Transcript

Good morning everybody.

My name is Enda Brady, I’m a Certified Financial Planner (CFP) and one of the owners with my brother Coman of iQ financial. You’re all very welcome. Today’s webinar is titled ‘Unseen threats. The top three ways savvy business owners protect their family, business, and wealth.

We started in business over 19 years ago, in July 2005, and before then, we advised business owners in our previous roles. We have about 30 years’ experience advising business owners

The strategies we will share with you this morning sit in the area that crosses between the advice you should expect to get from your financial planner, your tax consultant (or accountant) and your solicitor. The reliable strategies that protect you.

In our experience, properly protecting your family, business and wealth is a team sport.

Before you make any decision, you should prepare a personal financial plan with your financial planner and then share that plan with your solicitor and your tax consultant.

At the start some housekeeping to make sure we make the most of the next 25 minutes or so, I will pass you over to Maria Devine. Maria is our senior financial planning administrator and our office manager.

Hello. My job today is to keep things running smoothly so we’re on track and on time. I’ll be keeping an eye on any questions you might ask as well. The way you can get involved is by clicking the Q and A button at the bottom of your screen where you can type your questions and we’ll answer these at the end. We don’t want anyone to leave today without having their questions being answered. I’ve also put a couple of links in the chat to our website where you can access our iQ Financial guides for business owners, including our latest guide, ‘A business owners guide to successful investing’, and also we have a guide specifically on today’s topic, ‘How to protect your family’s financial future as a business owner’. I’ve also put a link in the chat where you can ‘book a learn more call’ or sign up for a newsletter on our website. After the webinar, we’ll send a follow up email with a recording of this session, the slides and the links to our guides for business owners, so if you miss anything the first time round, you can catch up later. Now I will hand back to Enda to get started.

This morning, we want to jolt you into action. If you take action on even just one of the practical steps we are going to share with you before the end, then this webinar will have served its purpose and been a worthwhile use of your time. This is what we will cover – the top three ways savvy business owners protect their family business and wealth, – a real life example of how proper planning saved a business and family from financial disaster – and your next steps, what you need to do to protect your family, business and wealth.

We’re conscious that there are some attendees that may not know about iQ financial and what we do, have not yet registered for our business owners newsletter, or connected with us to get LinkedIn content, or attended one of our webinars before. At iQ financial, we provide a Financial Planning and Investment Management Service to business owners. We help business owners make the most of their money. We advise owners over 45 who want to sell, retire or make work optional in five to 10 years. We help owners plan for retirement, provide for their family and invest wisely.

www.iqf.ie is the best place to go to learn more or contact us, and we’ll share more ways to get in touch just before the end. We received some fantastic news since our last webinar, last month, for the first time, we were shortlisted for the prestigious ‘Financial Advisor of the Year Award’ at the 2024 Irish Pension Awards.

In our experience, the two most significant events that have tested whether business owners have done enough to protect their family, business and wealth were the global financial crisis of 2008, and Covid 19.

If you cast your mind back to 2008 the global financial crisis led to a property value collapse, a credit crunch and austerity and tax hikes. Property prices in Ireland plummeted by over 50% from their peak. Banks facing liquidity issues and massive loan defaults significantly tightened credit availability. The Irish government implemented austerity measures, increasing taxes to stabilise public finances, with higher income and capital gains taxes. This reduced disposable income and opportunities for wealth accumulation for business owners, who also faced reduced consumer demand due to the overall economic downturn.

The 2008 global financial crash was a perfect storm for business owners. The covid 19 pandemic led to business closures and revenue loss. Lockdowns and restrictions led to widespread business closures, particularly in retail, hospitality and tourism. Many business owners experienced significant revenue loss. In the crash of 2008 many business owners went from being paper millionaires to being insolvent in less than 12 months. With both the 2008 and covid 19 crises, many business owners were totally unprepared for this financially. They had no emergency funds, were in many cases spending significantly more than their earned income could cover, and in the case of the global financial crisis, had all their investment eggs in the property basket.

The stress that caused so many business owners, in some cases, for many years, was incredible.

It was bad for them financially and really bad for their health and quality of life.

We want to help as many business owners as possible to learn from mistakes of the past so that they don’t make similar ones in the future. Human nature has a funny way of tricking us.

