I have attached the Market Update for March 2012 as put together by OnePath.
It examines Monetary Policy in Europe, US inflation and the Australian economy for the December quarter.
Also included are updates on the US, UK, China and Japan; Global & Aussie Shares & Commodities.
Click here to read more: Market Update March 2012
Buy-Sell Insurance – What is it all about?
Another expression used for buy-sell insurance is a business will.
Owners of a business enter into a written agreement to plan just what will happen to their respective interest in the business should either die, become disabled or suffer a critical or terminal illness.
The agreement needs to cover off how the ‘exiting’ partner can sell their inerest in the business to the surviving partner and establish a mechanism to fund the transfer.
Why is it Needed?
Most businesses realise that they would suffer in the event of one of their key people becoming totally disbled, suffer a traumatic illnesses, injuries, or even pass away.
Problems may arise with the family of the deceased making demands for the business to be wound up, paid out their share or loans to be repaid. They may even insist on direct control over daily operationsof the business without the necessary skill set.
The estate may be forced into a ‘fire sale’ of their business interest.
If the ill business owner suffers a trauma, much uncertainty can exist over their ability to return to work leaving a heavy burden on the remaining owner, who still needs to profit share with their sick partner.
So what products are available to help out?
Death & Total & Permanent Disability cover are usually easy to insure against and can be included in a buy-sell mechanism.
Trauma insurance is also available but does raise some more complex issues.
How do you work out how much to Insure for?
Each owner needs to vale their share of the business. I.e. A $500k business with 2 owners is likely to be $250k each, assuming equal partnership.
Current Market Value of the business is the usual way for a business to be valued and the level of cover is likely to need an annual review. Not considering appropriate values and a trigger event occuring can cause hardship in working conditions within the business, a deterioration of living standards, decrease in value or even forced closure of the business.
Other methods used to value the business may include an Agreed formula method, usually in consultation with an accountant. Any formula chosen needs to be clearly articulated in the written buy-sell agreement.
Alternately, the owners may choose an Agreed Value for the business that is justifiable, regularly reviewed & updated & arrived at in conjunction with their accountant.
Otherwise, an independant arbitrator can be utilised to arrive at an acceptable market valuation.
Whichever method is chosen, all parties should be in agreeance and advice obtained from appropriate sources for the most suitable method to be used.
Have you ever wondered if you need to consider some form of business insurance for your particular situation? Been pondering the ‘What-ifs?’ Perhaps you could try asking some of the following questions to assess your own Buy-Sell Insurance needs…
Once the needs of your business have been identified, the goal of the insurance is to provide a funding mechanism to help the business survive the loss of a key person.
Shareholders, Employees and Creditors are also able to see that business has demonstrated sound financial management and sensible planning. Feel free to call the team at Wealth Planning Partners for an obligation free assessment of your particular business needs.
Every small business, SME or partnership should consider risk planning and some of the following strategies are definitely worthy of inclusion in the discussion:
So, some of the words sound familiar but you’re not really sure what it’s all about?
A team of professionals should be considered to make sure you ‘get it right.’ Most often, a Financial Adviser, Lawyer and Accountant may need consulting.
The Adviser is there to match the product to the need of the business, the Lawyer to draft the appropriate agreements or Business Will and the Accountant is there to value the business and calculate any costs involved.
So why consider business insurances?
Every business that has two or more owners needs to have a think about what would happen to the business should one of the partners die, become disabled or suffer a traumatic illness.
Most businesses depend on a few key people to produce the results, provide capital and manage the business. If there’s no plan, there’s likely to be significant financial hardship for the surviving owner as well as family members.
This specialised area of insurance needs to help you undertake a detailed process including the needs of the business, amount of insurances necessary, cost factor, prioritisation of needs, and underwriting the cover.
The team at Wealth Planning Partners are ideally situated to assist owners to help assess their unique business needs and establish the appropriate levels of cover required.
Brian Redican is an Economist within Macquarie Research.
In this paper, Brian examines the Reserve Bank of Australia’s decision to cut interest rates
again following its December Board meeting and the impact this is likely to have on the economy in 2012.
Read here for more insights: Economic Commentary
