Q.

My children, aged 14 and 11, recently inherited $50,000 each, and my husband and I are trustees. The terms of the will stipulated that the children should receive the money when they each reach 25 years of age. I would like to find a way to minimise the tax we have to pay on this money while keeping it safe and hopefully increasing the capital. Do you consider investment or insurance bonds to be a good way to proceed? In order to cut out some fees, is it possible to invest money in an index fund, rather than a managed fund, using this tax strategy?

Because the money is from an inheritance you will not be liable for the harsh childrens tax provisions. Therefore an investment by you as trustee in their name should suffer very little tax, particularly if the income is coming from franked dividends. If you do not believe you can locate an active managed fund that will outperform the index you can certainly opt for the index fund.