Receiving an Inheritance
Receiving an inheritance might feel like hitting the financial jackpot, but it’s rarely as straightforward as it seems. Beyond the excitement of newfound wealth lies a maze of emotional considerations, family dynamics, and financial decisions. Is it an opportunity to supercharge your goals, or could it create unexpected challenges? This blog based on Season 3 Episode 1 of our podcast ‘Financial Wellbeing with The Money Collective’, unpacks the many complexities of inheritances, from emotional ties to strategic planning, and offers insights to help you navigate this journey with confidence, clarity, and maybe even a touch of humour.
Is Inheritance Good, Bad, or Just Complicated?
Let’s get one thing straight: inheritances are not inherently good or bad. A financial windfall can be life-changing, but it can also bring unexpected challenges. For some, it’s an exciting opportunity to pay off debt, invest, or pursue dreams. For others, it’s an emotionally charged experience filled with guilt, pressure, or even confusion about how to use the money wisely. And let’s not forget the potential for family tensions—nothing stirs the pot quite like money.
“The truth is, inheritances are what you make of them.”
- Darlene Neu
Inheritances are a tool, not a guarantee of happiness or success. The impact depends on your financial habits, emotional preparedness, and the values guiding your decisions. So, before you start imagining a new super yacht or a year abroad, take a moment to breathe, reflect, and consider the possibilities and the responsibilities that come with this gift.
Emotional Strings and Family Ties
Inheritances often come wrapped in layers of emotion. Losing a loved one is tough, and when money enters the picture, things can get even more complicated. Family members might have different expectations, and long-buried tensions can resurface. Questions of fairness, who gets what, and even old sibling rivalries can bubble to the surface. Sound dramatic? It is—but it’s also common. We’ve all heard a story about this kind of money either causing or amplifying rifts.
The Productivity Commission states that the average inheritance is around $125,000, with the average recipient aged 50 years old.* With a range of Provisions and Acts across different Aussie states, some more liberal than others, it is estimated that that a significant number of wills in Australia are contested**.
The best way to navigate these challenges is through open, honest communication. Sit down with family members, clarify expectations, and, if needed, involve a neutral third party like a financial advisor or mediator. Clear conversations won’t erase emotions, but they can prevent misunderstandings and preserve relationships.
We encourage honest, opening conversations with family about how money will be distributed in the Will while the person is still alive. This could reduce the likelihood of issues when the time comes. Remember, the inheritance is about honouring someone’s wishes, not dividing a family.
Plan Before You Spend
One of the most common mistakes people make with an inheritance is rushing to spend it. Whether it’s splurging on a luxury car, booking a first-class trip, or making impulsive investments, quick decisions can lead to regrets. Instead, take a step back and create a plan. Assess your financial situation, define your goals, and prioritize what matters most to you.
This is where understanding your personal Money Personality comes into play. Are you a Spender, a Saver, an Avoider, or a Risk Taker by nature? And what are the challenges you face when you approach your inheritance with that impulse?
Learning more about your current spending habits and what works and doesn’t work for you, will mean you’re better equipped to handle the inheritance windfall from a place of mindfulness and awareness of your own vulnerabilities.
Take the Money Personality Quiz now to discover your Money Personality. Learn more about how your Money Personality impacts your impulses.
Secondly, taking the time to consider your personal Money Story means you’re more mindful when carrying forward any past baggage into the use of your inheritance, such as traditions, gender norms, cultural expectations, or the guilt of past financial mistakes.
Ask yourself: Should I pay off debt? Invest for the future? Save for a rainy day? Maybe you want to allocate some funds for joy—like a family vacation or a personal passion project. That’s fine, too! The key is mindful balance. By mapping out your options and being aware of your personal Money Personality and Money Story, you can ensure that your inheritance becomes a tool for long-term financial wellbeing, not just short-term indulgence.
Financial Independence Matters
One important truth about inheritances? You can’t rely on them to fix your finances. While a windfall can be helpful, building your own financial independence is critical. Budgeting, saving, and investing should be part of your life regardless of what may or may not come your way. Why? Because inheritances aren’t guaranteed, and even if they are, they might not be ‘big enough’ to even meet your goals.
Financial independence means having control over your money and the confidence to make sound decisions. It’s about knowing you can handle life’s uncertainties, whether it’s a job change, unexpected expenses, or a global pandemic. And when an inheritance does arrive, you’ll be better prepared to manage it wisely, knowing it’s a bonus, not a lifeline.
Big Decisions, Big Values
When it comes to spending an inheritance, values matter more than numbers. What’s most important to you personally? Is it paying off debt, creating financial security, or building memories with loved ones? There’s no one-size-fits-all answer, and that’s the beauty of it. Inheritances are an opportunity to align your financial decisions with what truly matters to you. It's not about making decisions that aren’t right for you, just because the person who left you the inheritance ‘would have wanted you to’. Shake off the subconscious guilt of owing them for the inheritance. Leaving it to you was their decision.
For some, that might mean investing for the future. For others, it could mean going on a dream vacation or starting a new business. The key is to be intentional. Take the time to evaluate your goals and ensure your choices reflect your priorities. It’s okay to indulge—responsibly. Just remember, the best decisions are those that bring you closer to your definition of happiness and success.
According to a study by Perpetual, the three most popular ways to use an inheritance are to invest (30%), pay off a mortgage (28%) and share it with family (19%)***.
Generational Impact
If you’re the one passing on an inheritance, the stakes are equally high. What kind of legacy do you want to leave? Passing on wealth isn’t just about the money—it’s about empowering the next generation. Will your gift help them grow, or will it create a sense of entitlement? It’s a delicate balance that requires thoughtful planning.
Consider involving your heirs in discussions about financial values and goals. Teach them the skills they need to manage money wisely, and be transparent about your intentions. Estate planning can also help ensure your wishes are carried out effectively. By approaching inheritances with clarity and care, you can create a legacy that uplifts your family for generations.
Final Thoughts
Receiving (and planning to gift) an inheritance is a journey—one filled with opportunities, challenges, and important decisions. Whether you’re planning how to use and inheritance, discussing it with family, or preparing to leave your own, the key is to approach it with thoughtfulness and clarity. At the end of the day, it’s not the money that defines you; it’s how you use it to build a life that aligns with your values.
Don’t do life waiting on an inheritance. Are you living or just existing? Make your own plans and be financially empowered so that if an in heritance comes your way, it is a bonus.
If you’re ready to take charge of your financial future—inheritance or not—The Money Collective is here to help. With expert coaching, courses, and tools, we’re dedicated to empowering you on your financial journey. Visit The Money Collective and start uplifting your financial wellbeing today!
*https://www.finder.com.au/international-money-transfers/inheritance-statistics
**https://www.armstronglegal.com.au/contested-wills/contesting-a-will/who-can-contest-will-australia/
***https://www.sbs.com.au/news/article/no-one-wants-their-parents-to-die-the-home-buyers-waiting-on-their-inheritance/zxkm6d85o
Listen to the full episode of the podcast here.
This article provides general advice only. It does not take into account your objectives, financial situation or needs. Before acting on any information provided, you should consider the appropriateness of the information and the nature of the financial product in regards to your objectives, financial situation and needs. We recommend discussing your personal situation with a financial professional.
Blog article by:
DARLENE NEU
Co-Founder, Financial Wellbeing Consultant and Mortgage Broker
The Money Collective