Providing financial security at home and work

Why did Simon come to us?

Simon runs an IT business in Birmingham.

The business has grown at a fast rate over the past few years, partly due to the backing of his bank, who had advanced a series of loans to fund the growth.

However, Simon felt concerned that he, his fellow directors and ultimately his family were exposed as the loans were not covered should he die or become seriously ill. Indeed, they had no protection whatsoever should either event occur.

What did we recommend?

We reviewed Simon’s existing protection provision.

To provide a large lump sum in the event of their deaths, we recommended that Relevant Life Plans were taken out for each director. This type of contract qualifies for Corporation Tax relief, effectively reducing the cost, which was popular with Simon and his fellow directors. The appropriate paperwork was completed to ensure that any lump sums would be paid to the director’s nominated beneficiaries via a trust arrangement. In the event of a payout, this would ensure the lump sum would be paid quickly, without the need to wait for probate and with no Inheritance Tax (IHT) deducted.

Term Assurance contracts were put in place to ensure the debt would be repaid if key shareholding directors were to die while the money was still owed to the bank.

Finally, term assurance policies, with a lump sum payable on death or illness were also put in place to ensure the smooth succession of the business, and the financial protection of their family, should one of the shareholders die or become seriously ill.

Equally importantly, we recommended that Simon and his directors consult with their lawyers to draft a Shareholders Agreement which accurately reflects their wishes.

How have Simon and his fellow directors / shareholders benefited from our advice?

The shareholding Directors now have peace of mind knowing that in the event of death or illness their families would receive a lump sum equal to the value of their shares. A further lump sum would also be payable on death, to provide additional security.

The loans will now be repaid should the main shareholding directors die.

The company will qualify for Corporation Tax relief on the premiums, helping to reduce the effective cost of the protection.