3 ways to transfer wealth using an investment bond

Investment bonds can be a cost effective, tax-effective and convenient way to pass on your wealth to your dependants and others, with minimal fuss. Investment bonds have unique 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 gifting and for making intergenerational wealth transfers), and superannuation.

1. Alternative to a will

Depending on your personal circumstances and the types of assets you are wishing to distribute, an investment bond can be used to transfer wealth as a non-estate asset (outside of your will.) Where an investment bond has a nominated beneficiary or instructions are provided to transfer ownership on your passing, the investment bond has a number of benefits:

• no additional costs involved in set up (compared to the cost of setting up a will)
• no requirement to obtain probate or administration of the estate
• benefit proceeds or ownership passes directly to the nominated beneficiaries or recipients (outside of the estate administration procedure)

2. Alternative to a testamentary trust

A testamentary trust may be established under a will to manage the transfer of wealth to beneficiaries. As an alternative to a testamentary trust, you can use an investment bond to plan ahead with peace of mind about how and when and to whom your estate’s wealth (or part of it) will be distributed to the next generation. An investment bond has a number of benefits compared to using a testamentary trust:

• not required to be set up under a will
• no additional establishment costs unlike a testamentary trust
• not requiring the appointment of a willing and competent trustee to manage the trust
• can invest non-estate proceeds without impacting on tax position of minor beneficiaries
• no ongoing tax reporting or investment earnings and administrative tasks

3. Supplementing your superannuation estate planning strategy

Investment bond beneficiary nomination features are similar to superannuation beneficiary arrangements to directly distribute death benefits and bypass your will and legal estate. The notable additional benefits include:

• No tax is payable under any circumstances by the nominated beneficiary as a result of the benefit payment. Proceeds are received tax-free in the hands of the nominated beneficiary.
• There are no restrictions on who can be nominated as a beneficiary. You can nominate any person or persons (including a company, trust or charity) to receive benefit payments.
• There is no trustee or issuer discretion - benefits are paid to the person(s) you have nominated
• Instructions once made do not have to be periodically refreshed or reconfirmed in future years, unlike many superannuation funds that provide binding nominations.

When considering the right estate planning approach for each of your assets, we recommend consulting a financial adviser to make sure your current and future investments are structured to meet your estate planning objectives.