What to Do With an Inheritance: The First 90 Days and the Big Decisions
Figures checked October 27, 2026 against primary sources
Inherited money usually arrives at a hard time, and often in pieces: a bank account here, a retirement account there, maybe a house. The same is true of other windfalls, like a legal settlement or a large bonus. The good news is that very little has to be decided right away. This guide covers what to do first, what can wait, and the order in which most people work through the bigger choices.
The Short Answer
- Do nothing permanent for the first few weeks. Put cash in an FDIC-insured account, within the $250,000 coverage limit per depositor, per bank, per ownership category.
- An inheritance is generally not taxable income under federal law. What it earns later (interest, dividends, rent) is taxable, and so are withdrawals from inherited pre-tax retirement accounts.
- Inherited property gets a new cost basis, generally its value on the date of death. Selling soon after often means little or no capital gain.
- Then work down a list: emergency fund, high-interest debt, retirement accounts, then your other goals.
- Be wary of anyone who contacts you with an urgent offer. Check any advisor on Investor.gov before handing over money.
Step 1: Park the Money Somewhere Safe
The first job is not to grow the money. It is to keep it safe and easy to reach while you sort out the rest. For cash, that usually means a bank savings account, a money market deposit account or a short CD at an FDIC-insured bank.
The FDIC insures deposits up to $250,000 per depositor, per FDIC-insured bank, for each account ownership category. Two details matter for a larger inheritance:
- Money you hold in the same ownership category at the same bank is added together. A single-owner checking account and a single-owner savings account at one bank share one $250,000 limit.
- Coverage applies separately at each bank and to each ownership category (single, joint, certain retirement accounts, trust accounts and others). Spreading cash across banks, or across categories, can keep all of it insured.
FDIC insurance covers deposits such as checking, savings, money market deposit accounts and CDs. It does not cover stocks, bonds, mutual funds, annuities, life insurance, Treasury securities or crypto, even when you buy them through a bank. Those products carry other kinds of risk and protection.
If you want the parked cash to earn something while you think, compare current high-yield savings rates and CD rates. A few months in a safe account costs you very little. A rushed investment decision can cost a lot more.
When the Money Actually Arrives
Heirs are often surprised by how long it takes. Assets reach you in different ways:
- Accounts with a named beneficiary. Retirement accounts, many bank accounts and life insurance can name a beneficiary. California's court self-help site notes that a person may have been named as a beneficiary on a retirement or bank account even if the will does not mention them. You claim these from the bank, plan or insurer, each with its own forms and steps.
- Property that goes through probate. Probate is the court process for transferring a person's property after they die. A personal representative (the executor named in the will, or someone the court appoints) collects the property, pays the bills and then distributes what is left to the heirs. An estate may need probate even when there is a will.
How long probate takes depends on the state and the estate. As one example, California's court self-help site says a formal probate case typically takes 9 to 18 months and can take longer. Many states also have simpler procedures for small estates; our small estate affidavit guide lists the limits by state, and a transfer on death deed can let a house skip probate.
The estate pays its debts first. The FTC and CFPB both explain that a person's debts are paid from their estate, and family members usually do not have to pay them from their own money. The exceptions include cosigners, joint credit card holders, and some spouses under state law. A debt collector may contact the executor, but it is illegal for a collector to suggest you owe the debt personally when you do not. Until the debts are settled, the executor may not be able to tell you what your share will be.
Taxes in Brief
Tax is usually smaller than people fear, but it depends on what you inherited. The short version, with our detailed guides linked:
- The inheritance itself. The IRS says that in most cases property you receive as a gift, bequest or inheritance is not included in your income. Income it produces afterward (interest, dividends, rent) is taxable to you. A few states have their own inheritance tax on heirs: see inheritance tax by state.
- Stocks, funds and property. Your basis is generally the fair market value on the date of death (or an alternate valuation date if the executor elects it). You owe capital gains tax only on a sale above that basis, and the IRS treats inherited property as held for more than one year, so any gain is long-term. Our capital gains tax guide has the rates.
- Inherited IRAs and 401(k)s. Withdrawals from pre-tax accounts are taxable income. Most non-spouse beneficiaries must empty the account by the end of the 10th year after the year of death; spouses, minor children, disabled or chronically ill heirs, and heirs not more than 10 years younger than the owner have other options. The timing choice can move thousands of dollars of tax, so read our inherited IRA guide before you withdraw anything.
- Estate tax is a separate federal tax that only very large estates owe. See who actually pays the estate tax.
If a relative gave you money while alive rather than leaving it to you, the rules are different; our gift tax guide covers that case.
