Investment bonds can avoid legal challenges to charitable bequeaths: CEO
The CEO of a financial services company says investment bonds are a safe choice for SMSF trustees to avoid legal challenges to charitable bequeaths and ensure their wishes are being honoured.
Emma Sakellaris, the CEO of Foresters Financial, a member-owned financial services company said investment bonds are separate from a deceased’s estate and not subject to probate, making it much harder to legally dispute the nominated beneficiary.
“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,” Ms Sakellaris said.
“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.”
Ms Sakellaris said for those individuals who feel strongly about donating to a charity, an investment bond will provide peace of mind to both the testator and charitable recipient.
“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 and avoids the complexity and cost of establishing an Ancillary Fund (Private Ancillary Fund (PAF) or Public Ancillary Fund (PuAF),” she said.
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. The individual maintains control of the investment decisions and can switch between investment options during the lifetime of their bond.
“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,” Ms Sakellaris.
“This provides an opportunity for the individual to establish their philanthropic legacy during their lifetime, and potentially further contribute upon their passing.”
