Already a subscriber?When Susan Smith’s husband died last year, she was surprised to find she had inherited a share portfolio worth $900,000.
Almost $5 trillion is due to pass from Baby Boomers and their parents to the next generation by 2034.investors aged 65 and older make up 20 per cent of current investorsBaby Boomers, aged 60-78, are most likely to hold Vanguard’s Australian shares ETF along with CommBank, Westpac, CSL and BHP, according to analysis of investors on the Selfwealth platform.
And it’s worth taking extra care if you’re inheriting shares bought on foreign exchanges, or if you are a foreign resident at the time of inheritance, as these both trigger different tax scenarios. But the most important thing is to hold on to records, says Geoff McClelland, NSW state chair at the Australian Shareholders’ Association. When it’s time to file your tax return, you’ll need to know when those inherited shares were bought.
“When it comes to a deceased estate, it’s becoming more and more common that people have complex holdings. It’s not just bank account, asset and shares – people are dabbling in investing, and it can be a problem where people don’t understand the implications.” “The first thing we had to do, in consultation with their accountant, was to work out what the embedded capital gains were. We could have easily just done a 50:50 split of each share – but you have to look back and figure out when they were purchased.”
He gives the example of someone who inherits BHP shares from their parents. It’s entirely possible that their BHP parcels were acquired at different times, due to share splits, dividend reinvestment plans and acquisitions.If you know your income is going to fall significantly in the next financial year, it may be worth holding off on any sale, says Todd Want.
“Concessional contributions to super come into it too. If someone has a super balance under $500,000 and hasn’t been making concessional contributions in recent years, they can take advantage of the carry-forward concessional contributions,” he adds. But the other side of it is to consider whether the cash is more handy now. An example is if you’ve inherited shares and are receiving dividends, those dividends will attract tax.
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