Receiving a large inheritance can be life-changing, and it can also leave you wondering what to do first. This guide walks through what to do with inheritance money, using the same steps Morgans advisers walk clients through every day.
Key Takeaways
- Press pause for 30 to 90 days before making big decisions, while you confirm what you've received and any tax implications.
- Build a plan that fits your goals, whether your inheritance is the average $125,000 or considerably more.
- Get advice early, especially if you're considering selling an inherited property within the 2-year CGT window.
Step 1: Pause and assess your situation
Before making big choices, slow down. The average Australian inheritance is around $125,000, and most recipients are in their fifties, according to Productivity Commission research, so whatever size yours is, these first steps still apply.
- List the assets you have inherited: cash, property, superannuation, shares, term deposits, insurance proceeds, or a business interest.
- Confirm control and timing. Has probate been granted? Are there executor timelines or sale constraints?
- Check any liabilities. Some assets may come with debts, fees, rates, or ongoing costs.
- Gather documents. Will, probate, estate distribution statement, title records, super death-benefit statements, cost-base records for property and shares.
Check for lost super too. If the person who died had super accounts you don't know about, our guide to finding lost superannuation can help track them down.
Short term, consider holding funds in high-interest savings or term deposits while you complete the groundwork. ASIC's Moneysmart has clear tips on handling large amounts of money.
Step 2: Understand the emotional impact
An inheritance often follows the loss of a loved one. It is normal to feel pressure to act quickly. Give yourself time.
- Avoid large purchases until you have a plan.
- Set simple rules. For example, no irreversible decisions for 30 to 90 days.
- Write down your goals and values. What will this money do for you, your family, or future generations?
If you feel rushed by offers or schemes, step back and check for red flags. Scamwatch has practical guidance.
The 30 to 90 day rule isn't arbitrary. It's roughly how long it takes most people to move from the initial shock of a loss to a clearer headspace for decisions, which is exactly why patience here tends to pay off later.
Step 3: Map your goals and timeframes
Your strategy should mirror when you will need the money.
- 0 to 2 years (short term): capital protection and liquidity. Cash, term deposits, or an offset account.
- 3 to 7 years (medium term): a diversified mix of income and growth.
- 7 years plus (long term): growth-focused assets with disciplined risk management.
Align each dollar with a job: emergency fund, debt choices, home or investment property plans, children's education, retirement savings, or charitable giving.
For example, if part of your inheritance is earmarked for a home deposit within two years, that portion belongs in cash or term deposits, not shares. Mixing up the timeframe is one of the most common ways a good plan goes wrong.
Step 4: Tax and rules to consider
Australia has no inheritance or estate tax, but a few things can still trigger tax once you hold inherited assets:
- Capital gains tax if you sell an inherited property
- Tax on some superannuation death benefits, depending on your relationship to the deceased
- Changes to Centrelink assessments under the income and assets tests, if you receive support payments
The rules here are detailed enough to deserve their own explanation. Read our full guide on inheritance tax in Australia for the specifics, including CGT timing rules and how super death benefits are taxed.
Step 5: Build a financial strategy
This is where the kind of financial advice inheritance recipients need most makes a clear difference. Inheritance-specific advice looks different to general financial planning, since it usually means integrating a lump sum into an existing financial life rather than starting from scratch.
That might mean coordinating the timing of a sale with your income for the year, or deciding whether topping up super makes sense given your existing balance and contribution caps.
A tailored strategy can help you:
- Preserve capital while generating reliable income.
- Create an optimised tax position.
- Invest based on your risk profile and timeframes.
- Plan for retirement or intergenerational goals.
Common strategies include:
- Diversified portfolios. Combine cash, fixed income, Australian and global shares, property, and alternatives.
- Superannuation contributions. Use concessional and non-concessional contributions where appropriate, subject to caps and personal circumstances.
- Debt reduction or offset use. Compare the after-tax, after-fee return from investing with the guaranteed saving from reducing non-deductible debt.
