Attention Business Owners……

If you own a percentage shareholding of any business, have you a plan in place in the event you pass away to ensure your estate or beneficiaries will get the full value of your shareholding? Can your company afford to compensate your estate/family or buy back this shareholding?

Shareholder/Directorship Protection is an arrangement between company directors, which allows for a deceased’s directors share of a company to be bought by the remaining Directors.

What are the advantages of Directorship Protection?

1. In the event of a director dying, the remaining directors participating in the agreement retain control and ownership of the company as they buy back the deceased director’s share.

2. The next of kin are bought out of the company by the remaining directors at market value and can therefore realise the cash value of the deceased’s share shortly after death.

3. The company/directors do not have to find the funds to cover the cost of the deceased shareholding.

4. It is a relatively straight forward shareholders plan.

How does this work?

There are two main parts to this arrangement:

1. The Legal Agreement between the directors to regulate the position on death.

2. The Life Assurance on each director’s life to provide the funds to the remaining directors to make a payment to the deceased director’s next of kin.

The solution outlined above can be achieved in one of two ways:

  • Personal Shareholder Protection - The shareholders enter into a personal agreement with each other to "buy out" a deceased shareholder's shares in the event of his/her death. To provide the funds to fulfil their personal obligation under the agreement, each shareholder personally effects life assurance cover which is payable to the surviving shareholders on his/her death. The proceeds of the life assurance policy are used to "buy out" the deceased's next of kin in line with the agreement.

  • Corporate Shareholder Protection - In this case the company enters into a put / call agreement with each of its shareholders to buy back shares from their personal representatives in the event of death. The company takes out a life assurance policy on each shareholder, to provide funds to enable the company to fulfil its obligation under the agreement. In the event of death, the proceeds of the life assurance policy are payable to the company, to be used to buy back shares from the deceased's next of kin.

Life Insurance vs Death in Service Benefit

Life insurance pays out a lump sum if you die or suffer a critical illness (depending on the type of cover you hold), helping your dependents to cope financially.

Death in service is similar. Death in service may be offered by companies as part of an employee’s benefits package. It’s paid out as a tax-free lump sum if you’re employed by the company (i.e. on the payroll) at the time of your death. Your employer will be able to explain how this benefit is calculated.

Some people may be unsure if they have death in service, while others may not know if it would be enough for their family to live on. Also, those who have this benefit may not realise they could gain from taking out life insurance too.

Death in service benefit is not taxable, but it can vary (though it is typically two to four times your annual salary). It can be linked to a company’s pension scheme, and you’ll need to be signed up to it to qualify for the benefit. Be mindful that tax is based on your personal circumstances and may change in the future.

The pay-out of a life insurance policy depends on the cover you have – meaning you have the freedom to decide how much your beneficiaries get, not your employer. While a life insurance pay-out is also free of income tax or capital gains tax, bear in mind it could form part of your ‘estate’ – your overall net worth – so may incur inheritance tax.

With death in service there’s no annual or monthly premium to pay – you just need to be employed to benefit from it. You’re required to make regular payments for life insurance, but your family or named beneficiaries could receive a higher pay-out in the event of your death.

It’s also worth remembering that if you leave the company where death in service is offered, you’ll no longer be covered. You are unable to assign your death in service benefit to cover your mortgage, but your beneficiaries can decide to use the money towards repaying a mortgage.

Most people who are not members of a death in service company plan can take out their own policy. The reason you might do this is because you can get tax relief (like your pension) on the premium cost of the life cover. So, if for example, the cost of your cover was €100 per month and you were on the higher rate of tax you may receive up to €40 a month tax credit.

Start Protecting Your Child’s Future

Ever since your children entered the world, you’ve done everything you can to protect them, giving them endless love and attention.

But what about protecting your little ones’ financial futures? As a good friend quoted, ‘the days are long but the years are short’. So the earlier you start taking steps to securing a happy financial future for your kids, the better.

Life insurance

If life insurance has never been a priority, now that you have a family, it could be the ideal time to make it one. Having cover in place will help protect your loved ones if something were to happen and they were no longer able to rely on your income.

Similar to other types of cover, you can tailor your life insurance to suit your needs, choosing from different levels and a range of optional extras.

For instance, critical illness cover can be added to your policy so that if you were diagnosed with an illness covered by the plan, you will receive a cash sum. This money can help to relieve the financial worries associated with critical illnesses, covering time spent off work, ensuring you can still pay household bills, and funding specialist treatment.

And what would happen if you were forced to take a prolonged period of time off work? Adding income protection to your life insurance policy would replace some of your earnings if you can’t work.

Make a will

Not the most pleasant task – but if anything were to happen to you, you want to be certain your family is provided for and cared for by the people you would choose.

