What Should I Do After Receiving an Inheritance?
Last reviewed: July 2026
Receiving an inheritance means you should slow down before making any major financial decision, then build a deliberate plan around what you actually received. Park cash in a high-yield savings account, leave investments and property as-is for the first three to six months, and avoid binding commitments until the emotional dust settles. The decisions you make in the first year shape whether inherited money becomes lasting security or a source of regret.
Key Takeaways
- Wait three to six months before making major moves; park cash in a high-yield savings account meanwhile.
- Most non-spouse beneficiaries must empty an inherited IRA within 10 years under the SECURE Act.
- The 2026 federal estate tax exemption is $15 million, so most heirs owe no federal estate tax.
- Inherited stocks and real estate get a step-up in basis to date-of-death value, reducing capital gains tax.
- Pay off high-interest debt and fund three to six months of expenses before investing any inherited money.
About the Author: Jeff Judge, CFP®, AEP®, ChFC®, CLU® is Managing Partner of Chesapeake Financial Planners in Forest Hill, Maryland. He has been helping families and business owners in Harford County and the Baltimore metro area navigate inheritances and sudden money since earning his CFP® certification in 2013, by using Chesapeake Financial Planners’ signature process, the R.U.D.D.E.R. method™. Jeff often tells clients that the biggest inheritance mistakes happen in the first ninety days, when grief and pressure push people toward decisions they can't undo.
What Should You Do First After Receiving an Inheritance?
Do nothing major for now. That is the single best move after receiving an inheritance, and it surprises almost everyone who hears it. You are likely grieving, processing loss, and dealing with estate settlement complexity all at once. This is not the time to make irreversible financial choices.
If the inheritance is cash, park it in a high-yield savings account or money market fund where it earns interest and stays liquid. As of mid-2026, top high-yield savings accounts pay competitive rates, so your money keeps working while you think. If you inherited property or investments, leave them as-is. Give yourself three to six months before making any significant move.
This pause is not laziness. It protects you from emotional decisions, from family pressure, and from your own urge to "do something" before you are ready. Jeff Judge has watched clients rush a property sale or a big gift in month one and regret it for years. Time costs you almost nothing here. Mistakes cost a lot.
What Did You Actually Inherit, and How Is Each Asset Taxed?
Before you can plan, you need a precise inventory of what you received, because each asset type carries its own rules. Inherited money in a checking account behaves nothing like an inherited IRA or a rental property, and the tax treatment varies just as widely.
Here is how the common asset types break down:
| Asset Type | Key Rule | Tax Treatment |
|---|---|---|
| Cash and bank accounts | Liquid and simple | Generally no income tax on the principal |
| Traditional IRA / 401(k) | 10-year withdrawal rule for most heirs | Each withdrawal taxed as ordinary income |
| Real estate | Confirm title and carrying costs | Step-up in basis to date-of-death value |
| Stocks and brokerage accounts | Check composition and value | Step-up in basis reduces capital gains tax |
| Business interests | Needs professional valuation | Varies; consult a CPA and attorney |
| Personal property | Appraise valuable items | Step-up applies; emotional value separate |
The step-up in basis rule is one of the most valuable provisions in the tax code for heirs. Your cost basis on inherited stocks or real estate resets to the value on the date of death, not what the deceased originally paid. According to the IRS, this can erase decades of unrealized capital gains. The inherited IRA is the opposite story. Under the SECURE Act, most non-spouse beneficiaries must withdraw the entire balance within 10 years, and the IRS confirms each distribution is taxed as ordinary income.
What Immediate Logistics Can't Wait?
Some tasks cannot be delayed, even while your big decisions stay on hold. Handling these promptly keeps small problems from becoming expensive ones.
- Update titling and beneficiaries. Work with the executor or attorney to retitle accounts and property properly in your name.
- Set aside money for taxes. If you inherited a traditional IRA or other pre-tax account, reserve 25 to 30 percent of any withdrawal in a separate account so tax season does not blindside you.
- Continue essential payments. Keep paying the mortgage, property taxes, insurance, and utilities on inherited real estate. Lapses create costly problems.
- Secure valuable items. Store inherited jewelry, art, or collectibles securely and update your homeowners or renters insurance to cover them.
- Make no binding commitments. Do not promise money to family, invest in a friend's venture, or buy a house yet.
Jeff uses a simple framework with clients here. Pay what must be paid, secure what must be secured, and freeze everything else. That discipline buys you the space to plan well.
Who Should Be on Your Advisory Team?
A substantial inheritance usually needs professional guidance, and the right team prevents avoidable mistakes. You do not have to hire everyone at once, but a few conversations early pay for themselves many times over.
