Speaking with The Australian Financial Review, Nicholas Parker, Senior Associate at Coote Family Lawyers, discusses the need to be mindful of the legal considerations that come with an inheritance.  

When US researchers compared inheritors with those who received different windfalls such as legal settlements or lottery wins, they uncovered something interesting. 

Those who inherited money were 24 per cent more likely to have spent their entire inheritance in the first year; in fact, almost half (44 per cent) of inheritors did just that, the University of Alabama and Texas Tech University researchers found. 

But if the beneficiary didn’t spend all of it, they were likely to spend none of it. Understanding how grief, shock, fear, or even anger can shape our behaviour is key to managing an inheritance, say psychologists, financial advisers and lawyers.
 

Remember the practicalities

Nicholas Parker, senior associate at Coote Family Lawyers, says it is also common for beneficiaries to come unstuck by disregarding some of the practicalities that come with an inheritance.                      

For example, when you inherit a property you need to sell it within two years, or you lose the main residence exemption and will have to pay capital gains tax on the sale. 

Some beneficiaries also fail to understand that CGT is payable on inherited shares, or that there may be tax on a superannuation death benefit.

"In many cases, an inheritance will represent the single largest lump sum of money someone will receive in their lifetime. People naturally are anxious to receive their money as soon as possible and can become impatient with the process."  

When impatience is thrown into the mix, it can lead to expensive mistakes, such as distributing funds to beneficiaries before six months have passed since the date of probate. 

Any claims against the estate need to be made within that period, and if funds have been disbursed, solving the issue is more complicated. 

"If people are unclear on the inheritance process and feel vulnerable to making errors, they should seek legal or financial advice. "

You can read the full article in The Australian Financial Review here: 44pc of people blow an inheritance in a year. Here's what not to do. 

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