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Child Endowment Plan Case Study

Using an investment bond

The following Case Study shows how to use an Investment Bond as a Child Endowment Plan, effectively minimising tax for the stakeholders – and simplifying the investment in an estate planning consideration.

The Case Study –

Steve, an airline captain and sworn bachelor is the proud god-parent of best mate James’ first born, Stephanie.
Steve wants to set up an investment for Stephanie to give her a financial head-start in life.

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 Stephanie when she turns 21.

Strategy and outcomes:

Steve decides to set-up a ChildBuilder and invests $5,000 as his child endowment plan for her.

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 not really fussed how Stephanie might use her Bond.

Based on an average 9% p.a. after-tax rate of return (net of fees), Steve calculates that on Stephanie’s 21st birthday, the $5,000 invested in her ChildBuilder should be worth $30,544.

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 ChildBuilder Bonds. Past performance is not indicative of future performance.>

Establishing your own Child Endowment Plan

The team of experienced financial planners at ContinuumFP has a range of strategies available to help you establish a tax effective investment strategy for a child in your life: to arrange a meeting with one of them for guidance and advice on the matter, call our office (on 07-34213456), or submit the Contact Us form on our website.

Our appreciation to Austock Life for approval to use this Case Study from their Child Builder ™ Bonds brochure.
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