Mr. Graham’s Harvard Case Solution & Analysis

Mr. Graham’s Case Solution

Answer Number One:

Mr. Onslo Graham and his wife Daisy Graham have been married for almost 30 years and live in a city with their adult child Rose, aged 28. Mr. Onslo and Rose are associated with a professional hockey team in their hometown since the past 25 years.

Mr. Onslo earns about $137,500 per annum. They also had an investment in some equity securities, dividends and interest from those securities are reinvested. Mr. Onslo also contributes $9600 to his 401K. The couple has a  gigantic list of expenses which mainly includes insurance expenses such as Large-cap funds, Mid-cap funds, High yield bond funds, etc. They are currently planning their retirement plan and trying to find out legitimate ways to reduce tax liability in the event of the death of any of the individual.

Answer Number Two:

There are many areas in the expenses summary of Mr. Graham that can be reduced to improve the cash flow position. Firstly, Daisy’s hobbies cost $500 per year this can be cut to improve the liquidity position of Graham. Additionally, the entertainment might be too expensive; Mr. Graham can reduce the entertainment cost to improve its liquidity position. Furthermore, charitable expenses, vacation expenses, and travel expenses can be controlled to improve the cash flow position.

Answer Number Three:

Considering the age of Mr. Graham, universal life insurance might be most appropriate for Mr. Graham. Universal Life Policy is also known as a flexible premium or adjustable life. It provides cash value based on the current interest rates permanently. The primary attribute that distinguishes between Universal Life policy and Whole Life policy is that the cash values, the level amount of protection and premiums can be adjusted as per the needs of the insured. The cash value generates are turn which is decided by the insurance provider with a guarantee that profits will not blow to an individual level.

Answer Number Four:

Health insurance is a typical type of insurance that pays the medical and surgical expenses incurred on behalf of the insured or reimburse the expenditure incurred by the insured. Even though Mr. Graham and his wife are quite healthy till now but they still have to take certain factors into consideration regarding health insurance.

Firstly, the age factor plays a significant role in the health insurance policy. The young people usually do not go to the doctor often,despite the fact that they have an increased risk of accidents. Premium is usually charged lower for the younger individuals and higher for the elder people.

Another critical factor is the profession; If the person is associated with a profession which has a high adverse impact on health, it might be possible that the individual will have to pay more premium.

Answer Number Ten:

Generation-Skipping Transfer:

It is crucial for Mr. Graham and Daisy that they fully use the $1.1 million exemption which can save massive amounts of taxes of the family. It does not mean the elimination of the benefits, but it is the skipping of the payments of taxes by the use of a trust. It is possible that the beneficiaries can also act as a trustee and they can control investment and ultimate disposal of the asset.

Mr. Graham’s Harvard Case Solution & Analysis


Family Limited Partnership:

The family limited partnership is invented to centralize family investment. Family limited partnership aggregates the property of the family into a single company whose shares are owned by the family members. The family limited partnership is mostly used in reducing the estate tax liability as the shares of the family limited partnership are transferred to different family members at a lower tax rate. The family limited partnership is different from conventional trust. The shares will be owned by the family of Mr. Onslo Graham, and the shares can be transferred to the various family members for taking advantage of tax exemption. If the asset is illiquid and complex in nature, they are more difficult to evaluate thus resulting in the higher savings in estate taxes................

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