Introduction Tim booked an appointment to see you two weeks ago. As a result of a life changing event, Tim has requested a limited scope statement of advice concerning his estate plan. Facts as determined at first interview Tim Collins is age 56 and is contemplating marriage to Diane Keating (age 50) whom he met one year ago. Tim has two children from a previous marriage, Linda (age 25) and Jason (age 21). Tim is an equal partner in a successful software game creation business with Andy and Susan. Tim bought into the partnership in 2010 for $100,000 and it has proven a very lucrative business, turning over $1.5million last year. Tim’s share of partnership net income is typically $200,000 pa. The major partnership business asset is the goodwill valued at $1.2million resulting from the individual skills and external networking of the partners. Tim is a joint owner of a new family home with Diane, the house is valued at $1million with no mortgage and each had contributed half the purchase price last month. Their combined jointly owned home contents are valued at $50,000 and Tim’s personal possessions a further $20,000. His Colonial First State Super balance is $300,000, all being a taxed element. There is no insurance nor death benefit nominations in his super. Tim is appointor and trustee of the Collins Family Trust. This discretionary trust was established under the Will of his late wife and currently holds $200,000 of shares and managed investments from the proceeds of her life insurance policy. The funds were invested after previously taking advice from you and have a capital growth of 5% pa and returns income of 2%. Cost base for the investment portfolio is $150,000. Primary beneficiaries are Tim, his children and any future grandchildren. The class of secondary beneficiaries include spouses of primary beneficiaries and any companies with their shares owned by primary beneficiaries. Historically, distributions have only been made to the children. Regarding his children, Linda has recently started practice as a medical specialist while Jason is struggling financially after a workplace accident and is unable to save a deposit to buy a house on his meagre workers compensation payments. Tim had financially supported Linda through her long university education and now he wishes to help Jason with a house deposit. Linda, being a very responsible and considerate person, fully agreed with Tim’s suggestion. In fact, Linda is a trustworthy, reliable and financially literate person who had been helping Tim to manage the family trust investments. Sadly, Jason has never been interested in finances and is a spendthrift. Tim has a current Will created two years ago which leaves all his estate to his children. While Tim would like to provide for Diane, but he would like the inheritance within the trust and as much of his estate as possible to remain in his family bloodline for future generations. Tim wishes to transfer the maximum amount of his assets to his children in the most tax effective manner possible in event of his death. He does have one concern that his son might waste his inheritance but he is confident that Linda is capable of monitoring him. Tim wishes his estate to get full value from his partnership interests by selling out to his partners in the most expedient manner. You reminded Tim that you had previously arranged a business lawyer to execute a buy/sell agreement between the partners using self-owned life insurance. To fund this, Tim took out a life insurance policy with value $400,000 and nominating his estate as beneficiary. The buy/sell agreement specifies that on Tim’s death, his surviving business partners are granted a call option over Tim’s share of business goodwill for zero exercise price. 

Required: Using the SOA template and appendices, recommend strategies to achieve Tim’s needs and objectives.

Answer rating: 100% (QA)

EXECUTIVE SUMMARY Identifying the most acceptable or right beneficiary for a clients retirement plans is one of the most crucial phases in constructing an estate plan This is partly because failing to ... View the full answer