Sometimes life’s timing is perfect. Last Sunday, we came across an almost ideal scenario for when to receive an inheritance. The following question appeared in the ‘Ask the Expert’ section of the Fairfax/Nine press:
My husband and I are in our mid-30s, with a baby due in the coming months. We own a modest home that we purchased two years ago. We have a $400,000 mortgage and no other debts. This year, we are set to inherit $500,000. We both work in highly casualised, precarious industries. I’m not eligible for maternity leave. We aren’t certain how to best use the inheritance. Our fixed low-rate mortgage has 12 months left. Should we pay off the mortgage and invest the rest? Our home is old, and needs renovations and repairs.
The columnist did a reasonable job of offering advice, although was probably limited by his word count to really take this issue on. So, we thought we would be more expansive, in the hope that we can offer some food for thought for our own clients.
Firstly, how perfect is this timing? An inheritance with the potential to either (i) leave this couple debt-free or (ii) massively change their net asset position – arriving in the same year as their first child. Their benefactor should be very proud of the change they will make in this couple’s life. It’s a good news story.
As it happens, this couple is now spoilt for choice. There are many, many ways that this inheritance can make their life better, and we set out some of these below. As we do not know all of this couple’s details, we will make some assumptions where noted. Remember, some of these options can happen in combination while others are mutually exclusive. But here are just some ways that this couple could respond:
As you can see from this brief list, this couple has many options available, all of which will make their lives easier and more enjoyable. The option/s they choose will depend on their personal preferences and their longer-term goals – which may actually need refining given their changed wealth and family position. Goals might also change after the baby is born; after all, becoming a parent is probably the biggest personal change in most people’s loves.
All of this makes now a GREAT time to talk to us to think carefully before they do anything! It is always better to take your time and make one good, long-term decision, than to rush into an error and have to fix your mistake a year or two down the track.
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Sensibly Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Nick Shanley, Steve May, Luke Styles and Shanley Financial Planning T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Sensibly Pty Ltd, AFSL 533923. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guides.
Shanley Financial Planning Pty Ltd trading as Steve May Financial Services (ABN 19 612 825 180) is a Corporate Authorised Representative of (1265706) of Sensibly Pty Ltd (AFSL 533923)
Nick Shanley, Steve May and Luke Styles are Authorised Representatives of Sensibly Pty Ltd (AFSL 533923)