At minimum, consult a financial advisor and a CPA within the first few months. A fee-based fiduciary advisor helps integrate the inheritance into your full financial plan and coordinates with your other professionals. A CPA becomes essential the moment you inherit retirement accounts, plan to sell property, or see your income jump. An estate attorney matters when trusts, business interests, or tangled family situations are involved. An insurance agent should review your coverage, because an inheritance changes your risk profile.
At Chesapeake Financial Planners, this is where the R.U.D.D.E.R. Method™ does its work. The R.U.D.D.E.R. Method™ is Chesapeake Financial Planners' six-step planning process: Review and Recognize, Uncover and Understand, Design and Develop, Discuss and Decide, Execute and Empower, and Reassess and Refine. An inheritance is exactly the kind of life event that benefits from a structured process rather than a scramble of one-off decisions.
How Should You Handle Debt, Taxes, and Family Before Investing?
Before you invest a dollar, clear high-interest debt, build a cash cushion, and understand your tax exposure. These foundational moves create stability that makes every later decision easier.
Pay off debt carrying interest rates above roughly 7 to 8 percent first. Credit cards and similar balances offer a guaranteed return when you eliminate them. Then build or strengthen your emergency fund to cover three to six months of living expenses in a liquid, safe account, so you never have to raid the inheritance for a surprise expense.
On taxes, the news is reassuring for most heirs. The federal estate tax is paid by the estate, not by you, and only on estates above the exemption. According to the IRS, the 2026 federal estate tax exemption is $15 million per individual, so the vast majority of families owe nothing federally. A handful of states levy their own estate or inheritance tax, so check the rules where the deceased lived. Maryland, for example, is currently the only state that imposes both, which is one reason a financial advisor in Maryland familiar with local rules is worth a conversation.
Family dynamics deserve a plan too. Inheritances often create tension, and you do not owe anyone an explanation or a share of what you inherited. Jeff frequently sees heirs make hasty gifts under emotional pressure, only to regret it once the grief fades. Set boundaries early and keep them.
Frequently Asked Questions
What should I do first after inheriting money?
Do nothing major for the first three to six months after inheriting money. Park cash in a high-yield savings account, leave investments and property untouched, and avoid binding financial commitments. This pause protects you from emotional decisions and family pressure while you assemble a clear, deliberate plan with professional guidance.
How is an inherited IRA taxed?
An inherited IRA is taxed as ordinary income on every withdrawal. Under the SECURE Act, most non-spouse beneficiaries must empty the account within 10 years of the original owner's death. There is no early-withdrawal penalty, but spreading distributions strategically across those 10 years can meaningfully reduce your lifetime tax bill.
Do I have to pay tax on my inheritance?
In most cases you do not pay federal income tax on inherited money itself. The 2026 federal estate tax exemption is $15 million, so the estate rarely owes estate tax. You will owe ordinary income tax on withdrawals from inherited pre-tax retirement accounts, and a few states impose their own inheritance tax.
What is step-up in basis on inherited assets?
Step-up in basis resets the cost basis of inherited stocks, real estate, or brokerage assets to their fair market value on the date of death. This can eliminate decades of unrealized capital gains, so if you sell shortly after inheriting, you may owe little or no capital gains tax on the appreciation.
Should I pay off debt with my inheritance?
Yes, paying off high-interest debt with inheritance money is usually one of the smartest first moves. Eliminating balances with interest rates above roughly 7 to 8 percent delivers a guaranteed return. Clear that debt and build a three-to-six-month emergency fund before you invest any of the remaining inherited money.
Do I need a financial advisor after receiving an inheritance?
A financial advisor is strongly recommended after receiving a substantial inheritance, especially one involving retirement accounts, real estate, or business interests. A fee-based fiduciary advisor integrates the inheritance into your full plan and coordinates with your CPA and attorney. Consult an advisor and a CPA within the first few months.
If you found this helpful, our guide on handling sudden money walks through windfalls of every kind in depth. Download it at chesapeakefp.com, and explore related reading below.
For more on related wealth events, see What should you do when you suddenly receive a large sum of money?, What should I do with money I inherited from a relative?, and How Can I Protect Inherited Money from Scams and Bad Decisions?.
Want to go deeper? Our First 90 Days After a Windfall walks through this step by step.
Disclosures
The information provided is for educational purposes only and should not be construed as investment advice. Investment strategies should be tailored to individual circumstances, risk tolerance, and goals. Past performance doesn't guarantee future results. Consult with qualified financial professionals regarding your specific situation.
Advisors associated with Chesapeake Financial Planners may be either (1) LPL Financial Registered Representatives offering securities through LPL Financial, Member FINRA and SIPC, and investment advisor representatives offering investment advice through Great Valley Advisor Group; or (2) solely investment advisor representatives offering investment advice through Great Valley Advisor Group and not affiliated with LPL Financial. Great Valley Advisor Group, and Chesapeake Financial Planners are separate entities from LPL Financial.