You can either write a will yourself, hire a solicitor or use a will-writing service; make sure you research each option thoroughly before deciding, as they all have pros and potential drawbacks.

Part of the process involves you appointing an executor, who will be responsible for carrying out the instructions left in your will. Executors need to be aged over 18 and can be listed in your will, so it could be your spouse or family member.

Savings options

Driving lessons, college, weddings may all seem like a world away, but planning how to build a savings pot to help fund your children’s future will give you a head start.

With the aid of our new financial planning tool we can highlight how best to use your money in order to plan for you and your family’s future. This tool processes all your incomings and outgoings to give a clear picture of where you stand financially, guiding you to make the correct decisions.

Life Check-Up

When you apply for life insurance, you may be asked to complete a medical exam. While the life company will pay for this medical exam, it is also worthwhile booking a medical check-up whether you are applying for insurance or not.

What does a health check-up test for?

The medical check-up determines your risk of developing a range of health problems, such as heart disease, kidney disease, stroke and diabetes. It also provides you with an opportunity to gain practical advice on how to minimise the risk of developing these issues.

Unfortunately, leading a healthy lifestyle doesn’t mean you won’t develop health issues, though it will limit your risk. A medical check-up can flag problems before they develop into something more serious.

What to expect from a medical health check

A health check generally lasts around 20-30 minutes and is usually carried out by a nurse, but it could be another healthcare professional. You shouldn’t need to prepare anything in advance, but it’s always worth asking the health centre you’re booked in with.

During the check-up, you may be asked: 

  • If close relatives have had the illnesses you’re being assessed for

  • If you smoke and how much

  • If you drink alcohol and how much

  • What your typical diet is like

  • How much exercise you do                                                                                                                          

After this, you’ll undergo a series of simple tests and measurements, including:

  • Your weight and height to determine your body mass index (BMI) and your waist may be measured

  • Your blood pressure will be taken using a cuff on your upper arm

  • A small sample of blood will be taken from your finger to check cholesterol and possibly blood sugar level

In most cases, you’ll receive the results immediately. You’ll be given a risk score (the higher the score the more likely you are to develop one of the illnesses) and will receive advice on how to adapt your lifestyle to lower risk.

What are the benefits of a medical check-up?

According to the Irish Heart Foundation, in 2016 more than 9,000 people in Ireland lost their lives to cardiovascular disease with almost half dying from heart disease.

The Irish Heart Foundation argues that in many cases, heart disease and stroke are preventable. Lifestyle changes such as regular exercise, having a healthy diet and stopping smoking, can have a positive impact when treating diabetes, high blood pressure and cholesterol.

What now?

Choosing the right life insurance cover for you and those closest to you is important and will provide many great benefits and peace of mind. Don’t let the fear of a medical check-up hinder your decision.

Spring Clean Those Finances!

We all strive to be ready for any financial scenario which may occur during our lifetime...and to possibly win the lotto! There are always bills to be paid and surprise expenditure that will pop up every few months e.g. car repairs, health bills, house maintenance etc.

In the words of the mantra I like to sometimes use, Fail to Prepare or Prepare to Fail! The best we can do is to be ready and informed. So in saying that, here are a few tips to help you along your financial journey.

  • Spending : Know what you are spending your money on and where it is going. A budget can be a very useful tool for seeing where you need to possibly make changes as a result of logging and assessing all of your expenditure. Shopping around for a competitive price when it comes to life assurance/mortgage protection, car/house insurance and groceries is also a good practice for knowing that you are not spending more than is necessary.

  • Savings : Short Term and Long Term. Saving an allocated amount each month, be it in the credit union, a pension or a personal savings plan is a very good habit to keep. In the short term, you may have unexpected bills that will come along when you least expect them. So having some type of emergency fund can be very reassuring. In the Long Term, you may be looking forwards to having a retirement pot and to finally reap the rewards of your hard-earned money.

  • Protection : Whether you are employed/self-employed, have bought or rent a home or have a family/dependents, it is highly essential to make sure you protect yourself. There are many variations of life assurance, serious illness cover and income protection available. I am just a phone call or email away and can explain the benefits and costs for any of these products.

  • Debt : Save on paying high interest charges by clearing any credit card debt monthly. Using a debit card rather than a credit card can also be a better way to manage your day to day expenses and will stop credit card bills building up.

  • Be Sensible : Be informed when making financial decisions. Always seek guidance where investments are concerned and be ready for the long game. The markets can go up but you also need to be ready for the down. This will inevitably happen over the lifetime of any investment and a minimum of 6-7 years will give a good reflection of how your fund is performing.

You’ve worked for your money, make sure your money is working for you!

