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Estate Planning Case Study

The following Estate Planning Case Study is just one example of a strategically sound use of investment bonds in securely providing for intergenerational wealth transfer.

Gloria, (in her mid 70’s) has substantial investment assets, including $2.2 million from the recent sale of her lifelong family home. As part of her estate planning, she wishes to leave $50,000 to each of her five grandchildren. (The youngest is two and the eldest is 14).

Under her Will, Gloria has provided for her own two children – one of whom is estranged – and for her late husband’s two children from his first marriage. She wants the peace-of-mind to place her grandchildrens’ investments beyond possible estate legal challenges.

As Gloria is a high-rate taxpayer, she also wants a tax-effective investment that will vest at each child’s 25th birthday. She wants certainty of this occurring irrespective of whether she is still then alive.  In Gloria’s situation, wise estate planning is vital.

Strategy and outcomes from this Estate Planning Case Study:

Set up five $50,000 ChildBuilder Lump Sum plans. Each Bond is set to automatically vest in each of Gloria’s nominated grandchildren at age 25, irrespective of whether Gloria is alive.

For Gloria – whilst the Bonds are in their pre-vesting phase she retains full ownership and control of each Bond, just in case she has a change of mind about a grandchild. This includes Gloria being able to make withdrawals, switch investments and alter Vesting Ages.

For Gloria’s estate (if she is deceased) – her legal representative will hold each ChildBuilder Bond “in trust” for each Nominated Child until vesting or until the child’s prior death.(1) The legal representative’s obligations and powers over the Bond are limited by law to be exercised only for the maintenance or benefit of the Nominated Child. Additionally, for both Gloria and her estate there is the benefit of no annual tax or CGT reporting obligations about the Bond.

For Gloria’s grandchildren – as each Bond is structured with a Vesting Age well after 10 years, at vesting each grandchild can elect to continue the Bond or fully or partially make “Tax-Free” withdrawals from it.

Gloria is also satisfied with these arrangements because as ChildBuilder is treated as an “excluded asset” from her estate, these arrangements should not be subject to legal contest by her estate beneficiaries under her Will.

Assuming an 8.0% p.a. after-tax return (net of fees), the five ChildBuilder Bonds that Gloria establishes are estimated to accumulate as follows:

Current Age
Estimated Value Vesting Age 25
One 14 $125,908
Two 11 $158,606
Three 8 $199,800
Four 5 $251,691
Five 2 $317,059

(1) Section 220 of the Life Act governs this situation.

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.

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

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