Using Investment Bonds to Pass on Family Wealth Securely and Tax-Effectively

As property values rise and super balances grow, we’re seeing more of our clients look for ways to pass on wealth securely and effectively. With an estimated $4.3 trillion in assets expected to change hands in Australia by 2050, families are also concerned about reducing tax and avoiding disputes during this transfer.

One tool that families may consider using is an investment bond, a long-term, tax-effective structure that can help you build, protect, and transfer wealth across generations.

Why Investment Bonds Are Gaining Attention

1. Tax-Effective Transfers
   Investment bonds are tax-paid structures. Earnings inside the bond are taxed at a maximum of 30%, and after 10 years, withdrawals are generally tax-free. On death, proceeds are paid directly to your nominated beneficiaries tax-free, regardless of their relationship to you. This can be a powerful alternative to keeping all the funds in superannuation, where adult children can pay up to 17% in tax on death benefits.
2. Control Over How and When Wealth Is Accessed
   You can choose how and when beneficiaries access the funds — for example, making them available only once they reach a certain age, or limiting how much they can withdraw each year. This can help protect younger beneficiaries or those still building financial discipline.
3. Asset Protection and Dispute Prevention
   Unlike assets left in a will, investment bonds bypass your estate, meaning they are usually not subject to will contests or family provision claims. This helps ensure your wealth goes to your intended recipients. They also offer some protection from creditors or relationship breakdowns.
4. No Contribution Caps or Beneficiary Restrictions
   Unlike superannuation, investment bonds have no contribution limits and you can nominate anyone as a beneficiary. This makes them flexible for families wanting to support children, grandchildren, or even other relatives.
5. Useful for Trusts and Family Structures
   Investment bonds can also sit within family or discretionary trusts, providing control over when income is distributed and to whom, while keeping earnings tax-effective.

Helping Families Build a Lasting Legacy

Used as part of a broader estate and wealth transfer plan, investment bonds can:

• reduce the tax burden on your estate
• protect assets from disputes or external risks
• give you confidence that your wealth will be used as intended

At Morrows, we can help you assess whether investment bonds are a suitable solution for your family’s goals and build them into a tailored intergenerational wealth strategy.

If you’re planning to support your loved ones, either now or in the future, we encourage you to speak with your Morrows advisor to explore how we can support you and your loved ones.