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Estate planning: unlocking the power of investment bonds

estate planning unlocking the power of investment bonds

estate planning unlocking the power of investment bonds

As a nation we’re on the cusp of the largest transfer of wealth we have ever seen. Between 2021 and 2027, Australia is expected to experience the peak of the Baby Boomer retirement surge. According to CoreData research, Baby Boomers currently hold approximately $4.9 trillion¹ in assets. An estimated $224 billion is to be passed on as an inheritance each year by 2050 both by and to Baby Boomers.

This historically large group of retirees are rightfully focused on funding the retirement they deserve, but they’re also turning their minds to the next generation – thinking about the footprint they’ll leave on the world when they pass away. Their legacy.

In the uncertain economic environment we’re now navigating where inflation and interest rates are top of mind, Australians need more support than ever to help build, protect, leave and preserve their legacy. This means that more than ever before, estate planning should be an important element of your financial plan, regardless of what stage of life you’re in.

What is estate planning?

Estate planning is the process of structuring your financial and personal affairs so that your assets and possessions are distributed according to your wishes when you pass away. Think of it as a thoughtful roadmap to help your loved ones navigate their next steps when you’re not here to support them.

When most people think of estate planning, a Will is the first (and sometimes only) thing that comes to mind. But it is so much more than that. Although a Will is an important part of estate planning, it may not necessarily deal with the effective distribution of your assets according to your wishes. Estate plans also include other important matters including:

  • Enduring Powers of Attorney (where someone you trust is given the authority to make legal and financial decisions for you when you’re not able to yourself)

  • Powers of Enduring Guardianship (where someone you trust is given the authority to make personal, lifestyle and treatment decisions for you when you’re not able yourself - they are not able to make legal or financial decisions for you)

  • Medical treatment decision-maker appointments

  • Advanced care directives (a document outlining which healthcare treatments you would like to have, or refuse, for if you’re ever in a position where you’re unable to make or communicate decisions about your care or treatment)

Having these in place ensures that someone you trust can make important decisions for you according to your wishes, if you are unable to make decisions for yourself.

Why is estate planning important?

Estate planning is important for several reasons. It helps individuals and families manage their assets, ensure their wishes are carried out after their passing, and provide for their loved ones in the most efficient and effective way.

Here are some of the main benefits that come with a robust estate plan.

Asset distribution: Estate planning allows you to decide how your assets, including property, money, investments, and personal belongings, will be distributed among your beneficiaries. This can help avoid conflicts and uncertainties among family members after your passing.

Tax-effective wealth transfer: Proper estate planning can help reduce the tax burden on your estate and beneficiaries. It allows you to use strategies to minimise taxes associated with the transfer of wealth, potentially preserving more of your wealth for your loved ones.

Managing complex family or personal relationships: Estate planning helps navigate the intricacies of blended or complicated families, allowing you to balance the needs of different family members e.g., stepchildren and biological children.

Protecting minor or incapacitated beneficiaries: If you have children that are minors or beneficiaries with special needs, estate planning allows you to make arrangements to ensure they are cared for and provided for according to your wishes.

Maintaining family harmony: Clear and thoughtful estate planning can help prevent family disputes and disagreements over asset distribution, reducing the potential for conflicts among family members.

Peace of mind is the ultimate benefit of effective estate planning – knowing that you have taken steps to ensure your loved ones are taken care of, your assets are managed as you wish, and your legacy is preserved and delivered as per your wishes.


Using investment bonds to meet your estate planning needs

Leaving a legacy for those that matter most is one of the most emotional life goals Australians will ever work towards, so helping them achieve this is something we’ve been particularly focused on when building our investment solutions. A legacy is not something you only think of late in life, it’s something that’s built and protected over time.

Investment bonds can be a cost-effective, tax-efficient and convenient way to pass on your wealth to your dependants and other beneficiaries, with minimal fuss to help you leave a legacy with certainty and peace of mind.

Investment bonds have features that can be used in conjunction with, or as an alternative to, traditional estate planning tools – like Wills, testamentary trusts  and superannuation.

Investment bonds offer you the ability to transfer your wealth on your passing to your nominated beneficiaries with control. In some cases, an investment bond may also provide an option to transfer ownership of the investment bond to another person on your passing without any tax consequences.

Generation Life’s innovative next generation investment bonds

Generation Life’s LifeBuilder investment bond has a unique feature that allows you to plan tax-effective inheritances or the transfer of ownership of the investment bond, with the flexibility to choose whether it forms part of your will or legal estate.

The EstatePlanner feature provides you with control and certainty over how your investment is passed on to the right people, at the right time - for example, if the beneficiary is a child they can receive a lump sum or regular payments from age 16, depending on your wishes.

Below are two additional features Generation Life offers to help you manage your future wealth transfer and estate planning effectively:

Future Event Transfers

Individuals, joint owners, and trusts can transfer their LifeBuilder ownership to their intended recipients at a nominated future date, which can  be on the day you pass away. The transfer of ownership happens tax-free and the investment bond 10-year advantage period is not reset when the transfer occurs. There is also an option to set up a future regular income payment to an individual recipient after the transfer has occurred to provide a future set income stream.

You can also nominate someone to authorise additional one-off payments if required by the recipient in the future where you’ve placed a restriction on access to funds by the recipient.

Nominating a beneficiary

If you are an individual or joint investor you can nominate one or more beneficiaries (which can include individuals, companies, trusts and charities) to receive tax-free proceeds of the LifeBuilder investment on your passing. There is also the option to manage your nominations automatically should a nominated beneficiary pass away prior, using the joint survivorship or down-the-line nomination feature.

Are you a financial adviser?

Find out more about our leading estate planning strategies to help your clients leave a legacy. Contact one of our distribution managers.

1.   Core Data 2023

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