Receiving a financial windfall isn’t always an occasion for celebration. If it comes in the form of an inheritance following the loss of a parent, it’s likely to be a time of sadness and reflection – for you, your siblings and your extended family. In time, deciding how to manage the bequest will also become a consideration and seeking professional advice could help you make those decisions. Here are some of the things you may need to work through when that time comes.
Inheritances can take many forms: cash, property, shares, a superannuation interest, or simply treasured possessions accumulated over a lifetime. There can also be complicated tax considerations associated with some bequests. The form yours takes is likely to influence whether you choose to retain or sell it and, if the latter, the timing of its sale. It can be helpful to take professional advice before making any decisions.
Settling your parents’ estate can be reasonably simple if you’re the only beneficiary. However, if the inheritance is shared among two or more siblings, things can become more complicated, particularly if the interested parties have different ideas about whether assets should be retained or sold. It can be a stressful time and clear, open communication is the key to ensuring relations don’t become strained or acrimonious while you work towards an agreement. This might involve the parties accepting unequal shares of the various assets. For example, one sibling may opt to buy the others out of the family home, or forgo their entitlement to cash or a superannuation interest in return for a larger share of the property. You may wish to enlist professional help particularly if the proposed arrangements are complex or if large sums are involved.
There’s a good case for discussing the matter before, not after, your parents pass on. Doing so can increase the likelihood of averting trouble and ill will down the track. It can be a difficult topic to tackle, but talking through the terms of the will with all parties in advance, including who has been chosen to act as executor, can ensure everyone knows where they stand.
Your life stage and financial position are likely to influence the way you choose to deal with a lump-sum inheritance. If you still have a mortgage on your home, you may opt to use the funds to reduce or discharge it. Alternatively, if your superannuation is still in accumulation mode, you may wish to top it up with a non-deductible personal contribution. Depending on your age and account balance, there may be the option to contribute up to $300,000 in one year to boost your retirement savings.
Sharing the inheritance with the grandchildren may also be something you want to consider. With house prices high around the country, it’s become common for mature Australians to help their offspring get a foothold on the property ladder, with a lump sum or loan for a deposit. It’s sensible to consider your own financial position before agreeing to give or lend money and to ensure all parties are clear about the terms of the arrangement.
If you’ve been pondering a major purchase or have a holiday or special experience you’d like to tick off the bucket list, you may consider allocating a proportion of the funds to this. Doing so can sometimes give the item or event additional significance and be a way to honour your parent’s memory.
It’s possible you’ll decide on a combination approach of saving, sharing and spending. Given you may be dealing with a significant sum, it’s wise to take your time thinking it over and avoid sudden moves. Talking through your priorities and plans with a financial adviser can help you choose how to put the funds to best use.
Learning to live without a parent – someone you’ve known and loved your whole life – can be very difficult, and the sense of loss their death brings may take a long time to subside. It’s important you allow yourself time to grieve and connect with family and friends to share memories as you settle their affairs and plan for the future.
Any advice and information on this website is general only, and has been prepared without taking into account your particular circumstances and needs. Before acting on any advice on this website you should assess or seek advice on whether it is appropriate for your needs, financial situation and investment objectives.
Any general tax information on this website is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we recommend you consult with a registered tax agent.
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