Nick Donato is a financial adviser at Guidance Financial Services who specialises in helping clients all over Australia aged 30 to 50 get their financial foundations sorted, so they can build wealth and have more choice in life through our Wealth Builder program. You can learn more about it here.

Receiving an inheritance can feel like two completely different things at once.

On one hand, it might create financial breathing room you never expected. It could help you pay down the mortgage, invest, support your kids, renovate the house, build a safety net or finally take the trip you’ve been putting off.

On the other hand, it usually arrives at one of the hardest emotional moments of your life.

You’re grieving someone you cared about. You may be dealing with family conversations, paperwork, probate, property, tax questions and a lot of opinions from people who are very confident about what you should do next.

And somewhere in the middle of all that, you’re expected to make smart financial decisions.

No pressure.

Because an inheritance is not just money. It is also a legacy. It can represent someone’s years of work, sacrifice, love and care. That is why so many people feel pressure to get it right.

So before you pay off the mortgage, invest the lot, give money to the kids or mentally spend it before it even arrives, it is worth slowing down and working through a clear plan.

In this episode of the Wealth Builder Podcast, I’m joined by Paul Benson to talk through what to think about when you receive an inheritance, especially if you’re in your 30s or 40s and already juggling a mortgage, kids, career, debt and long-term financial goals.

What is the first thing you should do when you receive an inheritance?

The first thing to do with an inheritance is usually nothing.

That does not mean ignore it. It means you do not need to rush into a major decision while you are still grieving, overwhelmed or unclear on what you are actually receiving.

In most cases, taking three to six months to let the dust settle is not going to ruin your financial future. What can cause problems is making an irreversible decision too quickly because you feel guilty, pressured or desperate to “do the responsible thing.”

People often feel like inherited money needs to be dealt with immediately. Pay off the loan. Buy the car. Help the kids. Move the money. Fix the house. Invest before the market runs away.

But this is one of those times where slowing down can be a very smart financial move.

Give yourself time to understand:

what you are receiving
when you are likely to receive it
whether tax or estate costs may reduce the final amount
what your short-term and long-term goals are
what your loved one may have wanted for you
what decision will actually improve your life, not just look sensible on paper

That pause can be powerful. It gives you space to make a decision from a clear head, not from grief, guilt or panic.

Should you pay off your mortgage with an inheritance?

Paying off the mortgage can be a great use of an inheritance, but it is not automatically the best answer for everyone.

This is usually the advice people hear first. And honestly, it makes sense. A mortgage is often the biggest debt in someone’s life. Reducing it can lower stress, improve cash flow and give you a feeling of security that is hard to put a price on.

But before you put the whole inheritance into the home loan, it is worth testing the decision.

Ask yourself:

Will paying off the mortgage leave me with enough cash for emergencies?
Do I have higher-interest debt that should be cleared first?
Am I missing an opportunity to invest for the future?
Do I need to think about super contributions?
Are there upcoming costs for kids, renovations, health, work changes or retirement?
Would putting some money into the offset give me more flexibility than paying down the loan permanently?

The right answer may still be to pay down the mortgage. For many people, that will be the move that gives them the most peace of mind.

But the point is to choose it because it fits your whole financial plan, not because “everyone says that’s what you do.”

What tax do you pay on an inheritance in Australia?

Australia does not have an inheritance tax, but that does not mean every inherited asset is completely tax-free in every situation.

The ATO says there are no inheritance or estate taxes in Australia. However, tax can still matter depending on what you inherit and what happens next. For example, capital gains tax may apply if you later sell an inherited asset such as property or shares.

Inherited property can be especially important to get right. The ATO notes that if you inherit a property and later sell it, you may be exempt from CGT in some circumstances, including rules around inherited main residences.

Super can also surprise people. If you receive superannuation death benefits, the tax treatment can depend on your relationship to the person who passed away and the components inside the super fund.

This is why you do not want to mentally spend the inheritance before the money has actually landed in your account.

The amount you expect and the amount you receive may not be exactly the same.

Why can an inheritance take so long to arrive?

An inheritance can take months to arrive, and some estates take much longer.

The ATO says finalising a deceased estate typically takes 6 to 12 months, but it can take longer. That timeline can stretch if there is property to sell, a business involved, a family trust, multiple beneficiaries, estate disputes, tax returns, probate delays or complex assets.

This matters because timing can affect your choices.

You may be planning to contribute money to super before a certain age. You may be relying on the money for a property purchase. You may be trying to help adult children. You may be waiting to clear debt.

But until the estate is finalised and the money is in your account, you need to be careful about making promises or commitments based on money that has not arrived yet.

In plain English: do not order the car before the money clears.

What should you do before spending inherited money?

Before spending inherited money, work out your goals and priorities.

That sounds basic, but it is where a lot of people go wrong. An inheritance can suddenly make things feel possible that were not possible before. That can be exciting, but it can also create a long wish list very quickly.

Pay off the mortgage.
Help the kids.
Upgrade the house.
Invest.
Take a holiday.
Build an emergency fund.
Clear the credit cards.
Buy the car.
Put money into super.
Keep some cash aside.

All of those might be reasonable. The problem is that the same dollar cannot do every job.

So the real work is deciding what matters most.

A good starting point is to separate your options into three buckets.

