- Re-invented insurance bonds are protecting inheritances for children and grandchildren – keeping such disputes over wills out of court/out of estate
- How? Because insurance bonds can be established to be excluded assets from a deceased estate
- These bonds offer simplicity/cost advantages over testamentary trusts that – estate planning across generations is affordable/available to all families
Austock Life’s managing director Ross Higgins – who designed the Imputation and ChildBuilder Bonds* – says that because insurance bonds can be established to be excluded assets from a deceased estate, bonds and their proceeds can be protected and put beyond the reach of disgruntled beneficiaries and contested Wills.
The other upshot of using them for non-estate bequests is that these can be made in secret, because these types of inheritances are not subject to Probate procedures (and costs) and hence not brought within the public domain.’
Higgins gives the example of a ChildBuilder investor, Gloria (aged 74) who wants to leave $50,000 to each to her five grandchildren.
In her Will, Gloria has already provided for her two children – one of whom is estranged – and she has also made small bequests to her late husband’s two children from his first marriage.
‘Gloria wants the peace-of-mind that her grandchildren’s inheritances are protected and beyond possible estate legal challenges – she also doesn’t want her grandchildren to have access to their ChildBuilder investments until age 25,’ says Higgins.
So, Gloria sets up five $50,000 ChildBuilder lump sum plans, each set to automatically vest on each grandchild’s 25th birthday.
Assuming an 8 % pa after-tax return (net of fees) the five ChildBuilder bonds once they vest and become owned by each grandchild are estimated to accumulate as follows:
- Grandchild number 1 (aged 14) will inherit a bond worth $125,908 in 11 years’ time
- Grandchild number 2 (aged 11) will inherit a bond worth $158,608 in 14 years
- Grandchild number 3 (aged 8) will inherit a bond worth $199,800 in 17 years
- Grandchild number 4 (aged 5) will inherit a bond worth $251,691 in 20 years
- Grandchild number 5 (aged 2) will inherit a bond worth $317,059 in 23 years
‘For Gloria,’ says Higgins, ‘whilst her ChildBuilder bonds are in their pre-vesting phase, she retains full ownership with discretion to make withdrawals at any time, even for her own purposes. So if Gloria changes her mind about a grandchild, she can make withdrawals to adjust the ChildBuilder’s value, or bring it to an end before it vests in favour of her grandchild by fully withdrawing. She also has flexibility of changing the vesting ages.
A special innovation with ChildBuilder’s insurance binds is an extensive menu of “intended purposes” is that Gloria can choose from for each bond’s use (once vested): – purposes like a first home deposit, a first car, education, wedding expenses etc
Specifying set purposes for each bond works in much the same manner as Gloria expressing non-binding instructions in her will for the use of a particular bequest. Whether or not ChildBuilder is used for its set intended purpose has no effect on the bond’s tax status.
Higgins says ‘ChildBuilder operates like a simple, mini-testamentary trust. This is because after Gloria’s death and until the bond vests in her nominated grandchild, it is only allowed to be accessed for the child’s maintenance or benefit.
ChildBuilder has advantages over testamentary trusts because it can flexibly tailored to meet small and large bequests and under a low cost, low maintenance “set and forget” tax-paid environment.
* ChildBuilder is an investment-linked life insurance contract (or bond) and a modernisation of a traditional type of contract also known as a Child Advancement Policy. It is governed by product rules, which are APRA-approved rules under the Life Act.
contact
Ross Higgins
Austock Life
managing director
03 8601 2056 0r 0407567774
life@austocklife.com
www.austocklife.com
Chris Hocking
Chris Hocking Strategies
chris@chstrategies.com.au
(02) 8215 1506
0418 603 694