Business Administration - Financial Planning RFC124 Chapter Notes - Chapter 7: Lump Sum, Missing Person, Life Insurance
Document Summary
Capital needs analysis: assesses assets vs liabilities and income needs. Needs vs currently held = the need for insurance. Administrative costs that the estate may incur. Lump sum amount is used to pay off outstanding debts: mortgage, line of credit, credit card balances, and any other large debts. Emergency cash fund for survivors and education. Long-term income: address reasonable life expectancy for spouse as well as income needs relative to some rate of inflation after lump-sum needs are met. Income needs and expected income flow = income gap. Capital gains tax from disposition of property. Insurance can be used to fund tax liability with rrsps also bequests in wills: benefits of life insurance are tax free, can be used to fund an equitable insurance for children in the family. Collateral from a borrower may be life insurance as security. Immediate working capital while the business works to address the missing person.