Coming into an inheritance: key considerations

Receiving a financial windfall isn’t always an occasion for celebration. If it comes in the form of inheritance following the loss of a parent, it’s likely to be a time of sadness and reflection – for you and your extended family. In time, deciding how to manage any inheritance will become more pressing and getting professional advice could help smooth the process. Here are some of the things you may need to work through when that time comes.

Understanding what you’ve inherited

Inheritances can take many forms: cash, property, shares, superannuation interest or simply treasured personal possessions. There can 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 the timing of any sale. It can be helpful to get professional legal and or financial advice before making any decisions.

Managing shared ownership

If an inheritance is shared among two or more people, settling an estate can become complicated, particularly if there are 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 while you work towards an agreement. This might involve people accepting unequal shares of the various assets. For example, a brother or sister may opt to buy the others out of the family home, or trade their share of cash or a superannuation interest for a larger share of the property. This is where professional help can be really useful, particularly if the arrangements are complex or involve large sums.

Discussing inheritance with your parents can make things simpler down the track. It can be a difficult topic to tackle but talking through the terms of the will with everyone in advance, including who’s been chosen to act as executor, can ensure everyone knows where they stand.

Establish your priorities

It’s possible you’ll decide on a combination of saving, sharing and spending your inheritance. However, taking the time to think things through before deciding anything is key. Talking through your priorities and plans with a financial adviser can also help you choose how to put your funds to best use.

Your life stage and financial position are likely to influence what you do with a lump-sum inheritance. If you still have a mortgage on your home, you may decide to reduce or discharge it. Alternatively, you might top up your super with a non-deductible lump sum contribution.

Sharing the inheritance with your children may also be something you want to consider. It’s become common for parents to help their kids get a foot on the property ladder by investing a lump sum or buying an investment property for them.

If you’ve been thinking about a major purchase or have something you’d love to tick off the bucket list, you may decide the time has come. It can be a lovely way to honour your parent’s memory.

SOURCE: https://www.mlc.com.au/personal/blog/2019/03/coming-into-inheritance