Inheritance

Start with one simple step: don't make any big moves right away.

Receiving an inheritance—whether it's cash, property, or investments—often comes at an emotional time. It's common to feel overwhelmed, uncertain, or even guilty about what to do next. That's okay.

The most important thing is to give yourself room to breathe and avoid pressure to act fast.

Here's what we recommend in the early days:

1. Let the dust settle.

You don't need to invest, spend, or distribute anything immediately. If you receive a large sum, place it in a high-yield savings or money market account while you plan next steps. For inherited property or accounts, hold off on selling or transferring until you have clarity on ownership and tax implications.

2. Don't go it alone.

This is a moment when personalized advice matters most. A financial advisor can help you understand what you've inherited and what decisions (if any) need to happen right away. We often work alongside estate attorneys and tax professionals to help address all aspects of the situation.

3. Get clear on what you've inherited.

This may include:

• Cash accounts or investments
• Real estate or business interests
• Retirement accounts (IRAs, 401(k)s)
• Trust distributions or life insurance proceeds

Each comes with its own rules—and potential tax consequences. It's important to understand them before acting.

4. Review any immediate responsibilities.

If you're also the executor or trustee, you may have legal duties to fulfill. Even if you're not, there may be:

• Property upkeep or insurance needs
• Required minimum distributions (RMDs) from inherited IRAs
• Deadlines for disclaiming or transferring assets

5. Align the inheritance with your long-term goals.

An inheritance can change your financial picture—maybe in subtle ways, maybe significantly. Once you've had time to process, we'll help you integrate the inheritance into your broader plan, so it supports the life you want.

Remember: an inheritance is a tool—not a plan.

Our job is to help you turn this moment of transition into a thoughtful, empowering next chapter—on your terms, with clarity and care.

An inheritance can be a gift—or a target. It often arrives at a time when emotions are high and decision fatigue is real. That's exactly when poor decisions, pressure from others, or financial scams are most likely to creep in.

Here are smart, practical steps to help manage what you've received:

1. Hit pause before making any big moves.

You don't have to invest, spend, or give away anything right away. Let the money sit in an insured account while you build a plan. Rushing decisions is how people lose control of inherited wealth.

2. Limit who you tell—and what you share.

The fewer people who know you've inherited money, the fewer unsolicited "opportunities" you'll encounter. If someone suddenly wants to sell you something, invest for you, or borrow money, take a step back.

3. Watch for emotional spending.

Grief, guilt, or a sudden sense of financial freedom can lead to impulsive purchases or over-generosity. A cooling-off period (and a solid plan) can help you honor your values without depleting your future.

4. Vet all financial professionals carefully.

Look for a CFP® and other credentials, and someone who utilizes the fiduciary standard, acting in your best interest.

5. Don't co-sign or lend money casually.

Well-meaning people often find themselves stuck in uncomfortable family or friend dynamics after an inheritance. It's okay to say, "I need to think about that," and get professional guidance before saying yes to any request.

6. Create or update your own financial plan.

Integrating inherited money into a well-thought-out plan helps you make confident, intentional decisions. Whether your goals include paying down debt, investing, giving, or planning for retirement, a plan reduces uncertainty and helps address potential concerns.

7. Consider legal measures.

Depending on your situation, it might make sense to place inherited assets in a trust—especially if you're concerned about creditors, future divorce, or family dynamics. An estate attorney can advise on the right structure.

Bottom line? The best approach is a calm pause, a thoughtful plan, and the right partners.

You don't need to go it alone—and you don't need to know all the answers up front. An experienced advisor can walk with you, help you avoid pitfalls, and work with you to address your goals for the future.

It depends on what you inherited—and how it was structured.

Most people are surprised to learn that inheriting money isn't automatically taxable income—but that doesn't mean there are no tax consequences.

Here's what to expect, based on different types of inherited assets:

1. Cash inheritance (from a bank account or trust):

You typically don't owe income tax on inherited cash. However, any interest the money earns after you receive it is taxable.

2. Retirement accounts (like IRAs or 401(k)s):

These often have the biggest tax impact.

• If you inherit a traditional IRA or 401(k), distributions are taxed as ordinary income.
• Most non-spouse beneficiaries must now empty the account within 10 years (due to the SECURE Act).
• Roth IRAs are tax-free—but still have required withdrawals over 10 years in many cases.

