What to do when you receive an (unexpected) inheritance
The skyrocketing property market in Australia has created an unforeseen financial phenomenon which has seen a growing number of families receiving unexpected inheritances due to the significant increase in property values over the last few decades. For many Australians, these inheritances represent a transformative financial opportunity. However, without the right planning and advice, this sudden windfall can also bring challenges.
If you’ve recently inherited a property or a large sum of money, it’s natural to feel a mix of emotions—gratitude, responsibility, and even confusion about what to do next. Taking a strategic approach can ensure you make the most of this gift for your family’s future. Here are five critical steps beneficiaries should consider.
1. Pause and reflect
It can be tempting to make immediate decisions when receiving an inheritance, whether it's paying off debt, buying a new car, or splurging on a family holiday. However, it’s essential to take a step back and evaluate your financial position. Consider the values and intentions of the person who left you this gift and how you can use it to honour their legacy. Avoid making rushed decisions until you have a clear plan.
2. Engage a financial adviser
Navigating an inheritance can be overwhelming, especially when it involves substantial sums or property assets. Consulting a qualified financial adviser can help you make informed decisions aligned with your long-term goals. Whether it’s creating a strategy for investing, reducing debt, or planning for your children’s future, professional advice ensures your inheritance works harder for you.
A financial adviser, in conjunction with your tax adviser, can also guide you through the tax implications of your inheritance. While inheritances are generally not taxed in Australia, capital gains tax (CGT) may apply if you sell an inherited property, and proper structuring can help minimise these costs.
3. Assess immediate financial priorities
An inheritance can provide an opportunity to address pressing financial concerns, such as high-interest debt or an underfunded emergency savings account. Prioritising financial stability before making discretionary purchases can lay the groundwork for long-term security. A financial adviser can help identify which debts or obligations should take precedence.
4. Invest for the Future
For many young families, an inheritance can serve as a springboard to future prosperity. Investing part of the funds in a diversified portfolio can create long-term growth and income. Alternatively, contributing to your superannuation or purchasing an investment property can bolster your retirement planning and financial resilience. Align your investment choices with your goals, whether it’s financial independence, funding your children’s education, or achieving other family milestones.
5. Plan for generational wealth
Receiving an inheritance can be an opportunity to think about your own family’s financial future. Consider how you can set up structures, such as family trusts or updated wills, to pass on wealth efficiently to the next generation. Engaging in estate planning ensures your loved ones are supported and prepared to handle any future windfalls responsibly.
Making the most of an inheritance
While an inheritance is often referred to as a “windfall,” managing it responsibly requires careful thought and expertise. A financial adviser brings clarity and structure to this process, helping you align your decisions with your goals and values. By taking a considered approach, you can transform a one-time gift into a legacy of financial security and opportunity for your family.
If you would like to discuss your family’s financial strategy, please contact Simon at [email protected] or via (02) 4325 0884.
Simon Tarrant (AR: 001270872) is a Private Client Adviser at Morgans Financial Limited (AFSL 235410 /ABN 49 010 669 726). Simon is passionate about creating quality financial strategies that are tailored and customised to a clients’ lifestyle, financial goals and risk profile.
Disclaimer: While every care has been taken, Morgans Financial Limited makes no representations as to the accuracy or completeness of the contents. The information is of a general nature only and has been prepared without consideration of your individual objectives, financial situation or needs. Before making any decisions, you should consider the appropriateness for your personal investment objectives, financial situation or individual needs. We recommend you see a financial adviser, registered tax agent or legal adviser before making any decisions based on this information.
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