Receiving an inheritance can be both a blessing and in some circumstances a burden. While it can provide financial security or the opportunity to grow your wealth, it also can come with tax considerations that may require the use of an accountant Melbourne for careful tax planning. Whether you’ve inherited cash, property, or investments, the way you manage your inheritance can have long-term consequences.
Here’s a guide to help you make informed decisions.
1. Take Your Time
Before making any big financial decisions, give yourself time to process the inheritance. Avoid the urge to spend impulsively or make immediate investments (it maybe worth consulting a financial advisor Melbourne before diving into any investments). Taking a pause allows you to assess your needs and goals without making quick rash decisions.
2. Understand What You’ve Inherited
Inheritance can come in various forms:
- Cash
- Real estate
- Shares or managed funds
- Superannuation death benefits
- Personal items or collectibles
Each type may have different tax implications, holding costs, and potential returns. If the estate also includes complex assets like trusts, companies, or overseas holdings, best to seek advice from an accountant Melbourne or financial advisor.
3. Consider Tax Implications
In Australia, there is currently no inheritance tax. However, there may still be tax consequences depending on the asset:
- Capital Gains Tax (CGT) may apply if you sell inherited property or shares.
- Superannuation death benefits can be taxed if paid to a non-dependent.
- Income-generating assets (like investment properties) can increase your taxable income and result in tax to pay.
A qualified accountant Melbourne can help you minimise your tax liabilities and structure your finances effectively.
4. Pay Off Debts Strategically
Using part of your inheritance to reduce or eliminate high-interest debts—like credit cards or personal loans—is often a smart move. However, consider the opportunity cost of paying down low-interest debt like home loans, especially if you could generate a better return through investing. Again, best to contact a financial advisor Melbourne to advise accordingly.
5. Invest for the Future
Once your immediate needs and debts are addressed, investing the remainder can help preserve and grow your inheritance. Depending on your risk profile and financial goals, options include:
- Managed funds or ETFs
- Shares
- Real estate
- Superannuation contributions (subject to caps)
- High-interest savings or term deposits
Diversification and a long-term outlook are key.
6. Seek Professional Advice
A financial advisor Melbourne can help you develop a tailored plan based on your goals—whether that’s early retirement, buying a home, helping your children, or building wealth. Legal and tax advice from an accountant Melbourne may also be necessary, especially for large estates or blended family situations.
7. Update Your Own Estate Plan
Inheritance is a reminder to put your own estate in order. Update or create:
- A will
- An enduring power of attorney
- A binding death benefit nomination for your superannuation
- Any trusts or guardianship provisions
Final Thoughts
An inheritance can be a life-changing event – but without proper management, it can be easily eroded. With a calm, informed approach and the right advice, you can turn your inheritance into a life changing event. Please contact us for a free no obligation discussion.