When things are going well, we tend to underestimate the likelihood of a crash, a recession or a downturn, the longer things stay good, the more we forget how vulnerable we might be. We start believing the good times will last forever, and that’s when we’re least prepared. But uncertainty is always there. Markets shift, external shocks like another global financial crisis or another covid 19 event will happen, we just don’t know when. We don’t want external shocks, but we should make sure we are prepared for them. Today’s session is about changing that mindset, about protecting your family, your business and your wealth, no matter what happens next.

We’ve chosen the top strategies from our experience that business owners use to protect their family, business and wealth, and we’ve separated the key strategies into three areas to show you the best legal, tax and finally insurance strategies from our experience that we think every business owner should use to make sure that when the next global financial crisis, covid, 19, or other unexpected external shock happens, you are best positioned to protect what you have built, provide for your family and not leave anything to chance. We’ll share with you what the strategies are and why they are important.

Firstly, the top three legal strategies:

A will ensures that assets are distributed according to the business owner’s wishes, protecting family wealth and business continuity.
An enduring power of attorney (POA) ensures decisions regarding financial, medical or legal matters are handled by a trusted person. If the business owner becomes incapacitated, both tools are essential to avoid family disputes, court intervention or mismanagement of assets.
Shareholder and partnership agreements clearly define each partner’s rights, responsibilities and succession plans in the event of death, disputes or exit these agreements prevent costly litigation and ensure a smoother transition of ownership and control. Without such agreements, business operations could stall or collapse, impacting the wealth of your family and your business itself.

Finally, under legal insights, a written estate plan outlines the distribution of both personal and business assets upon the owner’s debt. It reduces the risk of family disputes, delays in probate and unintended tax consequences. This protects the business and family wealth, and provides clarity for heirs, ensuring a well-structured legacy transfer.

There are many insights from the tax advice we have been involved in and we have seen that we could share with you. We’ve chosen the following three tax strategies as the most important to share this morning.

Capital reliefs allow business owners to minimise tax liabilities when selling or liquidating your business. Many business owners are not aware that capital reliefs can apply when you liquidate your limited company, not just when selling to a third party. By reducing the tax burden, more proceeds from your business can be retained for you and your family

Using tax efficient company paid pensions, importantly with diversified investments, help to build retirement funds in a tax effective manner. Contributions can be offset against corporation tax, while diversified investments protect against single investment risk, such as what we witnessed with property investments in the 2008 global financial crisis. This ensures the business owner’s future financial security without excessive taxation, without a focus on a small number of investments, or without an over reliance on the future sale of the business itself.

Finally, under tax strategies, using what’s called capital acquisition tax thresholds, property gift and loan agreements, and in some cases, family partnerships and holding companies help transfer wealth to your family tax efficiently. It prevents excessive inheritance taxes, allowing wealth to be preserved and ensuring the family’s financial security is not diminished. If you’ve reached your financial independence target and you’re comfortable that you have enough, family partnerships and holding companies can be more appropriate to help transfer wealth to the next generation. The tax advisor on your team will have the detailed advice to help you implement the right solution.

Finally, the top three insurance strategies. Most people don’t get excited about life insurance or income protection, and specified serious illness insurance doesn’t exactly get the blood pumping! However, if you die, suffer an unfortunate accident, or are unable to work to a long term illness, these financial products can mean the difference between maintaining a reasonable lifestyle and perhaps losing much of your hard earned wealth. Death or serious illness is bad enough without adding financial hardship for you and your family to the mix.

If you have a personal financial plan, which includes how you want to protect your family business and wealth, then everything that supports the achievement of that plan is hugely important, crucially, that includes your personal and business insurances.

So three areas to highlight for you here – co directors life insurance is a specialised form of life insurance that provides financial protection for both the directors of a company and their families. It helps to ensure that in the event of the death of a director, the transition of ownership is smooth, and the financial well being of the deceased director’s family is safeguarded. Upon the death of a director, the insurance policy pays out a lump sum typically used to purchase the deceased director’s shares, ensuring continuity of business ownership. It is often linked to a Buy Sell agreement, which in advance, stipulates how the shares will be handled in the event of a death. It provides financial security for the deceased director’s family and the business.

Revenue approved inheritance tax life insurance covers inheritance tax liabilities for your children, ensuring your family won’t need to sell assets, or as many assets, in order to pay inheritance taxes. Despite unknown future asset values, and unknown future inheritance tax rules, these policies offer fixed premiums for life, enabling better long-term financial planning. You know in advance what you are going to pay into this type of insurance, and using conservative assumptions about asset growth over time, you’ll see how much of a benefit in saving of tax this can provide to your children.

