Home / finance / Investment bonds ‘ideal vehicle’ to protect will wishes: Foresters

Investment bonds ‘ideal vehicle’ to protect will wishes: Foresters

Transferring wealth between estates can be problematic, but investment bonds can add surety by dint of their position outside of a deceased estate according to Foresters Financial.

Just because a family member is bequeathed an asset by a departed loved one, that doesn’t mean the asset will fall into their hands. And with the proliferation of legal challenges to wills mounting, families are being urged to consider investment bonds as an alternative vehicle to transferring wealth in estates.

As opposed to most other assets, investment bonds are separate to the holdings within a deceased estate and therefore not subject to probate, a fact that makes it much more difficult to dispute the nominated beneficiary as the one who takes ownership.

According to Emma Sakellaris, chief executive at member-owned financial services company Foresters Financial, this feature has become increasingly significant as more people challenge testator wills.

  • “We’re observing an increasing number of legal challenges to testamentary charitable donations because family members feel aggrieved at the quantum of the gift, particularly when compared with their entitlement,” Sakellaris says.

    “When donations are challenged, charities are often highly reluctant to contest the matter in court for fear of a legal dispute reflecting poorly on their brand and impacting future donations and bequests – particularly in the current economic environment in which beneficiaries are under increasing cost-of-living pressures.

    “So, charities will often agree quietly to a reduced donation with the executor, effectively meaning the testator’s wishes have not been fully honoured.”

    The value of investment bonds in providing surety plays a strong role when individuals are intent on donating to a charity, she adds, as it provides “peace of mind” to both the charitable recipient and the testator.

    “It also means the charity is receiving untied funds without the involvement of an intermediary trustee, which would mean additional administrative and management costs and requirements,” Sakellaris says, adding that an investment bond negates the need to establish an Ancillary Fund (Private Ancillary Fund (PAF) or Public Ancillary Fund (PuAF), both of which have the potential to be complex and costly.

    “Donations to PAFs or PuAFs are irrevocable and cannot be accessed by the donor under any circumstances. But with investment bonds, the funds can always be accessed if and when required by the individual and the individual maintains control of the investment decisions and can switch between investment options during the lifetime of their bond,” she says.

    “This is good for charities because it means donors are more likely to bequeath larger sums with confidence knowing they can access the funds if there is a financial need. Importantly the donation can also be made to the charitable recipient during the testator’s lifetime, at the discretion of the testator.

    “It provides an opportunity for the individual to establish their philanthropic legacy during their lifetime, and potentially further contribute upon their passing.”

    Staff Writer

    Print Article

    $3.5 trillion wealth transfer disputes mean families need to think outside the box

    With so much capital changing hands through estate transfers in the next few years, the potential for confusion and contention is high. A new whitepaper from Foresters Financial serves as a reminder that there are other alternatives to traditional estate planning.

    Staff Writer | 28th Mar 2024 | More
    ‘Collective wisdom of the past’: Foresters Financial notches 175 years

    Key to the ongoing survival of Foresters, the CEO explained, has been the ability to continually reinvent its product offering over generations while retaining its core ethos of being a member-owned friendly society.

    Staff Writer | 29th Feb 2024 | More
    Securitisation stays strong through market turmoil, propped by non-bank lending growth

    Even the RBA is extolling the virtues of the role non-bank and private lenders play in Australia’s financial ecosystem, with the sector providing investors with another critical path to volatility protection through diversification.

    Lisa Uhlman | 15th Jan 2024 | More
  • Popular posts: