If you’ve recently received an inheritance, you may be feeling overwhelmed. You’ve been handed a great responsibility right in the middle of your grief. What happens next? How do you access accounts and pay taxes? It’s easy to feel like you need to figure everything out immediately, but you don’t need to rush. Give yourself time to review all your options and take the next steps when you’re ready.
It can be stressful figuring out what to do with an inheritance. This article walks you through what to do when you inherit money and how to make thoughtful long-term decisions on a timeline that works for you.
What happens when you inherit money?
There are a few immediate steps that take place after receiving inheritance money. First, the deceased person’s legal and financial affairs need to be put in order in a process called settling the estate. The person in charge of settling the estate is called the executor. The executor is responsible for a number of administrative tasks, including:
- Notifying government agencies, such as the Social Security Administration and the IRS, that the individual has passed
- Creating an inventory of the deceased person’s assets and property
- Paying outstanding debt and taxes
If the estate includes assets with no named beneficiary, such as real estate or vehicles, it enters a legal process known as probate. The executor files the original will and death certificate with the state’s circuit or probate court, which appoints a judge to oversee all the legal aspects of settling an estate. Depending on the estate’s size and where you live, this can take anywhere from a few months to over a year, and the timing is mostly out of your control.
Inherited assets like annuities and other accounts with named beneficiaries aren’t typically subject to probate. If you’re named as a beneficiary, the first thing you need to understand is inheritance tax implications.
As of 2026, individual estates worth more than $15 million are subject to federal estate tax. Married couples do not have a separate “joint” threshold; a surviving spouse may inherit the deceased spouse’s unused exclusion (“portability” of the DSUE) if the executor makes a timely election on IRS Form 706. The executor is responsible for overseeing this tax, and it doesn’t usually impact heirs directly. However, you may be subject to state inheritance tax, depending on where the deceased person or their property was located. You may also owe taxes on certain assets, such as traditional IRAs or 401(k)s. If you inherit an asset like stocks or real estate and decide to sell it, you will likely owe a capital gains tax.
Inherited assets held in a taxable account generally receive a stepped-up cost basis to fair market value on the date of the decedent’s death under IRC §1014, which may reduce capital gains tax on subsequent sale. Inherited traditional IRAs and 401(k)s do not receive a step-up; distributions are generally taxed as ordinary income, and under the SECURE Act most non-spouse beneficiaries must distribute the full account within 10 years. Consult a qualified tax professional.
Remember: There’s no need to rush a decision on how you handle your inheritance. Depending on the estate’s complexity, you may not receive assets for many months.
If your inheritance includes assets like life insurance or an annuity, payout election deadlines vary by contract and by state; review the contract and any beneficiary election forms provided by the issuing insurance company, and consult a qualified tax professional. If you receive cash, keeping it in a basic savings or money market account while you let emotions settle is perfectly fine.
First 90 days: What to do before making big decisions
Grief can have a profound impact on your health and judgment. Try to give yourself 3 to 6 months following the loss of your loved one before making any major decisions. Once you’re ready to tackle your inheritance, start small with these practical steps:
- Open a separate account: Keep the inheritance apart from your regular checking and savings accounts so it doesn’t get mixed in with your everyday money.
- Pay down high-interest debt: Credit card and other high-interest balances grow quickly and cost you more over time. Addressing them early preserves more of your inheritance.
- Build your emergency fund: Keep enough money for 6 to 12 months worth of expenses in a savings account.
How to manage your inheritance money: Your long-term plan
If you have inheritance money left over after paying off debt and building your savings account, there are a few directions you can take. Start by defining what you want this money to do. Do you want to supplement your income? Maybe you want to use it for a specific goal, such as going back to school or taking a once-in-a-lifetime trip. One of the best decisions you can make with an inheritance is to invest it for your retirement.
Once you know what you want to do, it’s time to decide if you want to hire a financial advisor or do it yourself.