3. Investments (like stocks or mutual funds):

You receive a "step-up in basis," meaning you'll only owe capital gains tax on growth after the date of death—not since the original purchase. This can significantly reduce your future tax burden if you sell.

4. Real estate:

Like investments, real estate also gets a step-up in basis. That means if you sell shortly after inheriting, there may be little or no capital gains tax due. If you hold it and it appreciates, future gains will be taxable.

5. Life insurance proceeds:

Life insurance paid to a beneficiary is not taxable income. However, interest earned on the payout is taxable if you leave it in the insurer's account.

6. Trust income or distributions:

If you receive money from a trust, the trust may owe taxes—or it may pass the tax obligation to you, depending on how it's structured. You'll typically receive a Schedule K-1 for reporting.

Good news: You won't owe federal estate tax unless the estate exceeds $13.6 million (in 2024). However, some states have lower thresholds or inheritance taxes.

Pro tip:

Keep track of when and how you receive each asset. Save all documents, ask for cost basis records, and talk to a Certified Financial Planner or CPA who understands inheritance issues. That way, you'll avoid surprise tax bills and make smarter decisions on what to spend, hold, or reinvest.

It depends on the type of debt, your goals, and how this inheritance fits into your overall plan. There's no one-size-fits-all answer—but there is a smart way to evaluate your options.

Here's how to think through it:

1. Start with your interest rates.

As a rule of thumb:

• High-interest debt (like credit cards or personal loans) may be worth paying off immediately.
• Low-interest debt (like mortgages or federal student loans) may be worth keeping—especially if your investments could earn more over time.

Example:

If your mortgage is at 3% but your portfolio could grow at 6–7% over the long term, investing may create more wealth—if you're comfortable with the risk and time horizon.

2. Consider emotional returns, not just financial ones.

Some people feel enormous relief wiping out debt, even if it's not mathematically optimal. That clarity matters—especially if the inheritance came from a loved one and you want to use it to create freedom.

Ask yourself:

• Would being debt-free help me feel more confident?
• Or would I regret not putting that money to work?

3. Weigh liquidity needs.

Paying off debt ties up the funds—investing keeps more flexibility. If your emergency fund is thin or your income is uncertain, you may want to keep more cash accessible, even if that means keeping some debt.

4. Blend the approach.

You don't have to choose just one. Many clients find clarity in a balanced plan, like:

• Paying off all high-interest debt
• Keeping a healthy emergency reserve
• Investing a portion for long-term growth potential
• Using some to enjoy life or give meaningfully

Smart next step:

A financial advisor can help you evaluate different options—so you don't just guess, you know you're putting the money where it may serve your goals.

Inheriting money can feel like both a blessing and a burden. You may feel overwhelmed, unsure what to do first, or tempted to make quick decisions—especially if the inheritance came with emotional weight. That's where costly mistakes often happen.

Here are some of the most common pitfalls—and how to avoid them:

1. Acting too quickly

Don't rush to invest, spend, or give the money away. Allow yourself time to grieve, reflect, and think clearly. Use a high-yield savings account as a temporary holding place while you plan.

2. Making big purchases without a plan

Many people buy homes, cars, or luxury items right away—sometimes out of guilt, stress, or the pressure to "do something meaningful." But spending before you strategize can leave you worse off in the long run.

3. Ignoring tax consequences

Not all inherited assets are tax-free. Retirement accounts like IRAs or 401(k)s can trigger income taxes. Selling real estate or investments may lead to capital gains. A financial planner and tax advisor can help you avoid surprises.

4. Lending or gifting too much too soon

An inheritance can create new expectations from friends and family. It's okay to be generous—but only after you understand what you need and want for your future. Clear boundaries now can help relationships later.

5. Investing without a strategy

Don't blindly follow hot tips, sales pitches, or your instincts—especially if investing is new to you. Start by identifying your goals (e.g., retirement, stability, education) and build a diversified plan that aligns with your risk comfort and time horizon.

6. Missing the opportunity to realign your future

An inheritance is more than just money—it's a chance to rethink your priorities, shore up weak spots, and build real confidence. Without a plan, that opportunity can fade quickly.

