Financial Planning Analysis: COR167e SUSS Wealth Management

This report provides a detailed analysis of financial planning, covering aspects such as tax avoidance versus tax evasion, wealth protection strategies, and investment planning. It examines the tax implications of various financial decisions, including salary payments, director's fees, and employee stock options. The report also evaluates investment options, distinguishing between active and passive investment approaches, and discusses estate planning considerations, including wills, trusts, and insurance nominations. The analysis incorporates calculations of investment returns and risk assessments, offering practical recommendations for optimizing financial outcomes. This solved assignment is available on Desklib, where students can find a wealth of resources, including past papers and study tools.

Running head: ANALYSIS OF FINANCIAL PLANNING
Analysis of Financial Planning
Name of the Student
Name of the University
Author’s note

1ANALYSIS OF FINANCIAL PLANNING
Table of Contents
Question 1..................................................................................................................................1
Question 2..................................................................................................................................4
Question 3..................................................................................................................................7
References................................................................................................................................10

2ANALYSIS OF FINANCIAL PLANNING
Question 1
Wealth protection and tax planning
Differences between tax avoidance and tax evasion
Tax avoidance
Tax avoidance is the process to reduce the tax burden without breaking the rules and
regulations of the tax laws (Barker,et al 2016).
Tax evasion
Tax evasion on the other hand is an unlawful act by which the assesse reduces the tax
burden. It does not follow any rule and thereby do unlawful act so that the assesse does not
have to pay tax (Alstadsæter Johannesen & Zucman 2018).
The major point of difference are stated below
Basis of comparison Tax avoidance Tax evasion
Meaning It helps to minimise the tax
liability by using the means,
which does not violate the
tax rules.
It means reduction of tax
liability by using illegal
methods.
Methods One of the method of tax
avoidance is hedging of tax.
Tax concealment
Attributes The nature is immoral as it
involves bending the law
without breaking it.
The nature of tax evasion is
illegal and objectionable.
(Dyreng Hanlon &

3ANALYSIS OF FINANCIAL PLANNING
Maydew2018)
Concept It takes unfair advantage of
the shortcomings of the tax
laws
Intentional manipulation in
the accounts, which causes
fraud.
Legal implications It use legal ways to avoid
the tax burden
It uses such ways that are
forbidden by law.
Time of occurrence It is done before the
occurrence of tax liability
It is occurred after tax
liability arises
Consequences Deferment of tax liability Penalty or imprisonment
Concept of wealth guarding through tax planning and insurance planning
 Creating a lifetime trust for the spouse and children, can save tax and protect the
wealth.
 Purchasing long-term care insurance policies or medical facilities.
 Using domestic asset protection or life insurance trust.
Question no 1b (i)
Salary to Dr smart’s wife
This should not be paid as salary as salary will attract tax and that will put burden on
the Dr Smarts wife as she is homemaker and does not have any idea about the rules of tax.
Director’s fees to brilliants mother
Dr Brilliants mother stay in Australia for which the directors’ fees should not be paid
in the name of his mother. If they do so, his mother will also become liable to pay tax and the

4ANALYSIS OF FINANCIAL PLANNING
burden of double taxation will be imposed on her, she will be liable to pay tax both in
Singapore and in Australia.
Salary to son of Dr Brilliant
The salary paid to the son of Dr Brilliant can be given as the amount does not comes
under the taxable slab rate and thus free of tax.
Question no 1b (ii)
The expenses that are related with the maintenance of the company car will be eligible
for deduction from the income of the partnership firm.
The expenses paid for the holiday to Bali will not be eligible for deduction from the
business income.
Dr Smart will be liable to pay property tax on the partly furnished apartment.
Question 1c (i)
The ESOP attracts taxes in two cases once when it is exercised and second at the time
of selling. When the employee exercise its options, it is considered as perquisite and so it is
taxes in the hand of the employee. When the employee sells the shares, it will be taxed as
capital gains.
Dr Smart also liable for paying tax in two cases as he exercised the option and sell
these shares in the open market.

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Question1c (ii)
Calculation of taxable royalty income
Question 2
Wealth accumulation investment planning
True
Reason: The liquidity risk considers the risk in liquidating or selling investment
True
Reason: the reinvestment rate is more significant to a bondholder than a shareholder
is.