When to work with an estate-experienced financial advisor (e.g., a CFP®, CPWA®, or estate planning attorney)
A qualified financial professional helps you invest an inheritance in a way that preserves its value. Their guidance shapes a growth plan that fits your goals and timeline, and they coordinate with tax professionals to reduce the impact of withdrawals and transfers. That same support extends to your own estate, ensuring your assets are organized and passed on the way you intend.
An experienced financial advisor is often worth the cost in a few scenarios:
- If you inherit a large sum (large relative to your other assets)
- If you’re dealing with a complicated estate that includes multiple assets.
- If you’re new to investing and feel overwhelmed.
If you’ve received a smaller, straightforward inheritance, you may prefer to handle it yourself. You can save or invest the money you would’ve spent on an advisor and enjoy knowing you’re in control of your finances.
How to invest your inheritance money
When it comes to investing, one of the best decisions you can make is to create a diversified portfolio. When you spread your investments across multiple strategies and asset types, you lower your overall risk. For example, market volatility that lowers the value of stocks in your brokerage account may not have the same affect on government bonds or money market funds. Having a mix of all three may provide greater stability to your portfolio.
If you want a lower-risk option with a contractually guaranteed rate of interest, you might consider a fixed annuity. They can be a useful addition to your retirement plan for consumers with a long time horizon and limited liquidity needs during the surrender-charge period.
A fixed annuity is a type of insurance contract you buy from an insurance company. You deposit a lump sum and receive either a guaranteed interest rate or income payments for a certain period (sometimes for life), depending on the account type you choose.
Say you deposit $100,000 into an annuity with a guaranteed annual rate of 5%. You can expect that in 5 years, you’ll have about $127,600, no matter how the market performs,
This is a hypothetical illustration only. Current rates vary by product, state, and issue date, are subject to change, and are not an offer.
What not to do with inherited money
There are a few common mistakes to avoid when you inherit money:
- Spending it quickly: People can treat an inheritance as disposable money, often spending far more of it than they save. That mindset can lead to tax surprises or poor investment choices, especially when sudden wealth creates a false sense of security. When it’s gone, they often regret not investing for their future and family.
- Giving large gifts and loans to family: It’s normal to want to (literally) spread the wealth around when you receive an inheritance. But short-term loans and gifts can only go so far in helping friends and family. You can often provide more for loved ones in the long run by saving and investing your inheritance carefully.
- Going all in on high-risk investments: Some people, especially those new to investing, want to grow their inheritance as fast as possible. But investing in high-risk assets with promises of large earnings can backfire, especially if you don’t have much experience handling market volatility.
Gainbridge customer testimonial
People turn to Gainbridge when they need a safe place to protect their money. For example, after receiving an inheritance from a close relative, Thomas wanted to protect that legacy and make sure the money continued to support his family. He needed a company he could trust, one that would honor where the money came from and help carry it forward.
Thomas chose Gainbridge because it offered “one of the highest APYs on the market” and gave him “peace of mind” that he was putting his inheritance to good use.
Gainbridge wasn’t just a place for Thomas to store money. It was a way to preserve something meaningful and feel confident that he was making a responsible long-term decision for himself and his loved ones.
You get to decide on your own timeline
An inheritance is both a gift and a responsibility. The best way to honor your lost loved one is to handle their gift with care. Taking your time and saving or investing it wisely is a great way to honor them and pass it on to your family.
This article is for informational purposes only. It is not intended to provide, and should not be interpreted as, individualized investment, legal, or tax advice. The Gainbridge Save® digital platform provides informational and educational resources intended only for self-directed purposes.
Annuities are insurance products. They are NOT bank deposits, NOT FDIC- or NCUA-insured, NOT insured by any federal government agency, and NOT guaranteed by any bank or credit union. Annuity guarantees are backed solely by the financial strength and claims-paying ability of the issuing insurance company.
Fixed and multi-year guarantee annuities generally include surrender charges for withdrawals during the surrender-charge period, may include market-value adjustments, and may include charges for optional riders. Review the annuity contract, disclosure statement, and any state-required buyer’s guide for a complete description of fees, charges, and limitations.
Withdrawals of taxable amounts from an annuity are subject to ordinary income tax and, if taken before age 59½, may be subject to an additional 10% federal tax.
