Strategic Education Funding And Wealth Preservation

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Strategic Education Funding and Wealth Preservation

In 2023, a 37-year-old mother, insured under a life insurance policy, passed away unexpectedly. The life insurance policy provided for her family by covering the mortgage and setting aside funds for her children's private school education. Her husband, working with SMART Private Wealth, sought a way to ensure that these funds would not only cover immediate expenses but also support the children’s long-term educational needs and future goals.

Financial Summary

Initial Life Insurance Payout: Approximately $510,000 allocated to cover the mortgage and fund the children's education.
Investment in Education Bond:
- Initial Deposit: $510,000 invested in an education bond.
- Purpose: To fund private school fees for two children (currently in Grade 5 and Year 7) and support long-term education costs.
Projected Bond Growth:
- Annual Growth Rate: Compounded growth within the education bond.
- Projected Value by Year 12 Completion: Estimated to reach around $600,000, covering all private school fees and still leaving a substantial balance.
Education and Beyond:
- Education Costs Covered: Full funding for both children’s private school tuition through Year 12.
- Remaining Balance: Expected balance of approximately $600,000, available for future educational expenses like university or other personal milestones.
- Flexible Access After 10 Years: Funds can be withdrawn tax-efficiently if not used for education, supporting milestones such as a first home purchase.

This structured financial approach allows the family to maximise the education bond’s growth potential, ensuring immediate educational funding while preserving wealth for future needs.

Investment Strategy

With approximately $510,000 available, the family invested in an education bond. This investment aimed to cover the children’s private school tuition through Year 12 while also allowing the principal to grow over time, tax-efficiently. The children, one in Grade 5 and the other in Year 7, would benefit from a structured financial plan aligned with their educational timelines.

Projected Outcomes

Based on financial modeling with the education bond provider, it is estimated that by the time the youngest child finishes Year 12, the bond will have grown to around $600,000, even after covering all private school fees. This substantial growth not only ensures that the children’s primary and secondary education costs are fully funded but also leaves a sizeable amount for future educational needs, such as university tuition. After 10 years, if the children choose to use the funds for non-educational purposes, the bond can be accessed tax-efficiently to support milestones like purchasing a first home.

This education bond investment allowed the family to secure immediate and future educational funding for the children while preserving wealth for future needs. The strategy effectively leveraged life insurance proceeds to create a lasting legacy, providing flexibility, tax advantages, and peace of mind for the family.

Lasting Legacy with Financial Planning

Even amidst loss, there are ways to secure a strong financial future for your loved ones. Our advisers are here to help you create a resilient plan with tools like education bonds, ensuring your family's needs are met today and for years to come. Speak to our experts to explore how we can support your family's journey forward.