- Property investment. Weigh cash flow, rates, maintenance, tenancy risk, and diversification.
- Philanthropy. Structured giving can align with your values and tax planning.
Step 6: Make considered debt decisions
A lump sum tempts quick mortgage paydowns or new borrowing. Test options with advice.
- Offset first. Parking cash in an offset account can cut interest while keeping flexibility.
- Compare outcomes. Paying down non-deductible debt is often strong, but do not drain all liquidity.
- Avoid new lifestyle debt. Large purchases can wait until your plan is set.
Step 7: Invest with discipline
Good portfolios are simple, diversified, and low friction.
- Use broad market building blocks supported by high-quality research.
- Keep fees and taxes in focus.
- Rebalance periodically to maintain your risk level.
- Document an investment policy statement you can stick to when markets move.
Step 8: Update your own estate plan
An inheritance is a prompt to review your legal documents.
- Update your will and enduring powers if your situation has changed.
- Review super nominations and life insurance beneficiaries.
- Consider a testamentary trust if suitable for family protection or flexibility.
Learn more about estate planning with a Morgans adviser.
Step 9: Avoid common mistakes
Many Australians make avoidable errors with inherited wealth, such as:
- Making large purchases without a plan.
- Ignoring tax consequences when selling assets.
- Failing to diversify or taking concentrated bets.
- Chasing high returns promised by unlicensed operators.
- Not seeking professional advice early enough.
Use checklists, document your decisions, and keep a record of key statements and dates.
Concentrated bets are especially tempting when a single stock, property, or the family business feels safe because it's familiar. Familiarity isn't the same as diversification, and a large inheritance is exactly the kind of money that benefits most from spreading risk.
Step 10: Work with a Morgans financial adviser
Every inheritance is unique, and so is your financial journey. This kind of advice typically starts with a single conversation to map out your situation, not a sales pitch. From there, your adviser works alongside your accountant and solicitor so tax, super, and estate decisions all point in the same direction, instead of being handled separately.
A Morgans adviser can help you:
- Clarify goals, timelines, and trade-offs.
- Model debt versus invest decisions.
- Design a diversified portfolio to suit your risk profile.
- Coordinate with your accountant and solicitor on tax and estate matters.
- Set up a review rhythm so your plan stays on track.
You can also learn more about our superannuation advice and financial planning services.
Contact a Morgans adviser for a free consultation, and start turning your inheritance into long-term financial security.
Frequently asked questions
Do I pay tax on inherited money in Australia?
There is no inheritance or estate tax. You may still pay tax on income or gains from inherited assets, including CGT on property or shares you inherit, or tax on some superannuation death-benefit payments depending on your relationship to the deceased.
Should I pay off my home loan or invest the inheritance?
It depends on interest rates, risk tolerance, cash flow, and timeframes. Many clients park funds in an offset account first, then decide with advice, comparing the guaranteed saving from reducing debt against the expected after-tax return from investing.
What if I inherit a house?
Decide whether to live in it, rent it, or sell. Each option has different tax, cost, and lifestyle impacts, and CGT timing rules can affect your decision, so speak to your adviser and tax specialist before you sign a contract.
Who should I talk to first?
Start with a licensed financial adviser and a tax accountant. If property or complex structures are involved, engage a solicitor. Your financial adviser can coordinate the team and build a step-by-step plan.
How do I find the right financial adviser for my inheritance?
Look for a licensed adviser who deals with inheritances regularly, not just general investing. Ask how they'd coordinate with your accountant and solicitor, since inheritance advice usually touches all three.
What if I've inherited alongside siblings or other family members?
Shared inheritances often involve decisions about jointly held assets like a family home. It's worth getting your own advice even when the inheritance is shared, since your goals and tax position may differ from theirs.
References
Productivity Commission: Wealth transfers and their economic effects
Australian Taxation Office: Tax on super benefits
This article contains general advice only and does not take into account your individual objectives, financial situation, or needs. You should consider whether this advice is appropriate for you and seek personal advice from a Morgans adviser before making any financial decisions.