An Inherited House: Keep, Rent or Sell
A house is often the biggest and least liquid part of an inheritance. There are three basic paths, and each one has costs that start on day one: property tax, insurance, utilities and upkeep.
| Option | When it can make sense | What to check |
|---|---|---|
| Sell | You do not want to live there or be a landlord, or several heirs need to split the value | Because the basis resets to the date-of-death value, a sale soon after death often produces little taxable gain. Agent fees and repairs still come off the top. |
| Rent it out | The rent would cover all costs with room to spare, and you are willing to manage it or pay a manager | Rent is taxable income. Run the numbers on vacancy, repairs and management before deciding. |
| Move in | The location and size fit your life, and you can afford the running costs | Any mortgage still on the house, property tax, insurance and deferred maintenance |
To compare the first two, use our home sale proceeds calculator for what you would walk away with, and the rental property calculator for the monthly cash flow if you keep it. When several siblings inherit one house, agree in writing who pays the bills while it is being decided.
An Order of Operations
Once the money is in your name and you know the tax picture, a simple order helps. It is a general framework, not a rule; your situation may call for a different order.
- Set aside known bills. Funeral costs you agreed to cover, taxes due on inherited retirement withdrawals, or costs of an inherited house.
- Fill your emergency fund. The SEC's investor education site notes that some people keep up to six months of income in savings. Our emergency fund guide and calculator help you pick your number.
- Pay off high-interest debt. The same SEC site puts it plainly: no investment strategy pays off as well as eliminating high-interest debt, or with less risk. Start with the highest rate; debt avalanche vs snowball compares the two common methods.
- Catch up on retirement accounts. 401(k) contributions come out of your paycheck, so one approach is to raise your contribution rate and use the inheritance to cover the drop in take-home pay. If you are eligible, you can also contribute to an IRA up to the yearly limit. Current limits: 401(k) and IRA.
- Fund near-term goals in safe accounts. Money you need within a few years (a down payment, a car, tuition) generally belongs in savings or CDs, not stocks.
- Invest the rest for the long term. Low-cost, diversified funds are the usual core; see should you invest in S&P 500 index funds. If you would rather not do it yourself, a robo-advisor or a human advisor can.
Paying down a low-rate mortgage early is a closer call. It is a guaranteed saving equal to the rate, but the money is hard to get back out. The mortgage payoff calculator shows the trade-off. For a longer view of where steady saving can lead, see how to become a millionaire.
Example: A $100,000 Inheritance
Hypothetical example, not a recommendation. Say you inherit $100,000 in cash. You have $5,000 in savings against monthly costs of $4,000, a $12,000 credit card balance, an $8,000 car loan, and you want to buy a home in about three years. One way to split it:
| Use | Amount | Where it goes |
|---|---|---|
| Top up emergency fund to about 5 months of costs | $15,000 | FDIC-insured savings |
| Pay off credit card and car loan | $20,000 | Debt gone, payments freed up |
| Retirement catch-up | $15,000 | IRA contribution, plus covering a higher 401(k) payroll deduction |
| Home down payment fund | $15,000 | Savings or CDs maturing within 3 years |
| Long-term investing | $30,000 | Diversified low-cost funds in a taxable account |
| Something for yourself | $5,000 | Spent on purpose, without guilt |
| Total | $100,000 |
Someone with no debt and a full emergency fund might put far more into long-term investing. Someone with a large inherited IRA would plan withdrawals and their tax first. The point of the table is the order, not the exact amounts.
Protecting It From Scams
Two kinds of scams show up around inheritances.
Fake inheritance letters. The FTC warns about letters from a supposed law firm saying a client has died and you are the heir to a large life insurance policy or estate. There is no money. If you reply, the scammers try to get your Social Security or bank account numbers, your money, or both. The FTC's advice is not to respond and to report it at ReportFraud.ftc.gov.
Pitches aimed at people who just came into money. The SEC's red flags of investment fraud include:
- Unlicensed investment professionals
- Offers called "risk-free," or promises of guaranteed returns
- Pressure to invest right now
- Unsolicited pitches asking for your personal information
- Requests to pay by credit card, gift card, or by wiring money abroad or to a personal account
If anyone asks you to pay a fee or share account details to release an inheritance, stop and check with the executor or the probate court directly, using contact details you look up yourself.
Choosing an Advisor
People who call themselves financial advisors can work under different rules. The SEC's Investor.gov describes the two main types:
| Investment adviser | Broker | |
|---|---|---|
| What they do | Gives ongoing advice and usually monitors your investments | Buys and sells investments for you and may make recommendations |
| How they are typically paid | A fee usually based on the value of the assets in your account | A commission or markup each time you buy or sell |
| Standard | Must act in your best interest and not put their interest ahead of yours | Must act in your best interest when making a recommendation |
Note the difference in wording: an adviser's duty covers the advice it gives you, while a broker's applies when it makes a recommendation. When someone tells you they are a fiduciary, ask whether that covers all of your accounts and all of the advice, all the time, and get the answer in writing. Either way, Investor.gov points out that how a professional is paid creates conflicts with your interests, and suggests asking about them.
