Wealth Protection

It is great to maximize the accumulation of wealth. However, we also need to be realistic that disruptions to our plans can occur and we need to plan as well as we can for unforeseen occurrences.

Everybody’s situation is unique and different risks needs to be assessed and minimized based on the cost/benefit of doing so. As your wealth grows it is prudent to put measures in place to protect against its loss or depletion.

What measures need to be used to protect your wealth as it grows? What measures need to be used to protect you and your family’s financial well being?

Wealth Protection:

Life Insurance

• Life insurance is usually taken out to provide an amount of money to improve the beneficiary’s financial situation should the insured die. If no life insurance was taken out it would be possible that the beneficiary might have to go into debt or use the existing wealth already accumulated to continue on with a similar standard of living.
• Therefore, on the one hand we see having the proper amount of life insurance as a way of protecting one’s wealth when there is not enough wealth already accumulated to sufficiently provide for the rest of the beneficiary’s life.
• On the other hand, even when sufficient wealth exists life insurance can be useful in paying for estate related expenses and taxes or to enhance the amount left for the beneficiaries which could also be to charities.
• Life insurance comes in different types (term, whole life, and universal life) which can have different purposes. Obtaining the right type of insurance is important and getting the best price for the insurance can also help in having more available to save. Using a qualified financial planner to assist with selecting the right plan at the right price is a good plan. Planwell offers a free assessment of your insurance needs and since the compensation comes from the insurance companies there is no cost to you for the assessment, application, processing and future servicing of the insurance plans.

Disability Insurance

• Disability insurance might be the most important insurance one can have if one is dependent on their employment income. Imagine not having an income to live on. For most people this would be devasting financially, not to mention emotionally and physically.
• We also consider having a good disability plan a way of protecting your wealth since if most people don’t have a disability plan any existing wealth may need to be drawn down to pay for the monthly expenses.
• Using 1% to 3% of one’s gross income to have a good quality disability plan can be a prudent decision when you consider the total potential pay back on these plans in the case of a long-term disability. If structured properly the income from a long-term disability plan can also be tax-free.
• Many people with long-term disability coverage provided through their employer’s group benefit plan may want to look carefully at this coverage to understand fully what coverage is provided and under what conditions. Reviewing these plans with a qualified financial planner is also a great idea and should be done as part of a comprehensive financial plan and reviewed regularly.
• Employees may want to top up their long-term disability coverage with a personal policy to kick in if their group plan stops paying. Small business owners should be especially careful of the coverage provided under a group benefits plan as it may require them to be fully or substantially disabled to qualify which may be difficult for most small business owners given their vested interest in the company.

Critical Illness Insurance

• Critical Illness Insurance which is still a relatively new and less well-known type of coverage provides coverage in the case of a critical illness, such as a heart attack, life threatening cancer or stroke. Many plans cover around 25 different critical illnesses.
• These plans can be useful when the conditions to claim on a disability plan aren’t met or when renovations to a home are needed due to an illness or when optional surgery is desired.
• Plans can be purchased with a return of premium feature which may allow for up to 100% of the premiums to be refunded by a certain date or lesser percentages at earlier dates if the plans are surrendered at that time.
• Critical Illness insurance can assist in protecting one’s wealth by providing a lump-sum payment on a tax-free basis instead of having to withdraw funds out of one’s existing wealth or go into debt.
• See a qualified financial planner to discuss whether a Critical Illness plan is right for you.

Long Term Care Insurance

• Long-Term Care (LTC) Insurance provides a monthly income when one is unable to care for themselves. This can be when one gets older but it can really be used at any time in life when care is needed. Depending on the LTC plan care can be provided in one’s home or in a care facility.
• Long-term care can be expensive and if needed for an extended period of time can be devasting to the wealth accumulated.
• Having a good LTC plan in place can provide the peace of mind that when care is needed that some or all of the monthly cost has been prefunded.
• Discuss with your qualified financial planner whether a LTC plan is an option for you. Don’t wait until you need a plan to look into it as the best time to purchase a LTC plan is when you are younger as the premiums will be so much more affordable.

Group Insurance (business owners)

• Offering a group benefit program for employees and the business owners is a great way to attract and keep employees. It is a key benefit most employees would like to have and is a great way for employers to meaningful care for their employees and assist with the financial well-being of their employees.
• Employers are encouraged to ensure their group plans are current and provide the latest in easy of use and additional benefits that now can be found with more progressive group benefit consultants.
• We believe that finding the highest quality group benefit consultants is critically important and a dedication to providing the best long term group benefits customer service. For this reason we partner with Apri Insurance Services to provide the best in group benefits consulting. Check out their CARE process or contact us to arrange a free group benefits review or consultation.

Key Man Coverage (business owners)

• Key Man Coverage is putting insurance on those people in the business which are key to the critical functioning of the business. In many businesses if a key person were to die or become disabled this could severely affect the functioning and potentially the financial situation of the company. Therefore, key man life insurance, critical illness and disability insurance can be put in place to pay a benefit back to the company in the event of a key person dying or becoming disabled or critically ill.
• This money can then be used to offset a reduction in revenue for the company or to offset extra expenses perhaps by having to hire temporary or new permanent employees that may need time to functionally replace the key person.
• Consult with a qualified financial planner to identify which employees and owners may need key person coverage and to structure the plans properly with the best coverage and price.

Shareholder Agreements (business owners)

• The death or disability of a shareholder can be a challenge for a company and for the remaining shareholder or shareholders. The remaining shareholder(s) may not want the beneficiary of the deceased to be the new shareholder so funding would need to be in place along with a shareholder’s agreement. Funding can sometimes be a challenge especially for a business if a shareholder has just died. Therefore, having insurance in place that kicks in in the event of the death or long-term disability of a shareholder can be advisable.
• Having the shareholder’s agreement and the shareholder’s insurance compliment each other is very important.
• Discuss with your qualified financial planner about obtaining a shareholder’s agreement through a qualified legal professional and about funding the agreement with the best insurance plans to ensure a smooth transition in ownership and ongoing operation of the business.

Succession Planning (business owners)

• At some point every business owner will have to transition out of the business one way or another. Having a well thought out succession plan ahead of time will be much better than trying to come up with something is the midst of an urgent situation.
• Well designed plans can have more advantageous tax out comes if structured properly and usually executed over a longer period.
• Consult with a qualified financial planner who will be able to assist you with some ideas around succession planning and advice on a legal professional to assist with structuring a succession plan contract if needed.

Power of attorney

• Life is uncertain and at times we can become incapacitated for shorter periods of time, longer periods and sometimes permanently. In these times it is important for someone to be able to act on our behalf to take care of financial matters that need to be addressed.
• As a way to protect your wealth it is usually important to have a power of attorney in place so that the person(s) that you trust will be able to act on your behalf.
• Discuss having a power of attorney with your qualified financial planner who will be able to recommend you to a qualified legal professional to assist with having this document prepared.

Representation agreement

• Where the Power of Attorney allows us to appoint someone to act on our behalf on financial matters a Representation Agreement allows someone to make decisions on our medical situation when we are unable to.
• We recommend considering having your will, Power of Attorney and Representation Agreement all done so that in the event of death, or incapacitation that your financial and medical affairs can still be managed by those you appoint and trust.
• Discuss having a Representation Agreement with your qualified financial planner who will be able to recommend you to a qualified legal professional to assist with having this document prepared.