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Jack, who is 36 years old, has been employed by XYZ Inc. for 12-(Answered)

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Jack, who is 36 years old, has been employed by XYZ Inc. for 12 years and subscribed hissuperannuation fund on his employment starting date at XYZ. He has a superannuationaccount balance $200,000 with $30,000 of tax-free component. Jack?s current income is$190,000 and it is expected to be unchanged until his retirement. Jack would like his nondependentchildren to receive a lump-sum after-tax benefit $500,000 on his death. Becausehe has only $200,000 in his superannuation account, he should buy additional life cover tomeet his financial plan.Jack can buy the life cover either outside the superannuation or through the superannuation.As a financial advisor, which option would you recommend?

Justify your advice byproviding the pre-tax premium of each option, and in particular, report how/why youradvice will depend on whether the policy within superannuation will be purchased fromconcessional contribution or not.

(For simplicity, you can make the following assumptions: first, regarding the tax-payable ofdeath benefits, consider the maximum tax-payable in case Jack dies today (i.e., consider thetax-payable most conservatively); second, the premium of life cover is 5% of the suminsured. If you need any additional assumptions for your analysis, please clearly state them inyour report.)

 

Paper#9256065 | Written in 27-Jul-2016

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