A $2 Million inheritance isn’t always equal
When it comes to estate planning, dividing assets “equally” between children may seem straightforward. But in practice, equality on paper does not always translate to fairness in reality.
A common scenario highlights the issue: two children are each set to receive $2 million from their parent’s estate. One inherits cash. The other inherits a property. At first glance, this appears perfectly balanced. However, tax can dramatically shift the outcome.
Consider a simple family structure:
- Mum leaves in her Estate:
- An investment property worth $2 million
- Cash of $2 million
- The Estate specifies that:
- Child A inherits the property
- Child B inherits $2 million in cash
On the surface, each child appears to receive the same value. But this overlooks a critical detail - capital gains tax (CGT).
The hidden difference: Cost base and CGT
If we assume the property is a post-CGT asset, for tax purposes, Child A inherit their mother’s original cost base of $500,000.
This means:
- If Child A sells the property for $2 million, the taxable capital gain is based on the difference between $2 million and $500,000.
- Even with the 50% CGT discount and applying the top marginal tax rate (~47%*), a significant tax liability arises from the sale.
- CGT will become an even greater burden, due to the recently announced budget changes (subject to final legislation)
In contrast, Child B receives $2 million in cash and it’s entirely tax-free!
Why “Equal” isn’t fair
The scenario above creates a built-in imbalance:
- Child A inherits a valuable asset, but also inherits a future tax bill depending on the sale price
- Child B inherits fully accessible, tax-free wealth
Let’s take a closer look at the numbers:
| Sale Price | $2,000,000 |
| (Less) Inherited Cost Base of Property | ($500,000) |
| Gross Capital Gain | $1,500,000 |
| (Current) CGT 50% discount reduction | 50% |
| Net Capital Gain | $750,000 |
| Tax Rate at top marginal* | 47% |
| Tax Payable | $352,500 |
In effect, Child A’s net position may be hundreds of thousands of dollars lower after tax, depending on timing and future property value.
To create true equity in this scenario the tax effected assets of the estate are:
- $2,000,000 cash
- $1,647,500 property
Therefore
- Child A would receive the property and $176,250 cash
- Child B would receive cash of $1,823,750
In addition, there are also practical considerations:
- At the time of making the estate plan, it is not possible to know what the market value of the property would be when Child A inherits the property
- Property is illiquid — Child A may need to sell to access funds
- Holding the property involves ongoing costs
- The eventual tax outcome is uncertain and dependent on market movements
While future growth could shift the balance over time, the inheritances may not be equal at the point of distribution.
Key estate planning risks
This type of arrangement introduces several risks that are often overlooked:
- Unintended inequality between beneficiaries
- Disputes due to perceived unfairness
- Unexpected tax burdens
- Poor liquidity outcomes for asset-rich beneficiaries
It also highlights the importance of accurate cost base records, as missing documentation can further increase CGT exposure.
How to create true fairness
There are several strategies to better align outcomes:
- Estate to consider contingent tax liabilities
- Adjust asset allocation
Rebalance the will so that the property recipient receives additional cash or a reduced share of the property. - Sell assets within the estate
Disposing of the property before distribution allows the tax liability to be shared across beneficiaries. - Consider the structure
The correct structure can help manage the timing of tax events and introduce flexibility in how assets are distributed.
These approaches ensure that beneficiaries receive outcomes that are not just equal in nominal value, but fair in economic terms.
Next steps
Estate planning is not simply about dividing assets it is also about understanding their value after tax.
Without careful structuring, well-intentioned decisions can result in unintended inequality. The difference in value between cash and a CGT-embedded asset can be significant, so considering these tax implications upfront is essential to achieving fairness across generations. It is also important to be aware of the proposed CGT changes arising from the recent Federal Budget announcements.
If you would like to better understand how tax, structure and asset mix may shape your estate planning outcomes, please speak with your usual Forvis Mazars advisor or contact one of our specialists.
* Personal circumstances such as carried forward capital losses and lower marginal rate could reduce this amount.
| Melbourne – Christopher Cicutto | Sydney – Dean Newman |
| +61 3 9252 0800 | +61 2 9922 1166 |
Published: 9 June 2026
Author: Susan Kamau & Christopher Cicutto
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