Receiving an inheritance can be complicated for many, especially if a significant value is involved. On one hand, you’ve lost someone you love, and you’re working through grief. On the other hand, you suddenly have to get your head around new wealth and everything that comes with it.
The ActOn Wealth team often provides inheritance financial advice to clients. Over time, we’ve seen first-hand the highs, lows, pitfalls and red tape inherent in newfound wealth. So, we’ve created this list of the ten most valuable inheritance advice tips we can offer. We hope this is useful, and don’t hesitate to contact our team if you’d like to discuss this or our broader financial services.
What is the best thing to do with inherited money?
Contact Us
Contact our team for bespoke advice about protecting and growing your wealth.
Perhaps the best inheritance investment advice we can offer is not to count on it. Until that wealth is transferred, you should never count your chickens. Alas, people can change their wills, third parties can launch costly and lengthy contests, poor communication can result in incorrect expectations… Don’t plan for it or spend it until it’s actually sitting in your account or titles are transferred to your name.
In other words, don’t rush into anything just yet. Take it slow. You didn’t have that wealth yesterday, and you don’t have to have a plan in place by tomorrow. You’re not just dealing with a new financial reality; you’re dealing with grief. There is no expectation or burden on you to have a plan immediately. If anyone is pressuring you to make immediate decisions, stop listening. You can afford to sit on this for a while and make decisions when you have the right headspace. Take the pressure off yourself and ease into this.
If you have no idea what to do with inheritance, seeking professional advice can make a seismic difference. Actually, it’s even a great move when you do have an idea. Why? Because financial advisers can give you peace of mind that you’re on track or provide you with alternative options that could help you get from A to B more efficiently and with greater rewards.
ActOn’s specialist inheritance financial advice takes a holistic look at your situation, considers your lifestyle and long-term financial goals, and develops a two-pronged approach to safeguard and grow your wealth. As a boutique Melbourne financial planning firm with its own Australian Financial Services Licence (AFSL), our advice is bespoke to clients. It’s based on what serves them best, not what might give us an ideal kickback.
Good news – you don’t have to pay tax on inheritances in Australia.
Not so good news – depending on your circumstances, you very likely have to pay tax on any wealth you grow from your inheritance.
It’s fair to say that if you’ve stepped up to a new league of wealth, you’ve also stepped up to a new level of tax obligations and complexities. Do you want to sell an inherited property? As far as the ATO is concerned, inherited property and Capital Gains Tax are very close bedfellows, so expect them to want to take a slice of your sale.
A big part of understanding what to do with an inheritance is also understanding what not to do. Decisions can have consequences, so it is crucial to know your tax liabilities and how you might reduce them. ActOn Wealth’s tax planning accountants can help you make strategic financial decisions to minimise your tax.
We will assume that your inheritance is considerable enough to comfortably cover your debt and still leave plenty aside. Paying debt saves money in the long run, but it can also lead to better quality of life. Debt can weigh you down financially and mentally. Here at ActOn Wealth, we’re big believers in the quality of life. Growing your wealth should never come at a cost to your well-being.
There are three main ways to invest in and grow your super fund. They are:
Your employer pays pre-tax directly into your super. You can ask your employer to direct part of your salary into your super fund before tax is taken out. This reduces your taxable income and can grow your super faster due to the concessional 15% tax rate (lower than most income tax brackets). The annual concessional contributions cap is $27,500 (as of 2024-25).
You can make additional contributions to your super from your take-home pay. These aren’t taxed going in (because you’ve already paid income tax), but they can grow tax-free in your super. The current cap is $110,000 annually, or up to $330,000 using the bring-forward rule (if you’re under 75).
These are voluntary contributions from your after-tax income that you claim as a tax deduction.
🛈 Salary Sacrifice Contributions, Personal Deductible Contributions, and Superannuation Guarantee Contributions fall under the Concessional Contribution.
The Superannuation Carry Forward Rule
Pending eligibility, the Carry Forward Rule permits you to increase the current year’s before-tax contribution limit by carrying forward any unused amounts from previous years’ limits. This increases your present year’s cap. However, there are some caveats:
The Superannuation Bring Forward Rule
The Bring Forward Rule applies to after-tax contributions and enables you to bring future limits forward and use them earlier. However, there are several caveats:
Speak to our team about bespoke superannuation advice for your situation.
A diversified investment portfolio helps to reduce and mitigate risk while generating stable returns. As part of our financial planning, we undergo a thorough risk assessment to understand where you (and your financial situation and goals) sit most comfortably. From that, our experienced wealth creation advisors develop an investment plan that aligns with your risk profile and preferences.
Safeguarding your inheritance money should be as much of a priority as growing it. Trust structures can be a smart way to prevent your inherited funds or assets from becoming directly associated with others, and to shield it from any claims made against you.
It’s also worth thinking about the legacy you want to leave so others can benefit the way you have. Estate planning is essential to ensure your wealth is allocated per your wishes. ActOn Wealth’s financial advisers have significant experience and skills in this area and can provide you with bespoke information and advice.
Giving to charity is an opportunity to share your good fortune with others in need. It can also serve as a way to offset tax. For significant levels of wealth, it could even be worthwhile considering the establishment of a charitable trust or foundation. Our financial planners can provide you with all potential options and map out the best strategy for your financial situation.
It’s important to remember how this all happened in the first place; someone who loved or deeply cared for your well-being has left you an enduring legacy. They wish you to have a good life. Looking after yourself is a way to honour your inheritance, and how you do this is very personal. But among the whirlwind of emotions, decisions, and discoveries this path will take you down, just remember to check in with and care for yourself.
Inheritance financial planning needs to be cool-headed, considered and bespoke to your situation. Why not organise a no-cost, no-obligation meeting with our financial advisors to see how we can help?
Future-proof your inheritance with expert financial planning.
Quick Links
About Us
Wealth Hub
FSG’s
Knowledge Centre
FAQs
Credit Guides
Privacy Policy
Dispute Resolution Policy and Procedure
Testimonials
News and Resources
Industries
Contact us