,000 he borrowed from his parent in law. The credit insurance is used to pay the debt and save ones business from bankruptcy. Leonard’s parent in law should own the policy and be the beneficiary (Dagatan, 2011).

LO5: Apply underwriting and claims concepts to client situations.

(d) Assume Leonard suffers an injury at work that renders him unable to work for a year.A workers compensation policy pays him the equivalent of $70,000 p.a. How much wouldhis income protection policy pay? Explain your answer. Show all workings

Income protection policy will pay Leonard stipend each month to pay medical bills beside from paying $70,000 p.a.

(e) Leonard’s injury results in one of his arms being amputated a few months later.Explain his claim options and outcomes, showing any relevant calculations.

Leonard will claim his total permanent disablement insurance of $70,000.


CASE STUDY 3: Harry’s Estate

LO2: Evaluate the initial and ongoing estate planning and succession risks faced by clients

(a) Provide a comprehensive overview of the issues and risks that could potentially impacthimand his beneficiaries.

Risks faced by harry and his beneficiaries are:

  • Conflict of interest between the beneficiaries could arise. (Business Succession Planning with Key Person Coverage and Buy-Sell Agreements).
  • Key personnel risk is an important risk for harry and his beneficiary. If a key person in the business dies the income may suffer because that person plays an important role in generating the profit and had strong relationship with important contacts.
  • A lack of business protection for major shareholders is another risk. The late beneficiaries may want to become involved in the business and this could be extremely upsetting.
  • Sudden illness or death of the owner
  • Unplanned tax liabilities
  • Liquidity crisis
  • Family crisis or disputes
  • Natural or manmade disasters
  • Departure of key management
  • Partnership of harry with his wife is another issue because specific provision is not made. When one partner dies, the partnership will end up on the death of the partner. When one partner dies then deceased partner’s estate becomes entitled to their share of the business. The other partner may have to pay the deceased partner’s estate the value of the deceased’s share.


LO3: Evaluate the range of strategies and potential solutions to manage clients’ personalrisks

Risk is an unavoidable part of the business landscape but Management of risk leaves doors open for the company and the family when succession planning strikes high gear. So the best insurance is risk planning with the ongoing objective of sustaining developed value and maximizing the flexibility and potential of the business.

Strategies to mitigate the personal risks which we recommend to our client are:

  • Business sustainability

This strategy ensures that human resource process and staffing fulfill current and projected requirements. Business plans and strategies forecast all possible business scenarios to make sure sufficient liquidity.

  • Family protection

There should be family protection and this protection can be done by keeping wills and other significant documentation updated to account for evolving family circumstances. There should be tax planning both now and through an eventual transition of the property and businesses to minimize tax liabilities and maximize liquidity.

  • Dispute resolution

Harry should develop contingency plan to account for rational changes in family interrelationships, such as divorce or disputes between him and his wife and his siblings.

  • Disaster planning

Fora broad range of potential disasters there should be maintenance of plans and documents.

(Anon, Securing your way to succession).

LO4: Evaluate the range of strategies and potential solutions related to business successionplanning including rural circumstances.

(b) Explore the potential solutions and alternatives available to him

Potential solutions and alternatives available to Harry are:

  • He should set up self managed super fund (SMSF).
  • He should go for insurance to protect all his property.
  • He should build trust to transfer and manage property for his family.
  • He should have life insurance and total and permanent disablement (TPD) in case any thing unexpected happens to him although he is healthy now.
  • Harry should build and update his will because will is one of the most important documents for the people, who are responsible for the monetary well being of others or who are concerned about what happen to their property when they die.

 (c) Include recommendations of solutions and alternatives

  • Harry and his family members know in advance how their business will be valued and what will betheir share.  This know how decreases the risk of legal actions that can disturb the underlying business as current and former owners fight over the pay-out amount.
  • If harry dies there should be the plan that exclude the probability of his spouse or children deciding against the desires of the continuing owners and to become an active partner of the business rather than taking the pay-out.
  • It should also be ensured that Harry’s spouse or family should not take their legal rights to claim a share of the business profits without having to work in the business and without his will.
  • Spouse, family or estate of harry should be prohibited from selling the share of the business to an unwanted third partner.
  • It must be confirmed that power of the business and its assets should not be limited due to legal complexity created by Harry’s ex-wife.
  • Security should be provided to all business members, staff and creditors.
  • There should be a help for continuing owners to afford to keep the business running, cover loss of profitability and business momentum.
  • Loans or leases of Harry’s business will be immediately callable by the lender if harry dies. So succession plan confirms that debt or loan can be retired by the continuing owners of his business.

(Anon, Business Succession Planning).

(d) Explain why your recommendations are suitable

The recommendation is suitable because each family member knows the share of Harry in business to avoid from any legal issues. Secondly will of the harry will be helpful in deciding who will run the business and how much share everyone in his family will get after his death to avoid family disputes and to avoid any third person take his business.

(e) Provide an SMSF strategy and reasons for the structure, membership and assets.

SMSF strategy should considers

  • Risk and return

Therisks and expected return associated with your investment

  • Diversification

Minimizing your investment risk by diversifying your portfolio and invest in different classes.

  • Liquidity

SMSF’s ability to convert assets to cash to fulfill fund expenses

  • Liability

Your SMSF’s capability to pay members’ benefits when they retire and other liabilities

He should generate SMSF fund of worth $1.4 million for himself and for his wife $1.1 million.

This SMSF fund will be generated to fulfill future financial needs.

(Anon, Superannuation).


Anon. (n.d.). BUSINESS SUCCESSION FAC TSHEET. NW Brown and Company Limited .

Anon. (n.d.). Business Succession Planning. baillieuholst .

Anon. (n.d.). Securing your way to succession. How private companies can address business and family risks deloitte .


Anon. (n.d.). Superannuation. Self-managed Super Funds Strategies .


Business Succession Planning with Key Person Coverage and Buy-Sell Agreements. (n.d.). Business succession planning .

Dagatan, R. (2011). Top 10 Insurance Products that Individuals Must Keep.


Tauer, L. W., & Grossman, D. A. (April 2002). Estate and Succession Planning for Small Business Owners.

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