Many parents are increasingly worried about the financial burden of their children who are financially unable to afford to leave home before age 30 or even later. An Insurance Bond can help as a dedicated investment to assist their children to meet the financial challenges of accumulating a first home deposit.
For grandparents, this is a simple and tax-effective way to set up a type of “directed” inheritance that can help with funding a grandchild’s first home, meet education costs, perhaps used to reduce a mortgage or a HECS debt.
A straight-forward strategy to assist children and grandchildren with a first home deposit is by parents, grandparents or other persons investing a single lump-sum contribution into an Insurance Bond. The Bond may be set to vest at their 21st birthday, or say age 25 as an endowment benefit for one, or a range of special intended purposes set by the funder of the Bond.
Alternatively, the nominated child’s own discretion on whether the Bond is drawn-down, or for it to continue as their own tax-effective investment during its vested stage.
Funding a child’s first home or deposit … avoiding the ‘overstayers’
Case study*: Turning $30,000 into a sizable house deposit
Steve wants a “Set-and-Forget” investment where he doesn’t have to worry about tax administration (including paying tax on investment returns himself) and something that will automatically vest for 10-year old daughter Stephanie when she turns 25.
Given the very long time-frame, he selects three Australian share based options from the Bond’s menu. He also sets a few Intended Purposes – overseas travel, a first home deposit, but is happy for Stephanie to decide how she might use her Bond.
Based on an average 8.25% p.a. after-tax rate of return (net of fees), Steve calculates that on Stephanie’s 21st birthday, the $30,000 invested in her Insurance Bond should be worth $103,000 (Figures rounded down).
At this time Stephanie is able to access her Bond as a Tax-Free lump sum withdrawal or keep it as her own investment for ongoing access.
*This case study is a hypothetical example and not meant to illustrate the circumstances of any particular individual. It is not based on actual or forecast investment returns for AUSTOCK ChildBuilder Bonds. Past performance has been used in the illustration but is not indicative of future performance.
Richard Atkinson
Head of IFA Product and Relationships
Austock Life Limited
t: 03 8601 2095
m: 0417 541 897
e: RAtkinson@austock.com
www.austocklife.com