Before you hire anyone:
- Check their record. Search the person and firm on Investor.gov, which leads to the SEC's Investment Adviser Public Disclosure site, or on FINRA's BrokerCheck for brokers. Investor.gov shows whether the person is licensed and any disciplinary history.
- Read Form CRS. This short relationship summary lists services, fees, conflicts of interest and legal or disciplinary history.
- Ask for Form ADV Part 2 (the brochure) from an investment adviser.
- Do not rely on initials after a name. Investor.gov notes that titles are not all alike and do not necessarily mean better service.
- Get the fee in dollars. A 1% yearly fee on $300,000 is $3,000 a year.
Our guide is a financial advisor worth it? covers when paying for advice tends to pay off. For an estate with real estate, a business or a complex trust, an estate attorney and a CPA may matter more than an investment advisor.
The Family Side
Money from a parent or spouse comes with grief, and sometimes with family tension. A few practical habits help:
- Keep inherited money separate from shared accounts until you have decided what to do with it, and keep records of where it came from.
- Answer requests for loans or gifts later, not on the spot. "I am not making any decisions for a few months" is a complete answer. If you do lend to family, our gift tax guide covers how to document it.
- Talk openly with co-heirs about a shared house or belongings, and put agreements in writing.
- Update your own plan. More money is a good moment to write or update a will and check your beneficiary designations: see how to make a will and living trust vs will.
A 90-Day Checklist
Days 1 to 30
- Get several certified copies of the death certificate.
- Find out who the executor or personal representative is, and whether there is a will or trust.
- Ask which accounts name you as a beneficiary, and contact those institutions.
- Deposit any cash you receive in insured accounts, within the FDIC limits.
- Do not respond to unsolicited calls or letters about the money.
Days 31 to 60
- List what you are inheriting and its date-of-death value (ask the executor), for your cost basis records.
- Read our inherited IRA rules before taking any retirement account withdrawal.
- If there is a house, compare selling and renting, and keep it insured and maintained meanwhile.
- Write down your goals and your current debts with their interest rates.
Days 61 to 90
- Fill your emergency fund and pay off high-interest debt.
- Raise retirement contributions and fund an IRA if you are eligible.
- Decide whether to invest on your own or hire help; check anyone you consider on Investor.gov or BrokerCheck.
- Set money aside for any tax the inheritance creates (retirement withdrawals, a sale above basis, rent).
- Update your own will and beneficiaries.
FAQ
Do I have to pay taxes on inherited money?
Generally not federal income tax: the IRS says inheritances are, in most cases, not included in income. You do pay tax on what the money earns afterward, on withdrawals from inherited pre-tax retirement accounts, and on gains if you sell inherited property for more than its date-of-death value. A few states tax heirs; see inheritance tax.
What is the first thing to do with an inheritance?
Put the cash in an FDIC-insured account, within the $250,000 limit per depositor, per bank, per ownership category, and give yourself time before making any big decisions.
How long does it take to receive an inheritance?
Accounts with a named beneficiary are claimed from the bank, plan or insurer using its own forms, so ask each one what it needs. Property that goes through probate takes longer; California's courts, for example, say formal probate typically takes 9 to 18 months.
How should I invest an inheritance?
After your emergency fund and high-interest debt are handled, most people use retirement accounts first and then diversified, low-cost funds for long-term money. Money you need within a few years is usually kept in savings or CDs.
Should I pay off my mortgage with an inheritance?
It depends on the rate and how much cash you would have left. Paying off a high-rate loan is a sure return, but money in a house is hard to get back out. Fill your emergency fund and clear costlier debt first.
Do I have to pay my parent's debts?
Usually not from your own money. Debts are paid from the estate, which can shrink what heirs receive. You may owe a debt yourself if you cosigned it, shared the account, or fall under certain state rules for spouses.
Is a fee-only advisor the same as a fiduciary?
Not exactly. "Fee-only" describes how someone is paid. Registered investment advisers must act in your best interest whatever their pay structure, and brokers must do so when making a recommendation. Check registration on Investor.gov and ask how they are paid.
This article is for general information and is not financial, tax or legal advice. The $100,000 allocation is a hypothetical illustration. FDIC coverage is from fdic.gov; tax rules are from IRS Publications 525, 544 and 551, the IRS gifts and inheritances FAQ and the IRS beneficiary page; probate basics are from the California Courts self-help site; debts after death from the FTC and CFPB; advisor, broker and fraud information from the SEC's Investor.gov. All sources were read on 2026-10-27.
