Inheritance money almost never arrives at a convenient moment. It shows up alongside grief, paperwork, and a surprising number of opinions about what you should do with it. If you’ve recently lost a parent or loved one, you’re carrying a lot, plus there are lots of account statements with your name on it.
Here’s the reassurance I offer friends and clients alike: very little needs to happen this week. An inheritance rewards sequence and patience more than speed. In this article, I’ll cover how to pace the decisions, what the tax rules mean for each asset, and when hiring a financial advisor for inheritance is the right move.
Pace Yourself: The First Moves Are Small
I like to think of an inheritance as a stack of moving boxes. Some are clearly labeled, many are not, and a few are stamped with a date—open by the deadline or pay for it later. Your first job is to simply sort through them.
Usually, the deadline pile is shorter than you might fear: the estate settlement (the executor’s work), required tax filings, and inherited retirement accounts, which come with real deadlines and penalties. Almost everything else can wait, including selling the house, reinvesting a portfolio, and a host of other hard-to-reverse decisions.
While you sort through everything, any cash you received can sit in a high-yield savings or money market account. Don’t look at parking money as procrastination, it’s a decision. And it’s often the right opening move, because grief and irreversible choices can be a bad combo.
Understand What You Inherited, Asset by Asset
More often than not, an inheritance arrives as multiple checks, and each asset follows its own tax rules. Here’s a quick breakdown:
| Asset | Tax treatment (general, as of 2026) |
A sensible first step |
|---|---|---|
| Taxable brokerage account | Step-up to date-of-death value; later growth taxable when sold | Review the allocation before assuming it fits |
| Traditional IRA / 401(k) | No step-up; distributions taxed as ordinary income; 10-year distribution rule for many beneficiaries | Confirm your beneficiary category before rolling into an inherited IRA in your own name |
| Roth IRA | Generally tax-free if the 5-year requirement is met; 10-year rule often still applies | Ask how the distribution window applies to you |
| Real estate | Step-up in basis; possible $250K/$500K exclusion on gains if it becomes your primary residence | Get an appraisal to document date-of-death value |
| Art, jewelry, collectibles | Step-up generally applies; specialty insurance often needed | Professional appraisal, then an insurance rider |
Tax treatments are simplified, current as of 2026, and subject to change. Details below.
Taxable Investment Accounts and the Step-Up in Basis
Brokerage accounts (sometimes called taxable or non-retirement accounts) generally receive a step-up in basis when the owner passes away; cost basis resets to fair market value as of the date of death, a rule the IRS lays out in Publication 551, Basis of Assets. In plain terms, growth during your loved one’s lifetime is generally not taxed to you when you sell.
Consider a hypothetical scenario: your mother bought stock decades ago for $100,000, and it’s worth $600,000 when she passes away. Your basis generally becomes $600,000, so selling soon after her death may create little or no capital gains tax, which means you can rebuild the portfolio around your own goals without an embedded tax bill impacting your decisions. A few exceptions exist (alternate valuation dates, community-property rules), which is where a good CPA comes into play. At Monument, we work with and can recommend a list of excellent CPAs.
Inherited Retirement Accounts and the 10-Year Rule
Retirement accounts play by their own set of rules, and it’s one of the easiest places for beneficiaries to end up paying more in taxes than they needed to. There is no step-up here: distributions from an inherited traditional IRA or 401(k) are generally taxed as ordinary income, and since the SECURE Act took effect in 2020, the IRS’s beneficiary rules sort beneficiaries into two groups.
Eligible designated beneficiaries (surviving spouses, minor children of the original owner, disabled or chronically ill individuals, and anyone not more than ten years younger than the person who died) can generally stretch distributions over their own life expectancy.
Many adult children land in the second group: non-eligible designated beneficiaries, who must empty the account by the end of the tenth year following the year of death. Under final IRS regulations effective in 2025, annual withdrawals may also be required in years one through nine if the original owner had already begun required minimum distributions. These rules have shifted several times and remain subject to change, so confirm the details before withdrawing.
Within that ten-year window, timing becomes a genuine financial planning lever. Consider a hypothetical scenario: a married couple with $300,000 of annual income inherits a $900,000 traditional IRA. Withdrawing roughly $90,000 each year keeps those distributions largely within the 24% bracket at 2026 federal rates, or roughly $216,000 in federal tax over the decade. Waiting and taking the full $900,000 in year ten pushes much of it into the 35% and 37% brackets, meaning roughly $309,000 in federal taxes in one year. That sequencing decision alone can be worth roughly $93,000, before state taxes or what the still-invested balance may earn. (Figures use 2026 federal rates, married filing jointly, and are subject to change; your own numbers will vary.)
And if an inherited retirement account provides you with money you don’t need right now, I explain your options in the article, Can I Reinvest My RMD?
