have 2 young children, Brandon (8) and Ally (6). They have recently
switched financial institutions to renew their mortgage and as a
special bonus have been offered a free financial plan. The team has
met with the couple and collected the following information:
- Shelly And Alan Are Both 38 Years Old They Are Non Smokers And Have 2 Young Children Brandon 8 And Ally 6 They Ha 1 (424.89 KiB) Viewed 36 times
Shelly and Alan have recently lost a close friend in a car
accident. They feel so sad to see their friend’s wife left
struggling to raise and provide for her 2 children all alone.
Shelly and Alan have given some thought to the family’s financial
affairs should an unexpected tragedy occur. Their wishes include:
family remains in the home, $140,000 is available for the
children’s education, if one spouse passed away the other would
need supplemental income equivalent to 50% of the other spouse’s
gross income until Ally completed a post secondary degree at 22. If
they both passed away Alan’s sister would take care of the children
and would require income of $20,000 each until Ally completed a
post secondary degree at 22.
Shelly and Alan would like the team to assess the amount of life
insurance they would need if:
1) Shelly passed away 2) Alan passed away and 3) both pass
away.
4)They also want to know if there is a rider that would provide
protection for both their children until they are adults.
5) Shelly and Alan are also concerned about getting sick or
being in an accident and not being able to provide for their
family. They ask you what steps they could take to protect against
illnesses or injuries in case they are unable to work for 6 month –
1 year.
• .05 discount rate
• make and state any other assumptions and ignore estate
taxes
Description Annual Earnings Home Mortgage (not insured) Heat/Hydro/Taxes Cars (2) Car loan Savings Account Shelly's RRSP Alan's RRSP Group life insurance policies Credit card Low interest rate credit card (12%) with a limit of $12,000) General Expenses Assets $550,000 $35,000 $2,500 (joint) $25,000 (contributing $2,000/yr) $40,000 (contributing $4,000/yr) Liabilities Income $145,000 $350,000 $15,000 $5,000 owing Shelly $85M+ Alan $60M *assume an income tax rate of 30% $145,000 Shelly $85M, Alan $60M (spouse is beneficiary for both) Expenses/Payments $1,840/mo $700/mo $450/mo Minimum payment is 5% / mo Groceries/ Drug Store $600/mo Children's activities, travel clothing $8,000/yr