THE WEALTH BUILDER: My husband is set to inherit a huge amount of money – should we put most of it in super?

James Wrigley, chief financial advisor at First Financial, answers questions about money every Wednesday.

Hello James,

My husband and I are both in our early sixties.

He will inherit about $500,000 in the next six months and I was wondering if putting $300,000 into his super would be a good idea.

If we do this, should we keep the remaining $200,000 we invested in our bank under his name only?

He still works full time. I don’t work and I don’t have a pension.

Greetings,

Vivien.

Hello Vivien,

Thank you for your question. It’s a common situation people find themselves in when it comes to inheritance.

You do not mention whether you still have a mortgage on your home. If you do, paying off your mortgage with your inheritance is a great first step. Then a contribution to super if there is money left over is a good idea.

When it comes to retirement, there are two types of contributions that can be made, and it’s worth exploring both.

1. Concessional contributions – these are the pre-tax contributions your employer makes for you (currently 11.5 percent of income) and any salary sacrifices you may make. You can also make these types of contributions with cash in your bank account (in your case an inheritance) and claim the contribution as a tax deduction by completing a declaration of intent, sending the form to your super fund and your accountant when you file your tax return .

The annual limit for these types of contributions is $30,000, including what your employer contributes for you. If you have less than $500,000 in super (measured at the end of the previous year), you can access something called concessional contributions. This allows you to use unused maximums from the past five financial years to charge a higher tax. deductible premium in the current financial year.

So the first thing I would have you do is check to see if your husband has these types of contributions, and then use the inheritance money to utilize what he might have, creating a nice tax deduction in the process.

2. Non-concessional contributions – this is a contribution you make to the pension with after-tax money (in your case an inheritance) and for which you do not claim a tax deduction. The annual limit is $120,000, or you can use the current annual limit and the next two years to make three separate payments of $120,000, for a total of $360,000 at once.

To make such a contribution you must be under 75 and have less than $1.9 million in super money. You mention that you don’t have a super, so you could make these types of contributions in your name if you wanted to.

The last thing worth exploring is your husband maximizing his concessional contributions to super. If he does, fine. But if not, I suggest you investigate whether you can afford for him to do so. If you can afford it, great. If you can’t, a move to a superannuation strategy can help you maximize his super contributions before tax, which will save some tax and boost his super in the process.

I hope this helps.

Thank you,

James.

Send your questions to James thewealthbuilder@dailymail.com.au

James Wrigley is a representative of First Financial PTY LTD ABN 15 167 177 817 AFSL 481098

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