What to Do if You Just Received an Inheritance

If you have just received an inheritance, then it is crucial to understand the implications based on your individual financial situation, needs and goals. You may inherit financial assets like the proceeds of bank accounts, share ownership, superannuation death benefits, property and other assets.

Tax implications

Firstly, the good news is that there are no taxes that are imposed immediately upon the transfer of inherited assets from an estate distribution in Australia.

However, there may be tax implications depending on what you do with any assets that you inherit. Three of the most common tax implications are:

  1. Income tax being applicable on any future income you derive from any shares (i.e., dividends) or property (i.e., rental income) that you may inherit. You will pay tax on this income at your marginal rate, though you can deduct any eligible property expenses to reduce the amount of tax payable. A tax specialist like one of our team at Wilson Pateras can help you to legally minimise your tax obligation.
  • Capital gains tax (CGT) may apply to any inherited asset that you sell at a profit either upon inheritance or in the future. For example, any inherited shares or investment property that you may sell. CGT is a complex area and you should obtain professional advice based on your individual circumstances before deciding whether to sell any inherited assets.
  • Tax potentially being applicable to any superannuation death benefit that you may inherit. This depends on a range of factors, including your age, whether you were a dependant of the deceased person, whether the income is paid as a lump sum or income stream, and whether the super payment has taxable components or not.

Once again, superannuation is a complex area and it is worthwhile obtaining professional advice if you inherit a death benefit.

Transferring wealth to your children or grandchildren

Receiving an inheritance is often an opportune time to either begin or review your own estate planning for your children or grandchildren. Yet again, seeking independent professional advice is crucial to ensure you transfer your wealth via an up-to-date will in the most tax-effective way for your estate beneficiaries.

Once you have an estate plan in place, you should review it regularly with your advisor, especially when your individual circumstances or market conditions change.

Do you invest?

Any time you receive a financial windfall like an inheritance is a good time to review your investment strategy with an independent financial advisor. This will help you to decide how to use or most tax-effectively invest these funds to meet both your current needs and future goals.

Do you pay money into superannuation?

Boosting your superannuation could be a tax-effective way of investing some of your inheritance proceeds, depending on your individual financial situation, needs and goals. Obtaining independent advice from a superannuation specialist will ensure that you take advantage of any unused concessional contribution cap amounts to minimise any tax payable.

The benefits of getting professional financial advice

An inheritance is often the biggest financial windfall that many Australians ever receive. It is therefore worthwhile to seek independent financial advice about how these funds or assets could be best used, invested or transferred based on your individual circumstances and goals.

If you would like assistance in making informed decisions regarding your inheritance, please contact us on 03 8419 9800 to book a meeting with one of our financial advisors.

This content has been prepared by Wilson Pateras to further our commitment to proactive services and advice for our clients, by providing current information and events. Any advice is of a general nature only and does not take into account your personal objectives or financial situation. Before making any decision, you should consider your particular circumstances and whether the information is suitable to your needs including by seeking professional advice. You should also read any relevant disclosure documents. Whilst every effort has been made to verify the accuracy of this information, Wilson Pateras, its officers, employees and agents disclaim all liability, to the extent permissible by law, for any error, inaccuracy in, or omission from, the information contained above including any loss or damage suffered by any person directly or indirectly through relying on this information.  

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