Wealth Protection: simple steps to protect what’s important to you

1. Wealth Protection: simple steps to protect what’s important to you

2. General advice warning • This presentation has been prepared by IOOF Investment Management Limited (IIML), ABN 53 006 695 021, AFS Licence No. 230524 (IIML).  IIML's contact details can be found on www.ioof.com.au. Our Head Office address is Level 29, 303 Collins Street Melbourne Vic  3000. • Information contained within this presentation is general in nature only and does not take into account your personal situation. You should consider whether the information is appropriate to your situation, and where appropriate, seek professional advice from an adviser. • All assumptions and examples are based current laws (current as at July2006) and the continuance of these laws and IOOF’s interpretation of them.  IOOF does not undertake to notify its recipients changes in the law or its interpretation. All examples are for illustration purposes only and may not apply to your circumstances.

3. Why insurance is so…. important • Heart disease is the leading cause of death in Australia, accounting for 50,797 deaths, or 40% of total deaths(1). • Each year approximately 350,000 new cancer cases are diagnosed(2). • One in every 3 males and one in every 4 females is likely to suffer some form of cancer in the first 75 years of life(1). • One in every 11 women is likely to develop breast cancer(2). • Stroke accounted for 11,982 deaths and remains the leading cause of long-term disability among adults(3).

4. Why insurance is so…. important • For a 40 year old, the risk of having coronary heart disease is one-in-four for men, and one-in-three for women • Every working Australian has a 1 in 3 chance of becoming disabled for more than 3 months before turning age 65 Sources: • 1 Australian Institute of Health and Welfare, Australia’s Health 2002 • 2 Australian Institute of Health and Welfare, Cancer in Australia 1998 • 3 National Heart Foundation Statistics, Australian Facts 2001 Highlights • 4 Calculations based on data from the Institute of Actuaries of Australia (2000). Interim Report of the Disability Committee. IAAust: Sydney

5. Protect what is important to you • Insurance may be used for both personal and business purposes. • Protection against a loss of income, to repay debts, or to provide for dependants. • Insurance needs depends on each individual

6. Strategies at a Glance • Eliminate debt on death or disability • Caring for your family when you are no longer able to • Don’t underestimate the value of the homemaker • A super alternative! • Your income - your most important asset • Keep your business running • Protect what’s most important to your business • The Business ‘Will’ • Estate equalisation

7. Eliminate debt on Death or Disability • Why? • Unfortunately, when we die, the debts do not die with us. • Clearing your debts means the asset is debt free and the full value can be passed onto your dependants. • The cost of implementing a protection strategy is only a fraction of what you and your family may otherwise stand to lose.

8. Eliminate debt on Death or Disability • How? • Calculate your total debts - this is a good starting point to identify the level of insurance cover required to clear debts. • Determine events to be covered (death, disability, sickness). • Most common is death, however you may also want to be covered for other events such as total & permanent disability and/or serious medical conditions

9. Eliminate debt on Death or Disability Tips & Traps • You may be able to nominate a beneficiary to receive benefits payable on your death • In conjunction with a professional adviser, you should consider your entire estate planning position, including your Will • Consider policies that allow you to increase level of cover without requiring further medical evidence • For certain people, there may be advantages in having your insurance through super • Under-insurance can present a serious problem - always ensure level of insurance are adequate

10. Caring for your family when you are no longer able to • Why? • You can provide a more financially secure environment for your family • You can relax knowing you have taken an important step in protecting your family’s financial future • The invested lump sum can be used as the primary source of generating an income • Ensure your family can maintain their standard of living

11. Don’t underestimate the value of the home-maker • Tips & Traps • Selection of life and TPD insurances for a non-working spouse may have tax advantages for the breadwinner if taken through a super fund. • Don’t forget to also take into consideration any outstanding loans. • The insurance can be owned by the working partner, thus ensuring complete control over the financial situation. • * Allocated Pension factors from SIS Regulations Sch 1.

12. A super alternative • Why? • If self-employed, or you have a spouse who is on low income, you can save on the cost of life insurance, in some cases by almost 50%! • The amount saved via tax deductions and offsets can be used to increase level of insurance • Tax deduction may mean lower tax bracket

13. Keep your business running • Tips & Traps • Premiums for business expenses are tax deductible, and benefits received will be assessable as income to either the business or the business owner. • Regular reviews of your insurance needs are vital to ensure your cover keeps up with the changing needs of your business. • You should consider insurance policies which allow you to automatically increase your cover in line with the CPI

14. Protect what’s most important to your business • Why? • The loss of key staff member can have substantial impact on profitability, operation management and the goodwill of your business. • Lump sum payments can help to: • offset a drop in profits in the event of the loss or disability of a key person • provide inducement to find and attract a suitable replacement • repay a called in loan • protect business from a forced sale • continue your business expansion or development Tax Free as withinPension RBL