First, financial security. This includes emergency savings, high-interest debt, your mortgage, insurance, cash flow and retirement planning.

Second, future wealth. This includes investing, super, education costs, helping kids into the property market or using the money to create more flexibility later.

Third, meaning and enjoyment. This includes travel, home improvements, experiences, gifts, family memories and things your loved one may have wanted you to do.

That third bucket matters more than people admit.

It is okay to use some inherited money for joy. It does not all have to be dry, dutiful and painfully sensible. Sometimes the most meaningful use of an inheritance is something that brings your family closer, gives you a memory, or honours the person who left it to you.

The key is to do it intentionally, not impulsively.

Should you use an inheritance to help your kids?

Using an inheritance to help your children can be a wonderful option, but it needs structure.

This comes up a lot, especially for parents who are financially comfortable and want to pass some money to the next generation sooner rather than later.

You might want to help your kids with a home deposit, education costs, rent, debt, a first car or simply give them a stronger start.

But before transferring money, it is worth asking:

Can I afford to give this away without risking my own future?
Should this be a gift or a loan?
What happens if my child has a partner and the relationship breaks down?
Will this create tension between siblings?
How do I keep things fair?
What does this mean for my own retirement plan?

Helping kids can be one of the most emotionally rewarding things you do with inherited money. But it can also get messy if the structure is vague.

This is where financial advice can be really useful. You can model what is affordable, look at the trade-offs, and work through whether a gift, loan or another structure makes the most sense.

Should you invest an inheritance?

Investing an inheritance can make sense if your short-term needs are covered and you want the money to support your long-term wealth.

But investing should not be the automatic answer either.

Before investing, you need to think about your timeframe, risk tolerance, goals, tax position, debt, cash buffer and whether you may need access to the money soon.

For example, investing money you might need in 12 months for a house renovation or family support may not be wise. Markets can move around, and short timeframes do not give you much room to recover from volatility.

But if your mortgage is manageable, your emergency fund is strong and your goals are longer term, investing some of the inheritance may help you build wealth beyond the immediate lump sum.

Again, the question is not “is investing good or bad?”

The question is “what job do I need this money to do?”

Should receiving an inheritance make you update your own estate plan?

Yes. Receiving an inheritance should usually trigger a review of your own estate plan.

This is one of the things people often miss.

If your financial position changes, your estate planning may need to change with it. Your will, beneficiaries, executor, powers of attorney and superannuation nominations may no longer reflect what you want.

There is also a practical issue. The person who passed away may have been listed in your own documents as an executor, beneficiary or decision-maker.

If that is the case, your estate plan may now have a gap.

This is not the most exciting life admin in the world, I know. But it matters. If you have just received a meaningful inheritance, it is worth making sure your own money would go where you want it to go if something happened to you.

How can financial advice help after receiving an inheritance?

Financial advice can help you turn a lump sum into a plan.

That is the real value.

It is not about being told to pay off the mortgage or invest or put money into super. It is about seeing the options clearly before you make a decision.

A financial adviser can help you look at questions like:

What happens if I pay off the mortgage?
What happens if I keep some money in offset instead?
Can I afford to help my kids?
Should I invest some of the money?
Would super make sense for me?
How much should I keep in cash?
Can I take the holiday and still be financially okay?
What tax or timing issues should I understand before acting?

When we work with clients at Guidance Financial Services, we can model different scenarios so you can see the likely impact before you commit.

That matters because inheritance decisions are often emotional. A good plan gives you something steady to come back to.

What is the biggest mistake people make with an inheritance?

The biggest mistake is rushing into decisions before you understand the full picture.

That might mean spending money before it arrives, ignoring tax issues, paying off one debt while leaving more expensive debt untouched, investing without a plan, giving money away without checking your own future, or doing what someone else says is “smart” without asking whether it is right for you.

But there is another mistake too.

Being so focused on making the “perfect” financial decision that you forget the human side.

An inheritance can be a chance to create security. It can also be a chance to reflect on what matters, what your loved one wanted for you, and what kind of life you are trying to build.

Dying with a massive balance sheet is not the goal. Living with clarity, security and meaning is much closer to the point.

What should you do next if you have received an inheritance?

Start by slowing down.

Do not rush to make the money useful before you have made the decision thoughtful.

Then work through the basics:

Confirm what you are actually receiving.
Understand the likely timing.
Check whether tax may apply.
Clear high-interest debt if needed.
Build or top up your emergency fund.
Talk to your partner if your goals are shared.
Prioritise what matters most.
Model the big decisions before acting.
Review your own estate plan.
Give yourself permission to use some of the money meaningfully.

An inheritance can change your financial future, but only if it is handled with care.

You do not need to make the perfect decision tomorrow. You need a clear process, good advice and enough breathing room to make choices you can stand behind.

Want personalised advice for your inheritance?

If you have received an inheritance, expect to receive one, or you are unsure what to do next, Guidance Financial Services can help you work through your options.

Nick Donato and Paul Benson work with people all over Australia who want to make confident financial decisions around inheritance, wealth building, mortgage strategy, investing, super and family goals.

Get Advice For Your Inheritancee

This article is for educational purposes only and does not take into account your individual circumstances. If you would like tailored advice, we can help you work through the numbers properly.

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