Wednesday, December 5, 2012
A US study indicates that one in five people who receives an inheritance of $100,000 or more spends it rather than saving or investing at least some of the money. The Border Mail believes these study results accurately reflect what happens in Australia too.
The average person only saves half of what they receive. With superannuation balances looking thin and the fact that government subsidies for elderly care are being reduced, Australians would do well to put most of an inheritance away.
There are two groups of people when it comes to inheritances: those who view the money as a legacy and those who view it as a lottery win. The first group usually feel a responsibility to use it wisely because they acknowledge that their parents worked hard for the windfall they are receiving.
Brendan Burwood, the managing director of ipac financial care, advises that you should pause as soon as you receive an inheritance. Then consider any tax implications if you liquidate assets. Next, look at the potential effect of your age-pension entitlements. After that, you should consider whether the inheritance can be used to pay off credit cards and other debt or provide an emergency fund you never had. You might also be able to help other people with your inheritance. And finally once you have considered all of those possibilities, then you could consider indulging yourself.
While most Australians leave everything to their kids, perhaps consider leaving a bequest to charity. You don't have to be wealthy or childless to do this. It is as simple as writing something to this effect in your will: "I give one-third of my estate to my daughter and the remainder in equal parts to these three charities."
See Making the Windfall Last, The Border Mail, Dec. 5, 2012.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention