Receiving an inheritance should be a blessing, but for many, it is a burden. There is an added sense of stress surrounding the responsibility of receiving an inheritance and whether the funds need to be used in a certain way. It is an emotional time that can make decisions around an inheritance extremely overwhelming
Deciding how to spend an inheritance is a common dilemma with no straightforward answer. It will always depend on how much money you have received through your inheritance, as well as your current financial health.
Here are some key strategies to consider in your decision-making process.
Retirement savings
Regardless of your age, you should consider your retirement savings and whether your inheritance could support you in getting ahead. If your projected income for retirement is falling short, you may choose to make a personal contribution into super. This could help to boost both your savings, and your retirement income.
With personal contributions, you can also enjoy tax benefits with earnings on super taxed at a maximum of 15 per cent. You may also be eligible to claim a tax deduction for personal super contributions, and therefore, reduce your taxable income.
Pay off debt
If you have a mortgage, you might consider using your inheritance to pay off some or all of your home loan. Reducing your home loan balance can save interest and help you to build equity. If you have any other debts with a higher interest rate, such as personal credit cards or loans, it could be wise to pay these debts off first. It may not be the most glamorous way to spend your inheritance, but getting rid of the burden will make you feel as though a weight has been lifted off your shoulders!
Family considerations
If you’re in a comfortable financial position, you could consider sharing your inheritance with your children or grandchildren to help them get ahead. For many parents and grandparents, there is no greater gift than setting their family up for success.
You may choose to open a Term Investment for your kids or grandkids, allowing it to grow over time with a high-interest rate. Opening the door to homeownership is another way that you support your family in getting ahead. This may involve putting money towards a deposit and allowing them to enter the property market sooner rather than later.
Donate to those who need it
Your finances may be in a stable position, therefore, an inheritance wouldn’t have a major impact on your life. If this is the case, you could always look at ways to support those who could significantly benefit from your donation.
This may involve a one-off donation to a charity that is close to your heart, or you could consider leaving a gift in your will to a foundation that will benefit. The APS Benevolent Fund was created with this in mind. All donations support the Cerebral Palsy Education Centre (CPEC) to create healthier and happier lives for those children living with Cerebral Palsy. Members and supporters can donate at any time or set up a gift in their will, knowing with confidence that their contribution will be supporting families for many years to come.
Take your time and seek advice when you receive an inheritance
Losing a family member is a distressing and emotional time. There is no need to rush decisions about your inheritance during a time of sadness and stress. We always recommend taking your time and seeking financial advice when you are ready.
An expert will be able to help you make the smartest decision for your family and your future. Discussing your goals and plans with a financial adviser is the best way to put the funds to the best use.