The Family Home
A house can be the most emotionally complicated asset you’ll inherit, particularly if it’s the one you grew up in and holds sentimental value. So, it’s worth really weighing your options here.
Inherited real estate generally receives the same step-up in basis, so capital gains on a sale are measured from the home’s value at the date of death rather than the price your parents paid decades ago. If you move in instead, you may later qualify to exclude up to $250,000 of gain ($500,000 if married filing jointly) under the IRS’s ownership and use tests—generally, owning and using the home as your primary residence for at least two of the five years before the sale. (Figures as of 2026, subject to change.)
Keeping the house, however, comes with financial commitments like property taxes, insurance, maintenance, and possibly a mortgage. Even if your childhood home holds fond memories, it’s worth considering the carrying costs before deciding if you want to keep it.
For valuables like art and jewelry, it’s a good idea to get a professional appraisal early. This allows you to document the date-of-death value for the stepped-up basis and tell your insurance agent whether any pieces need their own rider.
When a Financial Advisor for Inheritance Makes Sense
When does a financial advisor come into play? You may want to hire an advisor if an inheritance significantly changes your financial picture. Multiple asset types, a ten-year distribution requirement, or a concentrated stock position can really complicate your financial plan.
Inheritance-specific advice means triaging deadlines, modeling distribution timing against your income, coordinating with the estate attorney and CPA so nothing falls between the cracks, and folding the new assets into your own personalized wealth plan so it reflects your priorities and value, not someone else’s. At Monument, that work connects directly to estate planning, because an inheritance touches your investments, your taxes, and your estate.
Two things are worth knowing before you hire anyone. First, understand the difference between a financial advisor and a fiduciary: a fiduciary is required to act in your best interest, which is precisely the standard you want when an inheritance comes into play. Second, interview more than one candidate—we’ve written a guide on what to ask when choosing a financial advisor. And if the person you inherited from had an advisor, you’re welcome to stay, but the relationship should earn its place the same way a new advisor would have to.
Give the Inheritance a Purpose
Once the mechanics are handled, a more personal question is waiting: what is this money for? Start with the person who left it to you: what did they hope it would do, and what did they value—education, travel, the family business, generosity, time together? A $50,000 inheritance directed with intention can shape a family more than a far larger one that simply disappears into the checking account.
For families thinking a generation ahead, this piece on legacy planning for families goes deeper on the topic. If settling this estate has shown you how heavy the process can be, one of the kindest gifts to leave your own children is organization. Our guide to helping your parents avoid probate works just as well when you’re the parent doing the planning.
Inheritance Planning FAQs
Should I hire a financial advisor after inheriting money?
It is possible to manage a modest, all-cash inheritance on your own. However, hiring an advisor tends to be a smart move when the inheritance is large relative to your existing assets or includes retirement accounts, real estate, or concentrated stock, where one tax or timing decision can end up costing you more than years of advisory fees. If you hire someone, look for a fee-only fiduciary advisor.
Do I pay taxes on inheritance money?
In many cases, no tax is due on the inheritance itself: there is no federal inheritance tax as of 2026, and federal estate tax is generally paid by the estate before assets reach you. You may owe ordinary income tax on inherited pre-tax retirement distributions, capital gains tax on appreciation after the date of death, and inheritance tax in the handful of states that levy one. Rules change, so confirm with a CPA.
How long do I have to empty an inherited IRA?
Non-eligible designated beneficiaries, including many adult children, generally must empty the account by the end of the tenth year following the year of the owner’s death, and annual distributions may be required if the owner had already started their own required minimum distributions. Eligible designated beneficiaries, such as surviving spouses, can generally stretch distributions over their life expectancy. These rules are current as of 2026 and subject to change.
Should I sell an inherited house right away?
There is rarely a tax reason to rush: gains are measured from the home’s stepped-up, date-of-death value, so taking a few months to decide typically creates only a modest taxable gain, if any. The better question is whether you want to own it: if the carrying costs or upkeep would strain your life, selling can be the more caring choice.
What to Do Next
Start with sorting everything out: list what you inherited, flag anything that carries a deadline, and set aside any cash for now. Before making any permanent decisions (like selling the house, emptying the IRA, restructuring the portfolio), it’s best to pressure-test the order of events, because the sequence matters.
Want help? Monument acts as your thinking partner, sorting through the complexity and providing clear options for moving forward with an integrated financial plan. Plus, our Complimentary Wealth Check is a no-pressure way to get an assessment of your situation and insight into how we can help. Want to get started? Let’s talk.
Note: Monument is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. Please consult your CPA for tax advice.
Want to suggest a correction to this article? Email us at info@monumentwm.com. Please note that Monument Wealth Management and its advisors are not tax advisors, and this article is not a replacement for professional legal, accounting or tax advice.
