Menu
Menu
Inheritance is often viewed as a future safety net for beneficiaries – funds or assets that may arrive in time to ease the financial burden of retirement, assist with housing, or support family goals.
For many Australians, especially in major cities where living costs are high, the expectation of receiving an inheritance forms part of their long-term planning.
While it can provide a welcome boost, relying on it too heavily brings significant risks.
Financial planning is about creating certainty so clients can achieve their goals within their preferred timeframes. If an expected inheritance is part of that certainty, what happens when things don’t go as planned?
And here’s another question: why does someone have to die for money to be transferred? There are many situations where a gift during one’s lifetime—an inter vivos—is a smarter, more effective option.
Here are some of the pros and cons of relying on inheritance:
Benefits of inheritance in financial planning
- Creating financial opportunities
An inheritance can open doors to opportunities that were previously out of reach, such as starting a business, investing in property, or clearing high-interest, non-deductible debt. - Lifestyle enhancements
Access to additional funds could broaden education options, enable overseas travel, or support large purchases that may have been delayed. - Boosting retirement confidence
Receiving an inheritance in your 50s or 60s can strengthen your superannuation balance, reduce debt, or help you reach retirement goals sooner.
| Michael, 59, received a $650,000 inheritance from his late mother’s estate just as he was considering cutting back on work. He used it to pay off the mortgage and top up his super. As he already had a modest plan in place, the inheritance gave him the flexibility to reduce his work week from five to four days and enjoy greater peace of mind. |
Supporting intergenerational wealth
A structured inheritance via testamentary trusts, binding death benefit nominations on super, or investment bonds can deliver tax-effective outcomes and better support for beneficiaries, especially minors.
The risks of relying on inheritance
Over the years, many people have casually said, “I’ll be fine; I’ll get an inheritance.” My response? “Do you know how long your parents will live or what care they’ll need?” That’s when the penny drops.
- Uncertainty on timing and amount
Inheritance is often unpredictable. Parents may live longer, require aged care, or change their wills. Legal disputes or market downturns can further reduce what’s eventually passed on.
| For example, the four Smith siblings all expected an inheritance. Their father had early onset dementia, and a move to aged care was being considered. Their mother, his carer, was then diagnosed with cancer. Between her treatment and his care costs, the couple’s savings quickly dwindled. After their mother passed away and their father moved into aged care, the estate’s value kept falling due to ongoing costs. |
| Another client, Suzanne, 45, postponed building her own wealth, assuming she’d inherit a significant share of her father’s estate but after he remarried, he changed his will to include his new spouse and stepchildren. Suzanne received far less than expected and had to make major adjustments to her financial future. |
- Loss of financial discipline
Expecting a future windfall can lead to complacency. People may reduce their saving habits, delay investing, or take on debt they assume they’ll later pay off and by the time if they don’t receive as much as they expect – it may be too late to improve their financial position. - Rising aged care costs
With Australians living longer, aged care costs are rising. Selling the family home to cover care bonds or daily fees is common, and this can significantly reduce what’s left to inherit. - Family conflict and legal disputes
Disagreements over wills, perceived fairness, and poor communication can lead to costly and emotionally damaging disputes.
| David and Anna, siblings in their early 60s, expected to inherit equally from their father, including a much-loved family beach house. However, the property was left solely to Anna, whom their father believed needed it more. David contested the will. The case dragged on, costing over $100,000 in legal fees and irreparably damaging their relationship. |
Considering lifetime gifting
I’ve worked with families where the parents have more money than they’ll ever need. By their 70s or 80s, you can estimate how much income and capital they’ll realistically require for the rest of their lives. After setting aside funds for unexpected costs, aged care and a safety buffer, any surplus can be gifted inter vivos.
Parents who aim to leave a meaningful legacy often overlook the tax implications of leaving assets through an estate. In some cases, helping children now by paying off a mortgage or contributing to their super may have greater impact than waiting until death.
Superannuation withdrawals often coincide with the same stage of life when children inherit. If the inheritance is sizeable and the children are older, their planning options become limited. Wouldn’t it be more fulfilling for parents to live to see the positive difference their financial help makes?
Conclusion
An inheritance can be a valuable complement to your financial plan but it shouldn’t be the foundation. Life is uncertain, and inheritances are never guaranteed. A robust financial strategy built on what you can control is essential.
As the Baby Boomer generation prepares to transfer unprecedented levels of wealth, Australians must have open, realistic conversations about ageing, legacy, and financial expectations. When managed thoughtfully and guided by professional advice, an inheritance can support dignity and financial wellbeing across generations.
Meet Esther at Perspective Financial Services or Find a Planner near you!
The Money & Life website is operated by the Financial Advice Association (FAAA). The views expressed in this article are those of the author and not those of the FAAA. The FAAA does not endorse or otherwise assume responsibility for any financial product advice which may be contained in the article. Nor does it endorse or assume responsibility for the information.