Company paid income protection and specified serious illness insurance provide either a taxable income or a tax-free lump sum to a business owner if they are unable to work due to illness or injury. They ensure that personal and family expenses are covered, safeguarding both the owner’s family and business from financial strain during that difficult time.

Before I hand back to Maria, who has a reminder for you, in the final part of the webinar, before we take questions, we are going to look at a real life example of how proper planning saved a business owner’s family from financial disaster, and we’ll give you the practical steps you should take to help you protect your family, business and wealth. But first, a reminder from Maria,

Hello, just to let you know that questions and comments you write in the Q A section are not visible to everyone, so only Enda and myself will see them, and then we’ll read them out at the end. And if you write any comments in the chat, everyone can see those. If you want to talk about any of the topics in more detail, you can send us a message in the Q and A or the chat, and I can set up a meeting for you, or you can click the link on our website to book a learn more call.

Okay, I’m going to hand back over to Enda.

Thanks, Maria,

About 10 years ago, we worked with a married couple, we’ll call them John and Sarah, that’s not their names, who owned two successful businesses. They had five young children and specific financial goals they needed to meet to secure their family’s future. At the time, they were over halfway to achieving the value of assets they needed to accumulate, and things were progressing fine.

As with all our clients, we created a personal financial plan that we shared with their solicitor and tax advisor. We advised John and Sarah to plan for the unforeseen by putting the right financial protections in place, we helped them identify their financial independence fund, that’s the amount they needed to ensure their family was secure, even if something happened to one of them before reaching that target, we also emphasised the importance of maintaining an emergency fund, knowing that while their businesses were profitable, their income could fluctuate significantly from year to year.

At that point, their emergency fund was a six-figure sum, providing a crucial safety net. As their assets grew, they wanted, on a number of occasions, to reduce or cancel their insurance policies against illness and death, and reduce their emergency fund, believing they could put that money to better use, but we advised them to keep these protections in place, particularly since they hadn’t yet reached their long term target. Thankfully, they made the decision to stay with the same level of protection.

Sadly, John was diagnosed with an aggressive form of cancer. Despite undergoing treatment, he passed away two years later. It was an incredibly difficult time for Sarah, but at least from a financial perspective, Sarah and the children were provided for.

John and Sarah had a number of protections in their plan. They had the right amount of life insurance that matched the targets in their personal financial plan. Emergency funds helped, particularly during John’s treatment. John’s company paid pension was not only tax efficient for growing his wealth, but was also structured to be tax efficient on transferring the pension to Sarah upon his debt because of the planning that was done. John’s life insurance and pensions provided lump sums that, added to their other investments that we had worked on, ensured that the financial targets that John and Sarah set for themselves and their children originally could still be achieved.

We’ve done more than what we said in our webinar invitation to you. We’ve not just shared the top three strategies business owners use to protect their family business and wealth. In fact, we’ve given you a checklist here of the nine tax, legal and insurance considerations we believe every business owner must review and implement where appropriate. As I said earlier, we want to jolt you into action, to doing what you would have possibly put off several times. You’ll be getting a copy of these slides, and we urge you to use this as a checklist to make sure you’ve done everything you can to protect your family, business and wealth.

In addition, these are some simple but we believe hugely powerful suggestions we can give you to protect your family, business and wealth. As we’ve mentioned here
1. Have a personal financial plan for you and your family, this is your foundation.
2. Spend less than you earn. It sounds simple, but it’s the key to long term stability.
3. Build an emergency fund, both personally and for your business, because cash flow is king, especially in a crisis,
4. Be prudent with debt. Avoid debt at high rates and make sure repayments are manageable.
5. Make conservative assumptions about investment returns and rental income.
6. And finally, have a team, a financial planner or advisor, a tax advisor & accountant, and solicitor, who all know your plan and work together to safeguard your future.

The vast majority of business owners that we serve have a plan for their business, a plan which helps the business owner decide what projects they’re going to take on in their business, and a plan that will see the business through for at least the coming few years. Many business owners, however, do not have a personal financial plan for themselves and their family.

The person with a plan for their money has a much better chance of success than the person without one.

