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

I’m 67, on the age pension, and still have a $60,000 mortgage. After years on the disability support pension, I now do casual work when I’m able. My daughter fled a violent relationship and has very limited financial resources, so I’d like to leave something for her and my two grandchildren.

With only modest means, what is the best way to build a small financial legacy? Would investing regularly in shares be sensible, and if so, what types of shares should I consider? Also, is it still possible to take out affordable life insurance at my age, and would that be a worthwhile strategy?

Your daughter and grandkids are lucky to have you. Life insurance would be expensive at 67, so I wouldn’t suggest going down that path. Insurance companies aren’t charitable organisations after all.

There are investment solutions that enable you to add $100 per month, so perhaps that is something you could establish. I can’t recommend specific products here, however I’m sure you could find these with some internet searching.

But I would encourage you to focus on paying down your mortgage. This will improve your own financial resilience, and as the loan balance reduces, you accrue more equity in your home which will pass on to your family when you are gone.

I expect to inherit ~$200,000 in bank shares in the next few years.  These shares have been held since the ’80s on a reinvest basis. I expected to pay CGT on the sale of these shares at some point in the future, and have all the reinvest statements to date to work that out.

My question is: with the 2026 budget CGT changes coming next year, will the new 30 per cent CGT be calculated from the share value when inherited (i.e. CGT before 2027 is grandfathered) or from the time of the original purchase? I am a fully self-funded retiree living off the pension phase of my super and have no other income.  I am ineligible for the age pension based on my assets.

Well done to you, or the family member from whom you are inheriting these shares, for having all the dividend reinvestment records. I’m impressed. Often, piecing this together is an absolute nightmare. I’ve seen cases where people never sell the shares just to avoid having to work this out.

There is still more detail to come around the new CGT rules, which don’t commence until July 1, 2027. But the general principle, which I don’t expect will change, is that when you inherit assets, you inherit their cost base.

This ensures tax payable is unimpaired by the transition of the asset from one person to another via an inheritance, whilst not forcing the recipient to sell down to cover any immediate tax liability.

Given this guiding principle, I would expect you get the 50 per cent discount until the new rules commence, then the indexed cost base approach from that point forward. There is some talk of giving taxpayers the option of applying the indexation method across the entire period, but there is nothing firm on this.

As to the requirement that a minimum 30 per cent tax is payable on capital gains, this only applies to the gain accrued from July 1, 2027.

It is worth highlighting here that because of these changes, knowing the value of your assets on July 1, 2027 will be super important. Given your history of outstanding record keeping, I’m sure you’ll be all over it.

Paul Benson is a Certified Financial Planner at Guidance Financial Services. He hosts the Financial Autonomy podcast. Questions to: paul@financialautonomy.com.au

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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