6ANALYSIS OF FINANCIAL PLANNING
True
Reason: older investors does not like to take much risk as there source of income gets
restricted so they cannot afford big loss of their wealth.
True
Reason: the modern portfolio theory states that the investors are less adverse to risk
and for that reason by diversifying the portfolio it will be possible to reduce the risk factor
from the portfolio.
True
Reason: the stock split does not reduce the value of the shares but it increases the
quantity of holding and reduces the market price per share.
False
Reason: when the market price of a stock exceeds both the book value and par value
of stock it indicates that the sock is overvalued and it will not be a good time to select that
stock for investing purpose.
True
Reason: Blue chip stocks are those stocks the income and growth both are moving
with high pace.
False
Reason: defensive stocks are those stocks that give steady return even at the time of
market volatility.

7ANALYSIS OF FINANCIAL PLANNING
Question 2b (i)
The ex-dividend date is the date before the record date of dividend declaration. The
record date of promise land is 22nd September so the ex-dividend date will be 21st September
2018.
Calculation of average annual return of the shares of promise land
Calculation of the annualised rate of return of the shares of promise land
Calculation of standard deviation of the stocks of promise land
The beta of the return of the stocks of promise land is less than one, which means that
the stock is not giving a consistent return on the investment made by Dr Smart.
Question c(ii)
Difference between active and passive investment

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The active investment is too expensive as the continuous buying and selling of shares
attracts high transaction cost and brokerage charges.
Passive investment is not that expensive like the active investment.
Flexibility
Active investment is flexible in nature as they can pick up any stocks and can sell at
any time.
In passive investment, the investors stuck with the stocks or index that, they hold.
Risk
The risk factor in the active investment is too high as the investment is directly linked
with the market and continuous buying and selling happens in this type of investment
(Walden 2015).
In case of passive investment, the rate of risk is not high.
Growth and value approach of investment
Growth and value are the two basic approaches of investment. Growth investors
invest in the companies that offer strong growth while value investors seeks companies that
appeared to be undervalued in the market.
Question 3
Wealth giving and estate planning
Question a(i)
Estate transfer
Will substitute

9ANALYSIS OF FINANCIAL PLANNING
Intestacy (intestate)
Testacy (testate)
Probate
Question a (ii)
Yes, the statement is true.
Trust is the created by the owner who transfers the property to a trustee. The trustee
hold the property for the beneficiaries of the trust. The trustee hold the position of the
property after the death of the owner of the property (Horton 2017).
The owner of the property on the other hand prepares Will before his or her death
where the owner specify the name of the person to whom the property is to be allocated after
his or her death (Karadimitriou & Manns 2016).
Question a(iii)
It is required to take the written approval of the nominee before revoking there name
from the insurance nomination as specified by the laws.so in this case also Dr smart is
required to take the written approval of his son and wife before he revoke their name from his
insurance nomination (Crawford 2017).
Question b
As Dr smart used different names in various deeds while purchasing different assets it
can create confusion if he only use the name “Smart Tua Huat” it is recommended to Dr
smart to change his name in all the other documents by an affidavit and then use the common
name “Smart Tua Huat”.
Question c

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The main thing that Dr smart should do before amending his will is to change the
different names that he has given while buying various property otherwise these properties
will not be considered as his property and any one can take illegal possession of these
properties (Council et al 2018).

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References
Alstadsæter, A., Johannesen, N., & Zucman, G. (2018). Tax Evasion and Tax Avoidance.
Working Paper.
Barker, D. C., Wang, S., Merriman, D., Crosby, A., Resnick, E. A., & Chaloupka, F. J.
(2016). Estimating cigarette tax avoidance and evasion: evidence from a national
sample of littered packs. Tobacco control, 25(Suppl 1), i38-i43.
Council, C. E. P., Montgomery, J. R., Boland, D., & Montgomery, L. L. C. (2018). Who’s
Your Client When Everybody is Your Client? Ethical Dilemmas for Estate and
Business Planners in Representing Family Members.
Crawford, B. J. (2017). Change Is Constant in Estate Planning: Reflections of an ACTEC
Law Journal Editor. ACTEC LJ, 43, 143.
Dyreng, S. D., Hanlon, M., & Maydew, E. L. (2018). When does tax avoidance result in tax
uncertainty?. The Accounting Review.
Horton, D. (2017). Tomorrow's Inheritance: The Frontiers of Estate Planning
Formalism. BCL Rev., 58, 539.
Karadimitriou, N., & Manns, J. (2016). Our common estate: Planning for land in large-scale
urban development. Journal of Urban Regeneration & Renewal, 9(2), 139-148.
Walden, M. L. (2015). Active Versus Passive Investment Management Of State Pension
Plans: Implications For Personal Finance. Journal Of Financial Counseling &
Planning, 26(2).