When you prepare a personal financial plan, you’ll have a guide to help you make the most of your money for the years ahead, and you’ll know what financial protections and margin of error makes the most sense for your business and family. Sharing your personal financial plan with your tax advisor and solicitor will mean you have left nothing to chance and are best positioned to deal with problems as they arise.

We also have more sophisticated technology to help us plan in a way that looks at your overall financial situation, instead of forcing you to make decisions piecemeal, something that can help you look at different implications for your family of decisions you might make.

What can you do now? What are your next steps? We suggest you should do three things.
1. Firstly, pick a financial planner or advisor to guide you in these areas and to guide you over the long term.
2. Then prepare your personal financial plan, including proper provision for your family that in your situation, best addresses the tax, legal and insurance considerations we have highlighted this morning.
3. Share your plan with your solicitor and tax advisor, as we have said, and most importantly, implement the actions from your plan.

In summary, this is what we have just covered
• The top legal, tax and insurance strategies savvy business owners use to protect their family, business and wealth.
• A real-life example of how planning saved a family and business from financial disaster.
• And we’ve covered your next steps, what you need to do to protect your family, business and wealth.

Maria, I’ll take a pause there, and we can take some questions that we might have.

Yes, I’ll just have a look now. So the chats and the Q and A are still open for anyone to write any questions. Now, we have some questions sent in earlier, when people registered, so I’ll just take a look at those.

And the first one says, ‘Tell me a little bit more about revenue approved inheritance tax, life insurance, how I can get it and how much it might cost’

The revenue approved inheritance tax life insurance. It’s also called Section 72 life insurance. You’ll see, you’ll see that phrase used. It refers to the part of the tax legislation which created this revenue approved life insurance. It’s designed to help your children pay for any inheritance tax bills that they may have.

The steps to putting it in place. When you do a personal financial plan, you can make an assessment on what potential inheritance tax liabilities would be for your children. And then, if it’s one of your priorities, you can use this life insurance.

And even though we won’t know the value of your assets in the future, and we won’t know what the future inheritance tax rules will be, the revenue improved inheritance tax life insurance is powerful because that type of insurance allows you to have fixed premiums for life. So if you make conservative assumptions about what will happen with tax rules and what will happen with the value of your assets, you can still see what benefit in terms of tax savings. It can have your children because up to age 100 you can know exactly how much you’re going to pay in premiums

The final thing to say on that these policies are normally done on a joint life, second death basis. So if you have a couple, the inheritance tax won’t apply when assets are passed from spouses, but on a joint life, second death basis, when both parents have passed away, that’s the event that triggers this form of tax, this form of inheritance tax, for your children. So the policy can be structured in in that way where it covers both lives, but pays out after the second parent has passed away. We can give more on on costs for that person’s specific requirements after this, but that’s the that’s the highlights of that particular strategy.

Last question that we have sent in is ‘how long does it take to create a personal financial plan’

Thanks for that question. This comes up a good bit. We’ve an approach that we bring business owners through, and it takes about four to six weeks from start to finish.

And our approach includes three meetings with business owners. We call them the discovery meeting, the strategy meeting and the implementation meeting. We spend a decent amount of time with our business owners to make sure we identify what’s important to them. We do that as part of what we call a discovery process to understand what their plans are for themselves and their family, and why the money is important to them. Then we look at their available resources, and we help them figure out the best use of their business and personal cash flow and their other arrangements to best meet the needs of their plan. So it’s a, it’s a three step approach, that approach that we take, and it takes about four to six weeks.

I think we’ve come to the end of our questions, just to remind everyone that you will get a recording of this webinar and a copy of the slides in an email afterwards, I’m just going to share again our contact details.

Thanks, Maria. If you have any other questions about what you heard today, or questions about any other financial query, we’d love to hear from you. If you go to our website, which is www.iqf.ie, you can book some time in our diaries using the Book a learn more call’ button at the top where we can learn more about your query. You can email us using clients@iqf.ie or call us on 071-9155560,

Thanks a million for your time this morning. We hope you got value from the webinar. We hope you’ll use this as a checklist, and this will jolt you into action to put protections in place for your family, business and wealth. We would appreciate any feedback you have to help us improve future events. Our next and final webinar of 2024 is titled ‘Mastering the art of tax efficiency, the top strategies every business owner must know’. And it’s taking place on Wednesday the 6th of November, at 10am

We hope to see you then. Thank you.