I’m 67 and on the pension. How do I leave my kids a good inheritance?

A 67-year-old Australian retiree who receives the age pension is seeking ways to create a financial legacy for their daughter and two grandchildren, despite limited resources and a $60,000 mortgage. The individual, who previously relied on the disability support pension, now works casually when possible. Their concern centers on how to effectively build a small financial inheritance while navigating Australia’s evolving capital gains tax (CGT) regime. The retiree expects to inherit approximately $200,000 in bank shares, acquired through dividend reinvestment dating back to the 1980s, and wants clarity on how upcoming tax reforms might affect the inheritance's value. The retiree asked whether regular investments in shares would be a viable strategy and what types of shares might be suitable. They also questioned the feasibility of obtaining affordable life insurance at their age. A certified financial planner, Paul Benson of Guidance Financial Services, responded to the inquiry. He advised against pursuing life insurance due to its high cost at 67 and suggested instead focusing on building a modest investment portfolio through monthly contributions of around $100. Benson emphasized that such strategies could be explored online, though he did not provide specific product recommendations. He recommended prioritizing the repayment of the mortgage, noting that reducing the loan balance would increase the homeowner’s equity, which would eventually transfer to the family upon the retiree’s passing. This approach would enhance both the retiree’s financial stability and the potential inheritance left for their children. Regarding the CGT changes set to take effect in July 2027, Benson explained that the new rules would apply only to capital gains realized after that date. Inheritors would receive the asset’s existing cost base, ensuring they are not immediately burdened with tax liabilities upon receiving the inheritance. Under current guidelines, the 50% CGT discount would remain applicable until the new rules begin, after which an indexed cost base approach would be used. However, discussions are ongoing about allowing taxpayers to apply the indexation method retroactively, though no official decision has yet been made. Benson highlighted the importance of tracking the value of the shares on July 1, 2027, given the impending changes. He praised the retiree for maintaining detailed records of dividend reinvestments, a practice often overlooked by others. Such meticulous documentation is crucial for accurately calculating capital gains and managing tax obligations under the new framework. The retiree also mentioned being ineligible for the age pension due to their asset level, relying instead on the pension phase of their superannuation. This situation underscores the need for careful financial planning to ensure sufficient resources for retirement while leaving a meaningful inheritance for future generations. The response from Benson reflects broader considerations among retirees navigating complex tax environments. As Australia continues to refine its fiscal policies, individuals must stay informed about legislative changes that impact long-term financial planning. For many, balancing present-day needs with future legacies requires strategic foresight and adaptability in the face of evolving economic conditions.