Although I believe commissions will remain part of the process on one level, I have been working on a new financial planning service which I will be offering to new clients over the coming months. Many existing clients have found this a very useful and concise tool in setting out a clear plan for their future. I believe this is a prudent exercise, wanting to know how our future will look and getting the most from our money.

Do you ever imagine what you would like to do in retirement or when your mortgage is paid off or even to retire earlier than you thought?

Some questions and comments I regularly hear when I meet people for the first time are:

  • I know I should save into a pension, but can you explain why it’s better than saving into a savings plan?

  • What will my pension pay me at retirement?

  • I am self-employed, can I protect my income if I am unable to work due to illness or injury?

  • I have pensions from a previous employment, can I get access to them on any level or what can I do with them?

  • I think I have mortgage cover, but I do not know what it does, can you explain it to me?

  • Should I pay more towards my mortgage and if so, what change will it have on my term and interest payments?

  • I don’t understand how a life assurance policy payment affects me if my partner dies.

  • What is the difference between Leaving Service Options and Retirement Options?

Should a person wish to avail of this financial planning service, it involves a simple 3-step process:

  1. You will receive a link to a budget planner where you fill in your personal and financial details. This is a comprehensive budget and will take up to an hour to complete.

  2. You submit the planner and I review and prepare recommendations and advice.

  3. We meet to discuss the results of your budget, your priorities and how you can better manage your money from a savings / pension / life assurance perspective.

Following this, you decide what step to take next. Either way this process will at the very least be an education to anybody who has no current strategy for retirement or savings needs.

Smokers Pay Way Higher for Life Cover

Quitting smoking can pay off in more ways than one... as ex-smokers stand to save substantially on life cover.

Smokers can pay twice as much for life insurance than their non-smoking counterparts, according to figures released today by a leading protection specialist, though people may not be aware of just how sizeable the difference between the premium costs.

At this time of the year when people are challenging themselves to kick the habit as part of their new year’s resolutions, the cost comparison may be the encouragement they need to keep going.

Smoking in Ireland – The Statistics

The Healthy Ireland Survey 2018 results showed that smoking rates are the highest among the 25-34 years group. For people in this demographic the financial implication that being a smoker has on the cost of their life assurance will add up. A smoker who will turn 35 on their next birthday can expect to pay over €5,700 more than a non-smoker for €300,000 worth of Life cover over a 25 year term.

Another example; a smoker turning 45 on their next birthday will pay over €16,600 more in premiums than their non-smoking counterpart for €300,000 worth of Level Term Life Cover over a 25 year term.

Sample Cost Analysis

Level Term Assurance Life Cover

Age      Term (year)       Monthly premium non-smoker        Monthly premium smoker     Savings over 25 year term

35                25                                       €24.11                                                     €43.37                                    €5,778.00

45                25                                       €53.01                                                    €108.53                                  €16,656.00

So for anyone who gave up smoking at the start of 2018 and are purchasing cover for the first time; they can expect to pay less than they would have one year ago. For individuals with protection cover already in place who have managed to give up smoking for more than 12 months, they can potentially avail of a reduction in the cost of their premiums.

Most Life companies would classify a non-smoker based upon total abstinence from any tobacco products in the last 12 months, including the use of e-cigarettes and nicotine replacement products such as patches or chewing gum.

Trump to the left of us, Brexit to the right…stuck in the middle with EU

There has been a lot of uncertainty surrounding Brexit and what impact this will have on people’s investments and pensions. A question I have been asked recently by clients, is whether they should move their investments to a safer fund or stick with their current strategy. At any given time, you need to accept the value of your investment when reviewing it. What you wish it was worth is not as important as taking a cold hard look at your circumstances for how you wish to strategize your investment going forward.

There are some things I would suggest you consider before giving any sort of advice:

  •  How long do you have before you will most likely need to mature your investment?

  • How much of your money can you afford to lose?

  • How will you react if you lose a significant value of your fund? Will you cash in your investment or move to a safer option or remain committed to your fund strategy?

  • What portion of your fund/investment would you call significant?

What has this got to do with Brexit? It has everything and nothing to do with it. I would not recommend that people try to time the market in terms of getting in and out of investments. Brexit may be the most immediate danger to the stability of the market, but it won’t be the only one over the coming years. So, if a person learns to see their investment as something that will go through good and bad periods, they will improve their chances of making the right decisions at different times.

One of the important things to note, is how long you plan to invest your funds. The longer you intend on investing your money the potentially greater the risk you can afford to take. The next thing is trying to work out how comfortable you will be with these fluctuations and this will help determine how much risk you can take.

So, what will happen with Brexit? Well, nobody really knows. Perhaps it will be a “Hard Brexit”. Maybe there will be a referendum or an election which will change the direction the UK is taking. What impact this has on investments is anybody’s guess. One would not expect that Brexit should lead to a worldwide recession like the crisis of 2007/08.