An investment bond can be a good way to manage a lump sum inheritance.
Unlike Super, there is no cap to your initial investment amount, and is still taxed favourably (30% taxed within your fund).

Children who have been hit with a large inheritance tax bill often like to use investment bonds to ensure they won’t be taxed again when it’s their time to pass it on or when they start using it as income.

Investor Goal

  1. 1.

    I’ve got a big chunk of money that I want to preserve and grow.

  2. 2.

    I probably can’t add to it each year, but I still want it to grow.

  3. 3.

    I don’t need the money now, so I want to invest for a longer time period.

Their situation

Rose was the primary caregiver for her mother and when she passed, she inherited the house, other assets, and a large sum of cash.

She was shocked by the inheritance tax bill and upset by how much her mother’s wealth was eroded when she passed.

Rose works full-time and is married with two kids. Her marriage is a bit rocky and wants to make sure that her mother’s inheritance wouldn’t go to her husband if they were to split.

Her main goal is to protect her mother’s legacy and do good with the money.


Why an Investment Bond was a good strategy

An investment bond was a good solution for Rose because she could hold ownership but pass the money on to her children when the time was right.

  • In case Rose and her husband were to split because she has named her children as the beneficiaries, her husband would have no claim to it. Even if she were to pass before her husband.
  • There are no caps to the initial first-year investment so she could invest the whole amount.
  • Investment Bonds are a tax-effective investment as tax is paid within the fund at 30% (less than her current tax rate).
  • Having the flexibility to transfer ownership to the beneficiaries was reassuring.
  • Because tax is paid within the fund, she won’t have to list any income earned on her tax return, provided she takes it out after 10 years.
  • And there is no tax payable when the money gets distributed – avoiding more tax eroding the balance.


Rose felt relieved, she’d put a plan in place to protect her mother’s legacy and was satisfied that there wouldn’t be extra tax paid when it came time to access the money.

Her money was earmarked for her children, but if she needed to, she could access the money.

This information is intended to be general in nature and was prepared without considering your personal objectives, financial situation or needs. Please consider the information contained in the Product Disclosure Statement and Target Market Determination before deciding to acquire the products. Please obtain independent professional advice from a qualified financial adviser, registered tax agent or lawyer before making any decisions. Past performance is not a reliable indicator of future investment returns. Tax laws may change in the future which may affect an investor’s tax outcomes. While all reasonable care has been taken in producing the information, to the extent permitted by law, Foresters Financial makes no representations and gives no warranties of any kind in respect of the accuracy or completeness of the information. Financial services are provided by Foresters Financial Limited (ABN 27 087 648 842, AFS Licence No. 241421).

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