While receiving money from a family member who has passed away can sometimes be quite handy for those facing cash-flow issues, managing an inheritance is more often an emotional, financial challenge.

Not only do individuals have to cope with the grief of losing someone, but they also face making crucial decisions regarding the deceased’s finances, which can have lasting tax implications for the future.

Here are three common inheritance myths individuals should know before facing tough financial decisions:

The Family Home Is CGT-Free

Principal places of residence are usually free of capital gains tax, but a principal place of residence can be subject to CGT when a beneficiary inherits it. The way homes are treated depends on whether they were purchased before or after September 20, 1985. If a deceased’s house was purchased before September 1985 and is sold within two years of the date of the owner’s death, then it is CGT-free. If the home is sold after this time, it is subject to CGT. The only exception to this rule is if the inheriting beneficiary used the home as their principal place of residence, which would incur no CGT.

A Will Cannot Be Changed

A person with the capacity can make as many changes as they want to their will to create a document that fulfils their wishes. But once a person loses their capacity and their will is not changed, things can become quite complicated. In cases like these, it is the responsibility of the executor of the will to ensure the document is valid, and binding and is the last official will of the deceased. Even though it can cost money to make changes to a will, it is certainly worthwhile in the long run to get it right.

Beneficiaries Receive The Cash Equivalent Of Any Gifts

Those who are set to receive an asset (e.g. the family home) sold before their parents pass away are not entitled to the cash equivalent if the parent’s will has not been changed. It is quite common for a person to sell their home to enable them to move into aged care, but problems can arise when homeowners die, and the proceeds of their house are divided according to the estate. Unfortunately, the general principle is that if a particular gift has been made to a beneficiary, but the gifted asset is not owned at the time of death, then that gift fails.