A key person is an individual whose continued association with a business provides that business with a significant and direct economic gain. This may be the CEO, Founding Director, Director or similar senior position.
Economic gain means more than just profits. It can also include capital injections, cost efficiency, goodwill, access to credit and contacts with suppliers and customers. Business owners will also usually be key people.
Key person insurance can compensate the business for the loss of a key person in two different ways: business profitability (revenue purpose) and the capital value of the business (capital purpose). Key person insurance proceeds can be applied to maintain the capital value and stabilise the business.
A testamentary trust is commonly used by estate planning lawyers to protect the assets and inheritance of the testator’s benefciaries from creditors, family law actions and providing flexibility in relation to the distribution of the estate.
There are limits on how much you can pay into your super fund each financial year without having to pay extra tax. These limits are called ‘contribution caps’.
Building Family Wealth takes time. But how easily can it be torn down in expensive litigation, legal challenges and regulatory and economic threat?