Friday September 3, 2010

Director's Fore

Welcome to our third opportunity this year to provide you with what we hope are some interesting and relevant articles to help you better protect and enhance your financial world.

At Lakeside Consultants we are working hard to expand our service offering and the value that we bring to our relationship with you.

One recent example is that of ‘Financial World Mapping’. We now have a program that can sort your entire financial world into the one place. Have you ever been frustrated with trying to put your hands on those important documents when you need them? Things like Wills, Trust Deeds, Titles and Insurance Policies can now all be stored electronically in the one place – at your fingertips.

Lakeside Legal, which was set up to properly handle the Estate Planning needs of our clients, continues to flourish. All too often we have clients coming to us thinking they have the right solution for their Wills – however, sadly in the majority of situations, this is not the case. This is a highly specialised field where much care needs to be taken. I really object to clients’ assets being unnecessarily exposed and tax issues compounding because of careless advice in this arena.
We are happy to refer you to the Lakeside Legal team to review your existing Wills and let you know where they stand. Please take this opportunity to revisit yours.

All the best for the start of this new financial year – may you and yours enjoy good health, wealth and happiness.

Best Wishes

Ross Hennig
 

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Legal

 Who will control your SMSF if you are incapacitated?

An important element of an SMSF, as the title suggests, is that the fund be indeed 'self managed', and therefore the law requires that all members of an SMSF must be either individual trustees of the SMSF or directors of the SMSF's corporate trustee. However, an exception allows for a member's legal personal representative — who holds an enduring power of attorney in respect of the member — to be a trustee of the SMSF in place of the member or the director of a corporate trustee.

This means that you can now appoint a person to act as a trustee or a director of a corporate trustee of your SMSF to cover the position should you become unable to act due to mental incapacity at any time. This will ensure that there will be someone to represent your interests in this situation. If you do not have a person who is empowered to act in respect to your SMSF, it may mean that no decisions can be made in respect to the management of the fund, which could be a huge risk. You need to consider carefully who the person or persons you nominate for this role and you should have this in place even if it is a two member fund and your partner is the other member as, unless you have authorized them to act on your behalf specifically in respect to your superannuation affairs, they will not be able to do so.

You may not be aware that there is a tax imposed on superannuation death benefits paid to non tax dependants. If you have adult children who will receive a share of your superannuation death benefits tax of 16.5% or more could be levied on the taxable component of funds to be paid to them after your death (and that could be $33,000 on $200,000 for example). If you have a Power of Attorney in place which specifically authorizes a person to manage your superannuation affairs, then it is possible that should you become incapacitated and unlikely to recover, arrangements could be made that may mean that this tax can be avoided.

Please call Suzanne Jones or Doug Patrick at Lakeside Legal on 9510 0788 to discuss your requirements.

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Finance

FIXED RATES – when is the best time to fix?

Are you concerned with the variable rate and if it will increase significantly?

Are you considering a fixed rate at the moment, trying to judge the market, asking yourself “when is a good time to fix?”

What is the cost of fixing your loan?

Here are some points to consider when deciding whether to ‘fix’ or remain on ‘variable’ rates:

1) What is the rate difference between fixed and variable? A significant rate variation will affect your cash flow should you choose to fix your rate.
2) Is your loan an investment or home loan?
3) Are you thinking of selling your property?
4) Do you need to do any renovations, construction or subdividing?
5) Are you expecting any lump sum monies to come your way, an inheritance or proceeds from a sale?
6) Is starting a family a consideration, could you be dropping to one income?

These factors could assist with any recommendation, whether you fix or leave as variable.

In general the fixed rate loans have no flexibility or capacity for offset accounts, so it is vital that you not restrict your opportunity to grow wealth by adding unnecessary limitations.

If you would like to discuss your current loan circumstances and/or future home loan needs and goals please call Troy Starcevich at Lakeside Consultants on 03 9510 0788.

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Insurance

NEW PRODUCT – Level 70 Life Cover

A new product has been released in the market recently and it’s caught our attention!
It actually gives something back that could almost make the cost of the policy free!

Here’s how it works –

* It’s an Insurance policy with a LEVEL Premium to age 70
* Minimum Life Insurance cover = $250,000
* Take out a Level 70 Policy AND keep for minimum 10 years and the Insurer will guarantee you a free $15,000 funeral benefit

No big deal, BUT read on………

For example -

1) A 39 year old male’s premium for $250,000 Life Cover is $507.91 per annum - multiply this by 10 years = $5,079.10. This is substantially LESS than the $15,000 the Insurer is GUARANTEEING to pay you.
2) You have a minimum cover of $250,000 for 10 years – which is essentially free, given the funeral benefit that is payable.
3) If this policy is Super owned, you are able to pay premiums from Superannuation monies, which would not affect cash flow .
4) BEST THING – you are undertaking a transaction with an insurance company where you are GUARANTEED to WIN (unless the rates significantly increase, OR you don’t keep the policy in force for 10 years).

In 20 years of insurance experience we have never come across a policy where you can benefit substantially, categorically.

Things to note -
* You must keep the policy IN FORCE for 10 years to be guaranteed the Funeral Benefit of $15,000.
* Rates are guaranteed until 2015.

Insurer underwriting applies – please check with one of our Advisors on 9510 0788 on how to apply, or if you would like more information .

Daffodil Day was on 27th August. That brought to mind the importance of Trauma (Critical illness) Insurance and Income Protection.
Facts:
* An estimated 13 new cases of cancer will be diagnosed every hour in Australia in 2010.
* 1 in 2 men and 1 in 3 women will be diagnosed with cancer before the age of 85
* More than 60% of cancer patients will survive more than 5 years after diagnosis
* The most common cancers in Australia are prostate, bowel, breast, melanoma and lung cancer
(Resourced from: Tower Australia, 2010)
 

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Financial Planning

Super Splitting - Why it is more important than ever

One key announcement as part of the Government’s response to the Henry Tax Review recommendations has reinstated the importance of Superannuation splitting.

The Government has announced an extension of the cap on pre-tax contributions of $50,000 for some clients over 50 to apply beyond 30 June 2012. But there is a catch. Your superannuation account balance (including pension interests) must be less than $500,000.

Couples could therefore consider using Superannuation splitting to ensure they have access to the higher concessional contribution cap, past age 50.

Super splitting will be increasingly effective if:

* Superannuation balance below $500,000; and
* There is a need to make pre-tax contributions (including both salary sacrifice and Employer Superannuation Guarantee contributions) above the standard concessional contribution cap of $25,000; and
* Superannuation owners are married or in a de-facto relationship.

Accessing the higher concessional contribution cap past age 50 will provide the opportunity to avoid excessive contributions and provide a significant boost to the tax-effectiveness of a transition to retirement strategy.

It may be the case that you do not use the whole $50,000 contribution cap. However, it is likely to be increasingly useful as your capacity to salary sacrifice is reduced by increased superannuation guarantee contribution (up to 12 per cent by 2019/2020). This alone is enough to make using Super splitting worthwhile if you are looking for greater flexibility when planning for your retirement.

Summary
Super splitting may become a powerful tool to access the higher concessional contribution cap in order to maximise the tax effectiveness of salary sacrificing into superannuation over age 50. It may not seem relevant to some of you at this moment, however failing to plan ahead could have a negative impact on achieving your wealth accumulation objectives.

Call one of our experienced Financial Planners on 9510-0788 for further information and to discuss YOUR options.

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