What To Do With An Inheritance

Posted on:

Raffi Pailagian
Financial Planner / Managing Partner

What To Do With An Inheritance

Sometimes in life a small, or not so small, windfall comes our way. It can be tempting to view this money as a bonus and rush out and spend it on cars and clothes. But if you have inherited a reasonable sum, it is worthwhile taking the time to stop and think about how best you can make this money work for you. So what should you do with an inheritance?

Where To Start

There are two things you need to identify before you can make any decisions in relation to an inheritance:

  1. How much will the inheritance be? Costs will need to come out of the estate, so don’t count your chickens before they’ve hatched. Wait until you have a good idea what you are inheriting before making concrete plans.
  2. What is your current financial position? What you do with the money you inherit will depend not only on how much you inherit, but on your current circumstances. While you’re waiting for probate is a good time to take a look at your situation and think about where your inheritance might best be used. This includes what an inheritance might do to your tax position.

Is An Inheritance Taxable?

At the present time, money or assets you inherit are not taxable.  That said, there is a fee for obtaining probate on a will which is based on the value of the estate. That amount will be charged by the solicitor if you use one, or directly by the courts, and will come out of the amount inherited before any other disbursements are made.

However, once you have received the inheritance any interest or income earned is taxable.

Some Suggestions

Once you know how much you will be inheriting it’s time to make some plans, because you want to make the most of it. Now would be a good time to talk to a qualified financial planner. Some ideas to consider might include:

  • Reducing or eliminating any current debts like mortgages
  • Investing in shares or property
  • Topping up your superannuation. A Financial Planner can tell you how much you are able to invest in super with either before of after-tax contributions, and what the tax implications will be for you, or you can check it out here via this link.
  • Upgrading or renovating your home
  • Investing in your business

A Little Indulgence

When you are deciding on exactly what to do with your windfall, don’t be afraid to set a little aside for an indulgence. Whether that might be a new car or a trip of a lifetime for the family, this money often comes at a time of sadness, so putting a little towards bringing a smile on your face is not a bad thing.

If you have just received an inheritance or windfall and would like some advice on how best to use it to your advantage, Manly Financial Services have the expertise and experience to help.  Call us on 02 9976 3388 or contact us via the button below, to find out how.

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