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Inheritance – what to do

| by Anne Graham, CFP®

I’ve just received a large inheritance – now what do I do?

I saw a new client last week who is about to receive a significant amount of cash. Jane* has done it pretty tough over the years and wants to make sure she looks after herself and her family as she realises the decisions she makes now will have a lasting impact.

Jane is in her late 50s and is a self-employed cleaner with limited income. Her husband works part time in a low income job and her daughter is just starting her final year of school.

Jane has had time to think about her goals and objectives (or hopes and dreams) and after we had a number of chats we agreed that there were seven main areas that we needed to take care of:

  1. Repay debt – Jane is fairly typical in that she has a mortgage, however her credit card debt has blown out and unfortunately she owes the ATO significant money. She is genuine in wanting to sort out her debts so the first thing to do is repay them – in full. This will save $1000’s a year in interest and tax penalties and build a sturdy foundation for the future.
  2. Review the household budget – Even though Jane has a good grasp of her income the family needs to review their budget so they know exactly what their expenses are. Expenses will reduce after the loans have been repaid, taking pressure of the family income. Jane doesn’t want to get carried away with her new found wealth and realises that, at least for her, if there is discipline in spending at the outset then there is less chance for bad habits to develop.
  3. Emergency funds – Having never had something to fall back on, a “running away from home account” or emergency cash is a sensible strategy and something that will provide comfort and confidence to Jane. Putting aside a set amount of money in a separate bank account will reduce the need for her to dip into an investment portfolio for unexpected emergencies.
  4. Education – Jane wants to ensure that her daughter’s education continues uninterrupted and is making sure that any plans they have will have minimal negative impact on her and her studies. At this stage, Jane’s daughter knows that there will be some funds coming into the family but Jane and her husband have decided not to share specific details at this time.
  5. Home renovations – Jane dreams of fixing up the family home and this will require a reasonable capital outlay. Part of the plan is making sure she doesn’t over-spend on the property and to make sure she leaves sufficient capital for retirement. Jane considered purchasing a new property but prefers the location of her home and doesn’t want to move.
  6. Retirement – Jane is considering retirement so we need to work with her to determine the amount of income required on an ongoing basis and where that income will come from. Jane’s husband will continue to earn a modest salary but that is unreliable so we need to consider the available options in the event that his income stops. Jane’s husband is somewhat younger than her so the retirement timeframe needs to be taken into account.
  7. Estate Planning – Wills and Enduring Powers of Attorney never crossed Jane’s mind before – in her view why bother when there was nothing to leave anyone? Now that her circumstances have changed she is conscious of making sure she leaves the right assets to the right people in the right way. She also wants to make sure that if she can’t make decisions for herself that she has arranged for someone that she absolutely trusts to be able to step in seamlessly.

What would you do if you came into a large sum of money?

Anne Graham CFP®
Story Wealth Management

* not her real name


Anne Graham, CFP®

Story Wealth Management

Financial Planning is all about creating a better future: for myself and my family, my clients, and our world.

With over 30 years working in finance and financial planning and degrees and certifications including: Certified Financial Planner®, Certified Practicing Accountant (CPA), Bachelor of Business (Accounting) and a Masters in Applied Finance as well as a long string of awards based on the results we’ve achieved for our clients it goes without saying that I know what I’m doing and have the results to prove it.

Sometimes people ask what difference a financial planner makes. I like to use the analogy of a personal trainer vs. a gym membership. You’ll get something out of your gym membership (provided you actually use it), but a personal trainer will help you achieve your goals much faster, with less worry and risk. In the same way, when you work with an award-winning financial planner you don’t just see progress in your financial affairs, you see yourself steadily moving from milestone to milestone as your goal comes ever closer.

In addition to client work I am also on several boards and committees, including the Securitor Financial Group National Advisory Council; Deakin University Department of Accounting Advisory Board; and the Future2 Foundation Board.

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