Planning for life and business challenges
Life is never as simple as we might like. Personal and business circumstances can change quickly and stress can elevate rapidly, particularly when you don’t have a clearly defined plan in place.
Just ask James (56) and Paula (52) who approached Strategic Wealth seeking advice on the most appropriate business structure for James’s new company, as well as advice on how to maximise their pre-retirement wealth accumulation.
About James and Paula
James was in good health, however, Paula was recovering from a recent illness. A foreign citizen, James had not long since been made redundant following the takeover of his international employer while on assignment in Australia. Like many families, James and Paula had a list of lifestyle goals they wished to achieve, along with other aspirations. Their goals included funding their ongoing living expenses, their children’s education, and paying off the mortgage on their new home and newly added swimming pool. They enjoyed travelling with their children and wanted this to continue both now and in retirement. Retirement for James was 10 years away and there was much ground to make up if they were going to be able to achieve this objective.
Enter Strategic Wealth
We knew there were many issues that needed to be considered and worked through to maximise James and Paula’s chances of achieving financial independence as soon as possible. James wanted to retain his citizenship and needed to understand where he should best accumulate his wealth to minimise his Australian and foreign tax liabilities. What business structure should be adopted and how would this impact on his taxation liabilities? What strategies would be effective to maximise their wealth accumulation across the next 10 years? And what type of lifestyle could they enjoy when James retires?One of the most important elements to consider when developing a wealth management plan is to secure your existing financial position and then focus on generating wealth. And that’s exactly what we did for James by protecting one of his most valuable assets (his future employment income against sickness and injury) and providing protection of the repayment of the large outstanding debt. We did this in the most tax effective way possible by considering where ownership of the various insurance policies should exist.
Creating Wealth
After securing their financial situation, we moved onto wealth accumulation. We introduced James to Australian and international tax advisers and facilitated meetings with these advisers to help them identify the most appropriate structure for James’s proposed consulting company. We helped them understand where best to accumulate their wealth given the consideration of both potential Australian and foreign tax liabilities. Superannuation was an important part of the wealth accumulation strategy and the Self Managed Superannuation Fund (SMSF) approach was an excellent fit given James’s particular interest in owning direct shares within his superannuation fund and having control over this important asset. We developed a defined contribution plan that enabled them to grow their wealth within the tax effective structure of superannuation, while also addressing the repayment of their housing mortgage.
Easing Financial Stress
We eased the immediate financial stress by suggesting that James and Paula take an appropriate amount of their cash reserves to reduce their housing mortgage. The couple were keen to maximise their wealth creation and use all appropriate strategies to accelerate the growth and manage their tax liabilities. We recommended that they implement a gearing strategy and invest in a diversified portfolio of quality Australian and International shares, once their cashflow reached a satisfactory level. Finally, we coordinated meetings with a specialist estate planner to understand James and Paula’s family situation thereby providing protection of this important aspect of their wealth management plan.
The Outcomes
Our advice and planning went well beyond its simple dollar value. We gave James and Paula an increased sense of comfort and confidence in their current situation. We took the stress away by collaborating with other expert advisers and coordinating with the couple to meet the appropriate specialists. James and Paula can now relax more about their financial and insurance situations, and James now has the time to focus on building his consulting company atop a sturdy and well-researched base.
