CASE STUDY: Restructuring family assets to minimise debt and focus on future wealth accumulation.

Simone is a specialist surgeon who works 60-80 hours per week. She is married with two primary school aged children. They lead a hectic life outside work with family and community activities and has little time to look after their financial affairs.

The Challenge

Simone was burdened with excessive debt. They have a large house with a large mortgage. Not only did this mean that her and her family were going backwards financially, she was stressed and this was affecting her ability to concentrate for long hours.

The couple had previously received poor advice to over-leverage into investments that were hit hard during the GFC. They had also received advice to borrow further to invest into residential property off the plan. Their estate plan was not tailored to his family situation, nor was it tax effective.

Further adding to the mix, Simone’s superannuation fund portfolio had not been actively managed and was being chipped away at by fees and insurance costs. The insurances she did have were excessive and poorly structured.

The Solution

The most urgent and critical area that needed addressing was the debt exposure. Simone’s loan was restructured resulting in a significant reduction in annual interest costs. A plan was put in place to make additional repayments to the loan funded from mortgage cost savings, dividends and income from investments and over time, sale of some of the investments where appropriate to reduce debt was agreed. Having this structure and plan in place provided them with peace of mind that this large debt burden was being addressed.

It was time to work on realigning investments in super in keeping with Simone’s risk profile, and to provide strong and consistent asset growth. We restructured the insurance so that Salary Continuance Insurance was outside super and fully tax deductible. The levels of Death and Total and Permanent Disablement (TPD) Insurance were reduced to a suitable level and moved to a less expensive insurer. The insurance policy was changed to stepped premiums to provide flexibility and reduce cost. TPD was moved to a hybrid policy allowing ‘own and any occupation’ definitions to be utilised, with proceeds accessible to client upon claim.

After getting debt and protection under control, we coordinated and executed matters with a specialist estate planning solicitor to establish Wills, Testamentary Trusts, Powers Of Attorney and Binding Death Nominations in super.

The Outcome: Stress minimised. Debt reduced. Growth plans in place

Our client’s situation now is vastly different to what it was just over 2 years ago. Simone can see their way beyond a mountain of debt to a stage where they can look to finance their children’s education, a key consideration and goal for Simone and her partner She is relieved to see her super balance grow. In her words, “I can now understand what a huge difference there is in getting the right advice.”

*names have been changed to protect client privacy.