Shock as Aussie mum plans to reject $3 million inheritance: 'Weirdo'

A finance expert has weighed in after an Aussie worker revealed she didn't want to accept a $3 million inheritance from a family member. Receiving money from a loved one can be a tricky experience, especially if it sparks infighting, but Barefoot Investor Scott Pape warned you shouldn't shy away from sudden influxes of cash.

A woman wrote to him explaining she wanted to reject the huge sum because she was worried it was going to make her life more difficult. In her letter, the single mum explained that she already had everything she could want.

"I have just paid off my house in Tasmania and am now adding 10 per cent to my super each pay. I don’t renovate or travel far. No dishwasher and a broken oven. It has come to my attention that I am to inherit $3m from a relative. This is generous but wealth like that brings complexity," she said.

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The nurse has already planned to retire by 65 and has set herself up to spend roughly $42,000 a year in her twilight years.

She said she likes the "simple life" of living within her means and she wants her children to "do well in their own right" without her helping out.

In Pape's Herald Sun column, he called the worker a "weirdo" for not accepting the cash immediately but understood that her perspective came from a good place.

But he said she should absolutely accept the inheritance.

Are you expecting a huge inheritance? Email stew.perrie@yahooinc.com

What Pape would do with a $3 million inheritance

The Barefoot Investor admitted that wealth can bring some types of "complexities" but he said she should use the money in three specific ways to make life more simple.

1. Allocate a portion of the savings for an emergency fund because you never know what can happen down the line

2. Put a "large amount" into an ethically invested index share fund

3. Set up a private ancillary fund (PAF) and donate the money into that, which will allow you to receive an immediate tax deduction

Pape said the index share fund can help "incentivise" her kids to save their money for a house deposit, as they might need a much higher amount than she did to get her property.

"Remember, your kids may not choose to live in Tassie. If they instead choose to live in Sydney, you’ll need a bloody big [property] ladder!" he wrote.

As for the PAF, Pape said this is a type of charitable trust that allows you to give away a portion of the cash in the most financially beneficial way.

"Each year you can use the money to give to the charities you choose. The key is to get your kids involved in deciding where to donate this money. Who knows, hopefully, some of what you’ve got will rub off on them!" he added.

With PAFs, you have to give away 5 per cent of the amount every year to be eligible for the tax deduction.

Huge inheritance transfer coming for younger Aussies

Aussies born in the Silent Generation and Baby Boomer eras are expected to provide the largest intergenerational wealth transfer in Australia's history in the coming years, with $3.5 trillion set to pass down.

Consumer finance group Finder found 28 per cent of Aussies are expecting an inheritance of more than $100,000, while 20 per cent think they will receive between $50,000 to $100,000.

Property is also an inheritance option for some Aussies, with one in five saying they will be given one home, while 4 per cent said they will inherit two addresses.

But with the cost-of-living crisis gripping the wallets of many Aussies, there's a huge portion of the population who are hoping to receive their inheritance before a loved one dies.

Two in five respondents to a recent Finder survey, equivalent to 8.3 million people, admitted they would rather have it as a gift while the family member is still alive.

Sarah Megginson, personal finance expert at Finder, said there can be big benefits to an early inheritance.

"[It] lets the parent see their children or grandchildren enjoying the gift, and the financial windfall at a younger age gives them more opportunity to use it towards something that drastically improves their life, like a deposit on a home or investing it in education," she said.

"It's not a decision that should be made without some serious consideration of your future financial needs and also the tax impacts."

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