15. Protect what’s most important to your business Tips & Traps • It is essential to identify the key person or people whose loss would directly impact your bottom line. • Revenue purpose policies (taken out to protect against a loss of profits) are tax deductible and benefits received are assessable as income - consider increasing the level of insurance to anticipate taxes. • Proper ownership of the insurance policy is vital. • Ensure your insurance cover is updated in line with the (increasing) value of the key person to your business. Not RBL tested $6,000 threshold 15 % rebate

16. The business will • Why? • You can maintain control over your business if one of your business partners unexpectedly dies or is permanently disabled. • A funded Buy Sell agreement can provide immediate funds to enable the purchase of the deceased’s share of the business. • Provides peace of mind for the continuing partners/owners/shareholders. • Can reduce the chance of disputes between continuing business owners and a deceased owner’s estate Tax Free as withinPension RBL

17. The business will • With a funded Buy Sell Agreement • The solicitor suggested that each business partner own the insurance policy on the other's life. • On Bill’s death the insurance money is paid to Alex. • Backed by the Buy Sell agreement, Alex is able to buy Bill’s share of the business from his estate. • Alex can gain full control of the business. • Lynn as beneficiary of Bill’s estate receives the full value of Bill’s share of the business. • Without a Buy Sell Agreement • Bill’s share of the business was left to his wife, Lynn. • Lynn was not interested in helping to run the business and did not know anything about engineering. • Alex did not have the funds to buy her share of the business. • Alex is trapped in the situation where he cannot afford to buy Lynn out, he is doing 100% of the work yet only receiving 50% of the profits Tax Free as withinPension RBL

18. The business will • Tips & Traps • Take the time to calculate the value of your business and contingency plans if something should happen to one of your business partners. • As the Buy Sell agreement is the document which affects your legal rights, it should always be prepared by a solicitor. • Ownership of insurance policies to fund the Buy Sell agreement should be recommended by a solicitor/ financial planner • It is prudent to make sure all family members are aware of the arrangements made.

19. Estate Equalisation • Why? • This strategy is useful when planning for the distribution of estate and family business. • It is designed to facilitate your wishes being carried out through your Will. • Can help prevent family rows over inheritance. • Reduce the chance for your Will to be contested in court. • Protect the value of your estate since assets do not have to be sold

20. Estate Equalisation • How? • Estate equalisation is specifically concerned with the equitable passing of a family business to the next generation. • Estate equalisation is the process when one asset (the family business) is bequeathed to one child and an asset of equivalent value is bequeathed to the other(s). • Often the only method of providing this “asset of equivalent value” is through life insurance

21. Estate Equalisation • Case study • Ted, a widower and third generation farmer has groomed his son, Stephen, to take over the farm. • Ted suffers a stroke and dies a few days later. • In his Will he has left the farm to Stephen, and realising that this was unfair to his two daughters, he had also taken out life insurance to provide for them.

22. Estate Equalisation Ted Stephen Carol Laurel Receives family farm (valued at $1.2m including current $294,000 capital gains tax liability Receives insurance proceeds equivalent to ‘net’ value of the farm ($906,000) Receives insurance proceeds equivalent to ‘net’ value of the farm ($906,000)

23. Estate Equalisation • Tips & Traps • Family Maintenance provisions vary in each state. You should get legal advice in relation to the provisions in your State. • To ensure equal provisions for all beneficiaries, take into consideration any uncrystallised capital gains tax liability that may reside in the business passed onto the child(ren) that will result in a lower business value. • Comprehensive and professional estate planning advice should also be obtained, acted upon and regularly reviewed

24. Disclaimer • IOOF Investment Management Limited (IIML) , its officers, employees, directors and agents believe that the information in this  presentation  is correct at the time of compilation, but no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors or omissions (including responsibility to any person by reason of negligence) is accepted by IIML, its officers, employees, directors or agents. • IIML is a member of the IOOF Group. IMML is the issuer of many financial products, the Responsible Entity of certain managed investments, the Trustee of various superannuation funds and the Operator/Custodian of a range of Investor Directed Portfolio Services.  IOOF Limited (ABN 21 087 649 625), another company in the IOOF Group is the issuer of other IOOF Group products. • Where you proceed with an investment in an IOOF product, IOOF  may  receive remuneration via fees for that product.  If you seek personal financial advice from a financial adviser, they may receive remuneration via commission payments from IIML.  Details of remuneration will be detailed within a Statement of Advice where personal advice is provided, or can be provided upon request.

25. Questions?