Minimise tax on your Estate and leave your full financial legacy

Ensure any inheritance won’t be taxed when you pass your wealth to loved ones

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

Adult 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 is their time to pass on a financial legacy. Or, to ensure they are not taxed when they start using the bond as income.

Protect your legacy from being eroded by inheritance tax bills

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

She was shocked by the significant inheritance tax bill. At an already-difficult time, Rose was upset further by how much her mother’s wealth eroded when she passed.

Rose works full-time and is married with two kids. Her marriage is a little rocky and she wants to ensure her mother’s inheritance will not go to her husband if they ever split.

Beyond that, Rose’s main goal is to protect her mother’s legacy and do good with the money at the same time.

An investment bond can protect against tax payable when the funds are distributed

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 the event that Rose’s marriage ends, her husband has no claim to the money, even if she passes before her husband. This is because she has named her children as the beneficiaries.
• There are no caps to the initial first-year investment. Rose could invest the whole amount of inheritance she received from her mother.
• Investment Bonds are a tax-effective investment as tax is paid within the fund at 30% (which is less than her current tax rate).
• Rose felt reassured by having the flexibility to transfer ownership to her beneficiaries.
• Because tax is paid within the fund, she will not have to list any income earned on her tax return (provided she takes it out after 10 years).
• There is no tax payable when the money is distributed—this avoids more tax eroding the balance.

With an investment bond, Rose has a plan in place to protect her mother’s legacy. She is satisfied there won’t be any extra tax paid when it comes time to access the money.

Her money is earmarked for her children, but she can access the inheritance too if she needs to.

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).