Investment bonds & estate planning

Intergenerational wealth transfer and financial peace of mind

With Tom Hartvigsen Ord Minnett

INVESTMENT bonds can be a cost-effective, tax effective and convenient way to pass on wealth to dependants, with minimal fuss. They’re also one of the most tax effective investment vehicles outside superannuation. 

Investment bonds have a maximum tax rate of 30%, but tax optimised investments can range between 10%-15%. Investment bonds have features that can be used in conjunction with, or as an alternative to, conventional estate planning tools – such as a will, a testamentary trust (for future gift- ing and for making intergenerational wealth transfers), and superannuation. 

As a form of life insurance policy but linked to investment returns, investment bonds have a life insured, which for estate purpose would typically be you. On your passing, the bond benefits would be paid to your estate or to your nominated beneficiary or beneficiaries. The investment bond, nominated in favour of a beneficiary, is a non-estate asset and is not subject to any directions under your will, challenges to your will or any delays in the distribution and finalisation of your estate (meaning you avoid probate). 

The payment of proceeds can be made confidentially and without the knowledge of other interested parties. Some investment bonds may provide the option of transferring ownership of your investment bond to another person. 

You may be able to elect when the person or entity gets access to the investment as well as provide for a regular income stream to be paid in the future. The transfer of ownership can happen without any personal tax consequences to your investment or the recipient of the investment bond. 

Using an investment bond’s transfer on death facility as an alternate estate planning strategy may be useful if you: want to pass on your wealth outside of your will and estate, pass on your wealth with no tax being incurred and want to manage when your intended recipient can access the investment and/or set a future regular income stream for their use. 

This is a great way to control and ensure your family benefits from the largest intergenerational wealth transfer this country has seen, all while reducing any possible death tax. Start a conversation today with Tom Hartvigsen from Ord Minnett on 07 5430 4444 or thartvigsen@ords.com. au. 

Tom Hartvigsen is an Authorised Representative (no. 000470576) of Ord Minnett Limited, AFS Licence 237121 and authorised to provide tax (financial) advice services. 

This article contains general financial advice only and does not consider your personal circumstances; you should determine its suitability to you.

Advertisement