Richard Atkinson from Austock Life spoke today at the Sydney session of its Taking Control of Estate Planning adviser roadshow about:
Insurance Bonds have advantages over testamentary trusts
The traditional thinking when seeking to leave money to grandchilden in the future (i.e. after the Willmaker is dead) was to establish a testamentary trust which is fine if the asset is over, say, $400,000 in value to justify the complexity in establishing and maintaining the Trust.
The executor of the Will has to find trustees who have the interest and time to fulfil the role and the hassle that goes with continuing this process over time.
An alternative is available at a fraction of the cost and without the possibility of influencing the future decisions on the money being contrary to the wishes of the will maker.
Insurance Bonds have advantages over testamentary trusts because the Bond can be flexibly tailored to meet small and large bequests and under a low cost, low maintenance “set and forget” tax-paid environment
As you can structure Insurance Bonds with long-dated vesting dates can be a simple and cost-effective way to create lasting inheritances. Insurance bonds can also be structured to achieve intergenerational wealth transfers.
Estate Planning
Insurance bonds can play an important role in arranging an estate’s affairs with certainty, and importantly the Bond can be used either outside, or in conjunction with your normal Will and legal estate arrangements.
Parents in blended family situations and in second marriages might make financial provision outside of their Will for the children of a previous marriage or relationship;
Or grandparents might use Insurance Bonds to solve potential conflicts and inequities between classes of beneficiaries (e.g. children vs. grandchildren) that might be difficult to handle under their Will.
Also important, is that prior to its vesting, the Bond Owner, retains full ownership and control just in case there is a change of mind or a change in their own financial situation. This includes being able to make full or partial withdrawals for personal use.
Intergenerational wealth transfers – An alternative to Family and Testamentary Trusts
An Insurance Bond has “off-the-shelf” like simplicity and can be used in your estate planning to achieve similar intergenerational wealth transfer objectives as against creating a testamentary trust under your Will.
Importantly, this can be done with the certainty of that an Insurance Bond directly vesting in favour of a Nominated Child irrespective of the death of the person who has established the Bond (e.g. parent or grandparent).
These Bonds operate subject to rules under the Life Act, meaning that if the parent or grandparent dies during the Bond’s accumulation stage, then the Personal Legal Representative must hold the Insurance Bond in trust for your Nominated Child until the Vesting Age, or until the child’s prior death.
To achieve similar outcomes using a testamentary trust not only requires creating the trust under your Will, but also appointing a willing and “investment-competent” trustee to act, and often for many years.
Setting up a trust can also be impracticable for smaller dollar bequests, and trust structures also entail annual administration and tax reporting costs and can be inflexible to access and costly to unwind.
Contact
Richard Atkinson
Head of IFA Product and Relationships
Austock Life Limited
p 03 8601 2095
m 0417 541 897
e RAtkinson@austock.com
w www.austock.com