Requirements:

1. I need Capital Needs Analysis for Javier and Maya.
2. What type of life insurance* would be recommendable for each?

*Note: Be specific on the type and any additional features required.

There is a CNA template to be used

Background Information

Javier and Maya Collins have been referred to you by their accountant for a risk management assessment. They live in Waterloo, Ontario. Javier is an Engineer for an automotive company. In this position he earns $152,000 per year. His group life insurance Benefit is two times salary. Maya has a Master of Social Work and is employed on a part-time basis at a local not-for-profit agency. She earns $40,000 per year. She has group life insurance of one and a half times her salary plus another $25,000 through Javier's group plan.

Biographical Information

Javier:

• Age 48
• Divorced -
  • 2 children from previous marriage (Nick currently age 16 & Arthur currently age 13),
  • $0 alimony, $550 per child per month child support
  • Owns a $300,000 term life insurance policy, payable to Nick and Arthur. On Javier's death, funds from this policy would cover any university costs and remaining child support for Nick and Arthur.
• Married Maya 11 years ago
• 1 child with Maya, Billy, age 8.
• Parents still living = Javier Sr. and Maud Collins
• Brother Juan died at age 42 from prostate cancer

Maya:

• Age 44
• Parents still living = William and Mary Nathaniel
• Sister Yvonne unmarried and works for the Ministry of Transportation for Ontario

Personal Characteristics

Javier and Maya have a happy marriage and look forward to spending the rest of their lives together. Both are devoted parents and are actively involved with their children's activities and education. Maya supports Charles's continued involvement with his sons from his first marriage. Nick and Arthur spend many weekends at the Collins's home and interact with the family in a warm and affectionate manner. Both boys seem to have adjusted well to their parents' divorce.

Personal Finances

Maya has a cashable term deposit of $18,000 at TD Bank. They have a joint savings account at TD Bank with a current balance of $5,000. They make ends meet each month and have a small surplus of $1,000 at the end of each month.

Javier and Maya share a VISA but keep the monthly balance at zero. They made some minor renovations to their kitchen recently which they put on their line of credit. The current balance is $41,000.

Their home is currently valued at $950,000. They have a mortgage on it of $460,000.

Javier has been contributing to a spousal RRSP in Maja's name for the last 10 years. It has a current balance of $121,000. Javier assumes he will work until age 65 and Maya will retire at the same time as him. They both expect to live until age 90.

Maya expects to inherit approximately $80,000 on the death of her parents. Javier's parents live modestly, and he isn't expecting an inheritance.

Objectives at DeathIn addition to paying off the mortgage, Javier and Maya would like to ensure there is sufficient cash to cover funeral expenses of $18,000. They would also like to allow for unexpected expenses of $30,000.

They expect that Billy will attend college or University away from home. They would like to set aside a lump sum of $80,000 for this purpose.

On his death, Javier would like to make a bequest of $100,000 to Princess Margaret Hospital in memory of his brother, Juan.

If Javier predeceases Mara, she estimates that she would need, in addition to her own income:

• All debts paid off.
• $60,000 per year until Billy is 18.
• $45,000 per year from Billy's age 18 until her retirement at age 61.

If Maya predeceases Javier, he estimates that he would need, in addition to his own income:

• All debts paid off
• $30,000 per year until he retires at age 65

The Collins's are aggressive investors and expect any invested capital to deliver strong returns. Assume the following:

• Nominal rate of return of 5.5%
• Inflation of 2.6%
• Marginal tax rate of 30% for both Maya and Javier

Capital Needs Analysis IfJavierDies IfMaya Dies

(Maya Needs) (Javier Needs)

Immediate Cash Needs

Current cash assets:
Life insurance proceeds
Cash Available	$	$

Debts and Lump-Sum Needs/Obligations

Final expenses
Emergency fund
Short term debts (LoC, Cr C, Loan)
Bequests
Education Fund
Mortgage
Other long-term needs:
Total Debts/Lump-Sum Needs
+/- Cash Available (from above)
Net Cash Available or Capital Required to Pay Debts	$	$

Long Term Income Needs

Minor Children Income Needs
Dependant Income Needs - pre-retirement
Dependant Income Needs - post retirement
Capital Required to Provide Income	$	$

Total Life Insurance Required

Javier = __________ -/+ __________ = $

Maya = __________ -/+ __________ = $