Written by:
Joel Simmonds
Head of Advice
Inheriting money, property, or investments can be life-changing. While it provides opportunities for financial growth, it can also feel overwhelming if you’re unsure of what steps to take.
Whether you’re wondering what to do with an inherited house, how to invest inheritance money, or how to handle debts, this guide will provide practical, detailed advice to help you make confident decisions.
The immediate aftermath of receiving an inheritance can feel emotional and overwhelming. You may feel pressure to act quickly, especially if you’ve inherited significant assets or if others are offering advice. However, rushing into decisions about inheritance money, property, or investments can lead to mistakes you regret later.
Why Taking Time Matters:
Practical Advice:
Inheriting assets is both a financial and emotional responsibility. Seeking the right support can help you manage the pressure and avoid common pitfalls.
It’s easy to feel pressure to act quickly — selling a house, paying off debts, or making big purchases. Rushing can lead to decisions you might regret. Instead, take the time to assess your options carefully.
At our practice, we’ve helped countless Australians manage their inheritances, and we’ve observed common mistakes. Many people feel compelled to act too quickly, leading to choices they later regret.
An inheritance can feel like a windfall, but it’s also a long-term responsibility. By pausing, planning, and seeking advice, you can avoid these mistakes, make informed decisions, and honour your loved one’s legacy.
Taxes are a significant concern for Australians managing an inheritance. Understanding the rules can help you avoid surprises and plan effectively.
Key Tax Rules:
Cash Inheritance:
Inherited Property:
Inherited Investments:
Practical Steps:
Before deciding what to do with your inheritance, it’s helpful to understand how the process works.
1. Estate Settlement and Ownership Transfer
2. Understanding Obligations Beyond Taxes
Inheriting a house can feel like both a financial opportunity and a responsibility. Your decision depends on your financial situation, the property’s condition, and your goals.
1. Keep the House
2. Rent the House
3. Sell the House
Receiving a cash inheritance opens doors to financial possibilities. But the question remains: what to do with inheritance money in Australia?
An emergency fund provides financial security for unexpected expenses. Aim to save at least three to six months of living expenses in a high-interest savings account or an offset account.
Why It’s Important:
Consider using part of your inheritance for immediate needs, such as:
Avoid spending large amounts on wants instead of needs. This includes things like impulse purchases, luxury items or lifestyle upgrades that don’t align with your long-term goals.
Deciding whether to use your inheritance to pay off your mortgage depends on your financial goals and the interest rate of your loan.
Benefits:
Drawbacks:
Offset Account:
Redraw Facility:
Example:
If your mortgage interest rate is 3%, but you could earn 6% by investing, it might make more sense to invest the funds instead of paying off the loan entirely.
On the other hand, if your mortgage interest rate is high, you may be better off placing your inheritance into an offset account. This allows you to save on interest and achieve a guaranteed return on your money without the risks associated with investing.
If you’ve inherited shares, ETFs, or managed funds, these assets require careful evaluation. Deciding what to do with inherited investments depends on their performance and your goals.
Understand What You’ve Inherited:
Evaluate Performance:
Capital Gains Tax:
Dividends and Distributions:
If you’re wondering what is the best way to invest inheritance money, the answer depends on your financial goals, risk tolerance, and time horizon. Whether you’re planning for immediate needs or long-term growth, investing can help you make the most of your inheritance.
Here are some of the most effective ways to invest inheritance money in Australia:
Why Choose Them?
What to Watch Out For:
Why Choose Them?
What to Watch Out For:
Why Choose Them?
What to Watch Out For:
Why Choose Them?
What to Watch Out For:
Take these important steps to ensure your inheritance investment decisions are well-informed:
Understand Tax Implications
Plan for Immediate and Long-Term Needs
Align with Your Goals
A balanced portfolio spreads your inheritance across different asset types to manage risk while targeting growth. Consider:
1. Failing to Consult an Adviser
2. Investing Without a Plan
3. Spending Impulsively
Let’s say you inherit $100,000. Here’s a zoomed-out view of how you might allocate it.
Be mindful that everyone’s financial situation is different, so use this example as a guide only and seek professional advice to clarify what would be best for you.
This approach balances short-term needs with long-term growth while keeping part of your inheritance accessible.
If you take away just one piece of advice, let it be this: talk to a financial advisor.
An inheritance is a significant financial and emotional event. Whether it’s money, property, or investments, the decisions you make now will have long-term impacts on your financial future. While it might be tempting to handle everything on your own, the complexities of tax implications, investment strategies, and financial planning are too important to leave to guesswork.
A financial advisor can provide you with clarity and confidence. They’ll help you navigate decisions like whether to pay off your mortgage or invest, how to manage capital gains tax, or how to build a balanced portfolio that grows your wealth. With their expertise, you can avoid common mistakes, maximise opportunities, and ensure your inheritance aligns with your goals.
Most importantly, a financial advisor removes the burden of going it alone. They’ll give you a clear plan, tailored to your situation, so you can focus on honouring your loved one’s legacy and building a secure future.
Don’t let uncertainty hold you back—reach out to a trusted financial advisor today. It’s the best step you can take to make the most of your inheritance.
In this video, Financial Adviser Erin Truscott shares how we help clients create tailored investment strategies that align with their unique financial goals.
Have questions about managing your inheritance? You’re not alone. Deciding what to do with inherited money, property, or investments can feel complex. To help, we’ve answered some of the most common questions clients ask us, so you can approach your decisions with clarity and confidence.
The best thing to do depends on your financial goals. You could use the funds to pay off high-interest debt, invest for long-term growth, contribute to your superannuation, or build an emergency fund. It’s always wise to consult a financial adviser to create a tailored strategy.
This depends on factors like your mortgage interest rate and investment goals. Paying off a mortgage provides financial security and saves interest, but investing could offer higher returns over time. Using an offset account or a redraw facility can balance both options.
You typically have three options: keep the house, rent it out, or sell it. Your decision will depend on your financial situation, the property’s condition, and your goals. Be mindful of costs like rates, insurance, and maintenance, as well as potential Capital Gains Tax (CGT) if you sell.
Cash inheritances are generally not taxed in Australia. However, income earned from investing the money (e.g., dividends or interest) is taxable. For property or investments, CGT may apply when you sell the asset. Consult a tax accountant to understand your obligations.
The best investment depends on your goals and risk tolerance. Popular options include:
Yes, you can invest inheritance money into your superannuation, which offers tax benefits and grows over time. This is particularly beneficial if you’re close to retirement and eligible for concessional or non-concessional contributions.
Start by assessing their performance and alignment with your financial goals. You can choose to keep, sell, or diversify the investments. Be aware of Capital Gains Tax (CGT) if you sell and consider consulting a financial adviser for guidance.
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Inheriting money, property, or investments can be life-changing. While it provides opportunities for financial growth, it can also feel overwhelming if you’re unsure of what steps to take. Whether you’re wondering what to do with an inherited house, how to invest inheritance money, or how to handle debts, this guide will provide practical, detailed advice to help you make confident decisions.
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This is a publication of Direct Wealth Pty Ltd, a wholly owned subsidiary of Direct Wealth Group Pty Ltd.
General Advice Warning – The information contained in this article is of a general nature and does not take into account your particular objectives, financial situation or needs. You should therefore consider the appropriateness of the advice for your situation before acting on it. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decisions regarding any products or strategies mentioned in this publication.
Disclaimer – While all care has been taken in the preparation of this blog, to the maximum extent permitted by law, no warranty is given in respect of the information provided and accordingly, neither Direct Wealth nor its related bodies corporate, employees or agents shall be liable for any loss suffered arising from reliance on this information.