How to do it right:

• Press pause
• Get organized
• Surround yourself with professionals who act in your best interest
• Make a plan that reflects your values—not someone else's

The best approach to invest an inheritance isn't a product—it's a process.

Before choosing investments, it's essential to understand your goals, time frame, and emotional comfort with risk. That's the foundation of sound, durable decisions.

Here's a framework to consider when investing an inheritance:

1. Don't invest right away.

Start by not investing. Place the funds in a high-yield savings or money market account while you make a clear plan. This helps you avoid rash decisions and gives you breathing room.

2. Define what matters to you.

• Are you trying to preserve the money for the long term?
• Generate income in retirement?
• Use some now and grow the rest?

Your goals and timeline will shape the right approach for you.

3. Build a diversified portfolio.

Rather than putting all your money into one place, spread it across different types of investments—stocks, bonds, cash, and possibly real estate. This may help manage your overall risk and smooth out volatility.

For example:

• Short-term needs: Keep in savings or CDs
• Mid-term goals (3–5 years): Consider bonds or balanced funds
• Long-term goals (10+ years): A well-diversified mix with stocks

4. Avoid chasing quick returns.

Inheritance scams, flashy real estate deals, and "guaranteed" high-yield investments tend to appear when people come into money. If it sounds too good to be true—it is. Stick with transparent, proven strategies.

5. Get help from an experienced, professional advisor.

A credentialed planner (like a CFP®) can help you:

• Clarify your goals
• Choose low-cost, tax-efficient investments
• Create a withdrawal or income strategy (if needed)
• Make adjustments as life evolves

Look for someone who puts your interests first—not someone trying to sell products.

A thoughtful approach is steady, intentional, and based on you.

Whether you want to retire early, support family, or build lasting wealth, the right plan will be aligned with your goals and your values.

An inheritance can change your financial picture overnight—and that's exactly why thoughtful, collaborative guidance matters. A financial planner helps you slow down, sort through options, and make decisions that are aligned with your goals.

Here's how a planner can support you during this transition:

1. Help you pause and prioritize.

It's easy to feel pressure to act quickly—especially if others have opinions or if the inheritance feels emotionally charged. A planner helps you take a breath, get organized, and clarify what truly matters to you before making any big moves.

2. Break down what you've inherited—and what it means.

Whether you received cash, property, retirement accounts, or investments, each comes with unique rules, timelines, and potential tax implications. A planner will walk you through:

• What you own
• What decisions are time-sensitive
• What needs legal or tax coordination
• What can wait

3. Help address taxes and avoid costly mistakes.

A planner can help you avoid common pitfalls—like triggering avoidable taxes, cashing out retirement accounts prematurely, or making emotional spending decisions. They'll also coordinate with estate attorneys or CPAs if needed.

4. Turn the windfall into a long-term strategy.

A good advisor won't just "manage your money." They'll help you:

• Rebuild or adjust your financial plan
• Decide whether to pay off debt, invest, give, or save
• Create income streams if you need them
• Align this inheritance with your future goals

5. Be your sounding board.

Inheritance often brings up family dynamics, guilt, or unexpected responsibility. A planner provides a neutral, experienced perspective to help you feel more confident and less alone.

A planner doesn't just work with the money—they help you make clear decisions in a high-stakes moment.

That's what makes the right advice worthwhile.

An inheritance can be a turning point—not just a windfall, but a chance to build long-term confidence, flexibility, and freedom.

The key is using it intentionally—not just letting it sit, get spent, or drift without a plan.

Here's how to use an inheritance to pursue your goals:

1. Press pause and manage it carefully.

Start by parking the money in an insured account while you get organized. This gives you time to think clearly, especially if you're navigating grief or overwhelm.

2. Define what matters to you.

For some, it's retiring early. For others, it's freedom from debt, helping family, or knowing they have resources for the future. The best use of an inheritance starts with your personal definition of what you're working toward.

3. Prioritize your foundations first.

Use the money to strengthen your financial base:

• Build or top off your emergency fund
• Pay down high-interest debt
• Catch up on retirement savings
• Set aside money for upcoming life changes (career shifts, caregiving, etc.)

4. Invest with intention.

Once your basics are in place, consider investing for long-term growth potential. A diversified portfolio aligned with your goals can help manage your money, while managing risk within acceptable ranges.

