The need for sound estate planning

If you don’t properly plan out your estate, there could be real impacts for both your loved ones and the value of the inheritance. For instance, a lack of clear instructions could mean your estate is wrongly distributed with your intended beneficiaries missing out.

If your loved ones had to collate and source your assets, or even dispute their ownership, they may face high legal fees. This can also lead to lengthy delays and in some cases there may be tax implications as well. Fortunately, Centuria LifeGoals has been structured to give you a simple, flexible and tax efficient way to invest while also effectively arranging your estate for your loved ones.

The Centuria LifeGoals solution

But first, what is Centuria LifeGoals? Centuria LifeGoals is a kind of investment bond structure which is essentially a mixture of a managed fund and life insurance policy. The most exciting features of Centuria LifeGoals include:

• The investment bond structure has a 30% tax rate, and you can access your entire Centuria LifeGoals investment with no additional tax to pay if you hold it for 10 years (and meet the 125% rule).
• There’s no initial investment amount limit when establishing your Centuria LifeGoals account and you can start from as little as $500.
• With your LifeGoals investment you can nominate single or multiple beneficiaries who will receive the funds tax free if the investor passes away. These funds are paid outside of the estate and probate process.
• After this, you can invest up to 125% of the previous year’s contributions, allowing you to put away more money each year (if you exceed this the 10 year period simply resets).
• Unlike superannuation, you have the freedom to withdraw money whenever you want, and if you do so before the 10 year mark you pay tax at your marginal rate on any earnings less a 30% tax rebate¹.

Your Centuria LifeGoals investment can also be used to help maximise your estate plans, protecting your loved ones from unintended stress and allocating your assets in the way you want. To show you how this works, let’s go back to Laura’s scenario.

Case study: How Laura generated returns and security with Centuria LifeGoals

Investment bonds like Centuria LifeGoals are extremely useful for estate planning as the holder of the account can nominate anyone as their beneficiary in the event of their death. Investment bonds fall outside of an estate so aren’t distributed according to a will or subject to intestacy laws (when no will is left and an estate has to be decided upon in the courts).

When Laura sets up her Centuria LifeGoals, she only wants her daughters to inherit this money. She and her husband have already decided that neither he nor his son need the money so she wants her estate to be quickly and securely passed onto her children. She invests an initial $150,000 and contributes $200 per month in the first year and chooses to automatically increase this by 5% per annum.

With Centuria LifeGoals, upon Laura’s death the money would be paid to her beneficiaries (her daughters) with no tax to pay. Should Laura’s circumstances change and she needs the money she can access it at anytime.

With Centuria LifeGoals, Laura is the owner and life insured of the policy. During her lifetime she can still invest and withdraw funds with flexibility and then automatically pass it onto her beneficiaries. If she had chosen to use another structure (such as a unit trust or term deposit), this would form part of her estate.

This way, Laura can enjoy the rest of her action-packed life safe in the knowledge that her estate is arranged and confirmed for her loved ones thanks to Centuria LifeGoals. After 15 years of investing in a managed growth option, her contributions would have amounted to $201,789* and have generated a total value of $327,528* after tax and fees – fortunately Laura is still fighting fit and able to leave the money where it is for her daughters to one day inherit.

This scenario has been produced purely to illustrate how Centuria LifeGoals can be used by different investor profiles and are is fictional.
1. Source: Australian Tax Office as at 31 January 2021.
2. In years 9 & 10 this difference is discounted by one-third and two-thirds respectively.
*The investment returns are calculated using the LifeGoals Investment Forecaster Calculator, which can be accessed on the Centuria website (centuria.com.au/investment-bonds/investment-forecaster-tool/). Please refer to the calculator’s “Returns Calculation Assumptions” for the assumptions used in calculating the investment returns figure.
The investment returns are illustrative in nature and should not be taken to provide an estimate of the amount of investment earnings you will receive. The actual returns may differ to the calculated returns. Centuria does not guarantee the performance of the financial product, the repayment of capital or any income or capital return.