Life Events Bond
Child Advancement Option
You can invest on behalf of a child under the age of 16 and transfer ownership to that child on a date selected by you. The only requirement is that the transfer must occur between the child’s 10th and 25th birthday. On the transfer date (known as the “vesting” date) ownership of the policy passes to the child free of any Capital Gains Tax (CGT).
Should you as Bond owner pass away before the transfer date, the Life Events Bond is held by your executor(s) until the vesting date.
The Life Events Bond provides the ability to nominate one or more beneficiaries who will receive proceeds (tax free) on your death as the last surviving life insured. The proceeds will be passed directly to your beneficiaries and not form part of your estate¹.
Nominations can be changed at any time.
Case Study - Child Advancement Option
Lois is a self-funded retiree with 3 grandchildren aged 10, 12 and 15. Lois wants to invest $25,000 for each grandchild with the funds to transfer to them on their 25th birthday. As Lois is in her late sixties, she wants certainty that the funds will pass to her grandchildren whether this occurs during her lifetime or not.
Lois establishes 3 Life Events Bonds, 1 for each grandchild, using the Child Advancement Option and nominates each grandchild’s 25th birthday as the vesting date. Lois remains in control (as owner of the Bond) up until the vesting date when full ownership switches to her grandchildren. If Lois dies before the vesting date the estate would be responsible for the Bond until the child reaches vesting age.
Assuming the funds earn 5% pa each year they are invested, Lois' grandchildren will receive between $40,722 and $51,973 to use as a house deposit, pay off University fees or purchase a new car, taking the pressure off at an important point in their life.
If by the vesting date the Bond has been open for 10 years then proceeds can be withdrawn with no tax consequences for her grandchildren.
Case Study - Beneficiary Nominations
Henry and Mary, aged 70 and 68, have just become grandparents again. They decide to set up an investment that can be shared equally amongst their 3 grandchildren.
Henry and Mary open a Life Events Bond with $60,000 and nominate their 3 grandchildren as beneficiaries each receiving a 30% share. Mary’s sister recently died of cancer and they decide to leave a 10% share to the Cancer Council of Australia. If Henry & Mary have additional grandchildren they can simply change the Beneficiary Nominations and percentage allocations. Funds will pass to their nominated beneficiaries outside of the Estate.
Assuming Mary was the last to pass away and the funds were invested for 12 years at an average of 6.5% pa, each of their grandchildren will receive $38,323 tax free and the Cancer Council a cheque for $12,774.
¹ Care is needed in NSW as investment bonds may be included in the notional estate if a family provision challenge is made. We recommend you seek independent legal advice.