Managing an Inheritance: What to Do With What You’ve Been Given
Receiving an inheritance often happens during one of the hardest seasons of life. The financial decisions that follow can feel overwhelming — and the pressure to act quickly can lead to choices you’ll later regret. The most important thing to know: you don’t have to rush. Most inherited assets give you time to think. Use it.
Here’s a practical framework for making decisions that serve your long-term financial future.
1. Start with Your Own Financial Goals
Before you do anything with the money, evaluate your current financial situation. An inheritance is most powerful when it’s put to work within a broader plan — not treated as a windfall separate from your financial life.
Ask yourself: What would make the biggest difference right now?
– Eliminating high-interest debt?
– Building or replenishing an emergency fund?
– Accelerating retirement savings?
– Funding a child’s education?
– A down payment on a home?
The answer shapes everything else.
2. Understand the Tax Rules Before You Act
This is where mistakes are most costly — and most avoidable.
Inherited retirement accounts (IRAs, 401(k)s)
Most non-spouse beneficiaries are required to withdraw the full balance within 10 years. Those withdrawals count as taxable income. Without a strategy, you could face a significant and avoidable tax bill. A tax-informed financial advisor can help you spread withdrawals to minimize the hit.
Brokerage accounts and real estate
Inherited assets typically receive a *stepped-up cost basis* — meaning the asset’s value resets to its fair market value on the date of death. If you later sell, you’ll only owe capital gains taxes on appreciation *after* you inherited it, not from when the original owner purchased it. This is a significant tax advantage, but only if you understand it before you sell.
Don’t sell inherited assets before understanding the tax basis. A quick conversation with a professional can save you thousands.
3. Decide What to Do with Inherited Property
Real estate decisions are often the most complex — and the most emotionally charged. Start by separating the financial reality from the sentimental attachment.
Consider honestly:
– Can you cover the ongoing costs (mortgage if any, property taxes, insurance, maintenance)?
– Do you have the time and capacity to manage or rent it?
– Is selling and reinvesting the proceeds better aligned with your goals?
There’s no universally right answer. But being clear-eyed about the numbers makes the decision easier — and the outcome better.
4. Invest the Rest for the Long Term
Once immediate needs are addressed, investing remaining assets can help them continue to grow. A diversified portfolio aligned with your risk tolerance and timeline is the goal — not speculative moves made out of excitement or grief.
This is the right moment to work with a financial advisor if you don’t already have one. An inheritance deserves a real strategy, not a reactive one.
5. Update Your Own Estate Plan
An inheritance changes your financial picture — which means your own estate plan may need to catch up. Review (or create) your:
– Will
– Beneficiary designations on retirement accounts, bank accounts, property, and insurance
– Trusts, if applicable
– Powers of attorney
What you’ve received is now part of what you’ll one day pass on. Make sure your own wishes are documented.
6. Consider a Charitable Gift
For many families, honoring a loved one’s memory through giving is meaningful. Whether it’s a one-time donation to a cause they cared about, an ongoing giving strategy, or a named fund, charitable giving can be a lasting way to carry their legacy forward — and may offer tax benefits as well.
Update Your Own Estate Plan
An inheritance can open real doors — for your financial future and for your family’s security. But the decisions carry weight, and the tax and planning details are genuinely complex. Click here to learn more about our Trust & Estate Planning services.
At Storen Advisory Group, we help clients think through these decisions clearly — from tax strategy and investment planning to estate plan updates and charitable giving. If you’ve recently received an inheritance and aren’t sure where to start, we’re here to help.
Blog by Kiran Sharma – Partner, Wealth Advisor
Learn more about Kiran and the rest of the Storen Financial team here.