Work with an experienced advisor to help ensure:

• Your investments match your risk comfort and time horizon
• You understand the tax planning implications
• Your plan can adapt over time

5. Build flexibility into your plan.

Well-being doesn't mean rigidity. Your plan should adapt over time—whether life throws you a curveball or presents new opportunities.

6. Don't forget your values.

A thoughtful plan may also include:

• Giving to causes or people you care about
• Creating a legacy through estate planning
• Making meaningful upgrades in your lifestyle—without guilt

Done right, an inheritance isn't just money—it's momentum.

With the right guidance, you can use it to build toward your goals, reduce stress, and make confident decisions that support the life you truly want.

It depends on what you inherited, your goals, and how those assets fit into your overall financial picture. There's no single right answer—but there are smart questions to ask before deciding.

Here's how to think it through:

1. Understand the asset's current value—and future potential.

Get a professional valuation of any property or investment you've inherited.

• For real estate, that means understanding market value, rental potential, maintenance costs, and location trends.
• For investments, it includes reviewing the cost basis (which may have "stepped up" to date of death), performance history, and tax efficiency.

2. Clarify your personal priorities.

Ask yourself:

• Does keeping this asset align with my goals?
• Would I have purchased this investment or property myself?
• Will it help me work toward my goals, or add stress and complexity?

3. Think beyond sentiment.

It's normal to feel emotionally attached to something a loved one owned. But holding onto an asset that doesn't serve your life—financially or logistically—can become a burden, not a tribute.

4. Evaluate the tax impact of selling.

Most inherited investments and real estate receive a step-up in basis, which means capital gains taxes may be minimal or even zero if sold soon after inheritance. But the longer you hold the asset and it appreciates, the more you may owe in taxes later.

This is an ideal time to consult a planner or tax professional to walk through your options.

5. Consider cash flow and liquidity needs.

• Will the property generate income—or require regular expenses?
• Would selling allow you to pay off debt, invest more strategically, or create more flexibility?

6. There's no rule that says you must keep it.

Just because someone left you a rental property, stock portfolio, or vacation home doesn't mean you're obligated to hang on. You can honor their legacy and make decisions that move your life forward.

Smart next step: Talk to a professional advisor who can help you weigh the emotional, financial, and tax planning considerations—and create a plan that reflects what you truly want.

Inherited retirement accounts can come with significant tax rules—and understanding them early can help you avoid costly mistakes. The type of account and your relationship to the original owner both affect how and when taxes apply.

Here's a breakdown of what to expect:

1. Traditional IRAs and 401(k)s

These accounts are funded with pre-tax dollars, so any money you withdraw is taxed as ordinary income.

What you need to know:

• Non-spouse beneficiaries must typically empty the account within 10 years (due to the SECURE Act). There are no annual required minimum distributions (RMDs), but the full balance must be withdrawn by year 10.
• You can choose when to take withdrawals within that window—but each distribution will be taxed at your income rate.
• If you withdraw a large sum in one year, it could bump you into a higher tax bracket.

2. Roth IRAs

These are typically tax-free for you as the beneficiary:

• The original owner already paid taxes on contributions.
• You still must follow the 10-year rule (for non-spouses), but distributions are tax-free if the account is at least five years old.
• No RMDs are required for the beneficiary during those 10 years—just ensure the account is fully withdrawn by the end of that period.

3. If you're a spouse beneficiary

You have more flexibility:

• You can roll the IRA into your own retirement account and follow your regular RMD schedule.
• Or you can treat it as an inherited IRA and delay withdrawals if you're under 59½.
• Your decision will affect when taxes are owed—so it's worth strategizing with an advisor.

4. Watch for exceptions and special cases

If you're a minor child, chronically ill, or more than 10 years younger than the account holder, you may qualify for exceptions to the 10-year withdrawal rule. These require documentation and planning.

5. You'll receive a Form 1099-R each year you take a distribution

This is what you'll report on your tax return. Keep track of all distributions and consult with a tax advisor to help manage your tax burden.

Pro tip:

If you inherit a retirement account, it's wise to avoid taking the entire balance right away—unless you truly need the funds. Spreading withdrawals across several years can help reduce your tax burden.

Need help figuring out which rules apply to your situation? An experienced advisor can help you map out a tax planning strategy based on your income, timeline, and options.