Over the past 20 years, around $1.35 trillion has been inherited by people in Australia1 - and $4.3 trillion in assets will change hands between now and 2050.2 The average inheritance figure in Australia is $125,000,3 with 80% of money passed down from parents landing with people in the 55-59 age bracket.4
While receiving a substantial windfall would usually be seen as a positive, when it follows the death of a parent or another person with whom you were close, it can be a time of great sadness - and significant responsibility, too.
In terms of what you do with the money itself, there are a number of aspects to consider, which will depend on your circumstances and your own time of life. Your financial adviser will be able to discuss these with you in depth.
However, there are also a number of other things to be mindful of when you receive an inheritance.
It's an emotional time
When you've lost a loved one, emotions are naturally heightened. Grief has been shown to rewire our brain in a way that has a detrimental effect on memory, cognition and concentration. It also impacts our ability to make 'good' decisions.5
Symptoms of 'grief brain' can last for a significant period of time. If they last for more than 12 months you may be diagnosed with prolonged grief disorder, and the longer these symptoms last, the more permanent those changes may become.6
Managing the family
While inheritances are often left with the best of intentions, they can be the source of family squabbles and disagreements - which only adds to the stress and sadness.
Estimates suggest that up to half of wills in Australia are contested,7 while a study from the University of Queensland found that 74% of those cases challenged in court, and 87% of those that entered mediation resulted in the will being changed.8
This is a difficult challenge to negotiate and work through. Aligning the instructions of the deceased with what is morally right and fair can be an unenviable task, as can managing the family dynamics that arise.
It's important to consider how any decisions you make may impact your relationships with other family members.
Aligning values
If you've inherited money, how you use it can be a bit more nuanced than if, for example, you'd had a lottery win. You'll likely want to use it in a way the person who left it to you would approve of and appreciate - as well as in a way that aligns with your own beliefs and values. Think about what mattered to the person who's left you an inheritance, too. Did they value travel, family support, philanthropy, the arts or other endeavours?
Honouring and commemorating their life
We all care deeply about something. Whether it's animals or health, education or sports, there are elements within the tapestry of life we are passionate about. If the person who has passed on hasn't made provisions along these lines, then you might wish to consider doing something in their name - for example, making a donation to a charity, providing some books for the local school or providing some funds to a local sports team in their honour.
Inheriting important and valuable items
Of course, inheritances come in different shapes and sizes, and inheriting valuables that were precious and important to someone else brings with it its own set of challenges. Again, managing family dynamics sensitively will be crucial here. If you've inherited a business or something else that brings some responsibility with it, make sure you're able and willing to dedicate the time and effort required.
Consider the long-term
Receiving an inheritance can lead to some major changes in your lifestyle, and it's wise to consider how those changes might affect your day-to-day life, as well as your long-term plans.
While it may be tempting to spend straight away, it's smart to take your time and make sure that the money is being used in the best possible way - both for you, your family and the person who left the inheritance to you.