Immediate priorities after an inheritance

When you inherit assets, the first 30–90 days are about information and protection, not big financial moves. Treat the event like triage:

  • Secure documentation: death certificate, beneficiary designations, the decedent’s will/trust, account statements, and title paperwork.
  • Confirm account registration and permissions with custodians, banks, and county records for real estate.
  • Pause. Don’t rush to sell or reinvest until you understand tax rules, beneficiary designations, and your own goals.

In my practice I’ve seen heirs sell assets in the first week only to learn they accidentally triggered avoidable taxes or lost the chance to use a step-up in basis on inherited property (IRS—basis of inherited property). Always get the facts first (IRS: What to do with an inheritance).

How inherited retirement accounts differ from other assets

Not all inherited assets behave the same:

  • Taxable assets (cash) are easy to move and invest, but they don’t carry special distribution rules.
  • Taxable brokerage accounts receive a step-up in cost basis for most inherited assets at the decedent’s date of death (reducing capital gains when you sell) — see IRS guidance on basis.
  • Retirement accounts (IRAs, 401(k)s) are governed by special rules that affect distribution timing and taxes. A surviving spouse can often roll a decedent’s IRA into their own account; non-spouse beneficiaries usually cannot and must follow beneficiary-distribution rules (see our guide on Inherited IRA Rules).

Because inherited retirement accounts are taxed differently and may force distributions under the SECURE Act rules (most non-spouse beneficiaries must empty the account within a set period), treat these separately from inherited cash or stock.

Step-by-step plan to integrate an inheritance into retirement savings

  1. Inventory and value every asset

    Create a single spreadsheet showing asset type, custodian, account title, estimated value, and known tax status (pre-tax, after-tax, Roth). For real estate, note outstanding mortgages, property taxes, and likely net proceeds after sale.

  2. Identify who the beneficiary is and what the paperwork allows

    Read beneficiary forms and trust/will language. A named beneficiary on a retirement account usually controls the mechanics of distribution regardless of the will. If the beneficiary designation conflicts with the will, the account designation typically prevails.

  3. Understand federal tax and distribution rules

  • Traditional retirement accounts: distributions are generally taxable when withdrawn. Rules for timing and required distributions vary by beneficiary type and by whether the decedent had already begun RMDs. For details, see the IRS beneficiary pages and our Inherited IRA Rules.

  • Roth IRAs: qualified distributions are typically tax-free, but beneficiary distribution timing still matters.

  • Nonretirement assets: capital gains and step-up basis rules typically apply (IRS: basis of inherited property).

    Because tax law changes since the SECURE Act (2019) and SECURE Act 2.0 (2022) affect distribution timelines for many beneficiaries, consult a tax pro before acting.

  1. Decide liquidity needs and short-term uses

    If you need cash for immediate expenses (funeral costs, estate settlement, medical bills), consider taking from cash or taxable accounts first to avoid tax surprises from retirement-account withdrawals. If you hold inherited securities or property, estimate likely sell costs and timing.

  2. Evaluate tax-efficient options

  • If you’re the surviving spouse, rolling an inherited IRA into your own IRA can simplify future planning and may allow you to delay RMDs until your own RMD schedule. That option does not exist for most non-spouse beneficiaries.
  • Non-spouse beneficiaries often must use an inherited (beneficiary) IRA vehicle—don’t commingle these funds with your own retirement accounts. See our Required Minimum Distribution (RMD) resource for distribution timing considerations.
  • You can’t simply “put” inherited retirement funds into your own 401(k) or IRA as a contribution. If you want to grow retirement savings using inherited cash, consider making new contributions to your accounts up to IRS limits if eligible.

  1. Rebalance and diversify with care

    An inheritance is a portfolio event, not an emergency. Use a phased rebalancing approach: move gradually toward target allocations (for example, over several months) to avoid bad timing. Consider tax-aware placement: hold bonds and tax-inefficient assets in tax-advantaged accounts and growth stocks in taxable accounts when possible.

  2. Consider Roth conversions and tax planning (with a CPA)

    Converting traditional IRAs to Roth IRAs can reduce future RMDs and provide tax-free withdrawals later, but conversions generate income tax now. If you inherited non-retirement cash, using some of it to fund Roth conversions in years where you have lower income may be sensible. Discuss timing, tax-bracket impact, and state tax considerations with your CPA (see our Roth conversion guide: When to Consider Roth Conversions).

  3. Think about income longevity and guaranteed income options

    For heirs who want steady retirement income, annuities or a systematic withdrawal plan can be part of the solution. Annuities remove market risk but introduce fees and illiquidity—run the numbers and read contract details carefully.

  4. Update your own estate plan and beneficiary designations

    After your inheritance is settled, update your will, trust, and beneficiary forms to reflect new assets and your goals. Not updating beneficiary designations is a common mistake that creates friction at your death.

  5. Use professionals for complex assets

    Real estate, closely held business interests, or large retirement accounts benefit from teamwork: estate attorney, CPA/tax advisor, and a fiduciary financial planner.

Taxes: key points to watch

  • Step-up in basis: Most non-retirement assets (stocks, real estate) receive a cost-basis adjustment to fair market value at death, which can dramatically reduce capital gains if sold soon after (IRS: basis of inherited property).
  • Retirement accounts: withdrawals from traditional IRAs/401(k)s are generally taxable as ordinary income when distributed. Roth accounts are generally tax-free if qualifying conditions are met.
  • Distribution timing and penalties: if you inherit a retirement account, missing required distributions or failing to follow beneficiary rules can trigger adverse tax outcomes. Consult our Inherited IRA Rules and the IRS for specifics.

Practical examples from practice

  • Case A: Cash inheritance, age 48. A client in her late 40s inherited $250,000 in cash. We earmarked 6–12 months of cash for immediate needs, increased emergency savings, used $50,000 to pay down high-interest debt, and invested the remainder in a diversified mix aligned with her retirement timeline. She also made maximum allowable IRA and 401(k) contributions for three successive years to take advantage of tax-advantaged growth.

  • Case B: Inherited family home, age 62. A client inherited a family home and owed little on it. After an appraisal (to document basis) and a break-even analysis, we sold the property, used proceeds to pay down mortgage debt and fund a laddered bond and equity portfolio designed for retirement income.

  • Case C: Inherited traditional IRA, age 55 (non-spouse). The beneficiary learned late of distribution timelines and nearly missed required withdrawals. We coordinated with a CPA to take distributions and spread the tax impact over multiple years, reducing the peak tax bite.

Each scenario shows the value of pausing, inventorying, and aligning the inheritance with long-term retirement goals.

Common mistakes to avoid

  • Acting too quickly: immediate liquidation can trigger unnecessary taxes or lost step-up basis.
  • Mixing inherited retirement accounts with your own: for non-spouse beneficiaries this is not permitted and creates recordkeeping and tax problems.
  • Ignoring beneficiary designations: retirement and brokerage accounts often pass directly to the named beneficiary — the will may not control those accounts.
  • Overlooking estate tax or state probate rules: large estates may have state filing requirements or probate costs—talk to an estate attorney.

Checklist: 10 actions in your first 90 days

  1. Gather documents and confirm beneficiary designations.
  2. Open a separate accounting ledger or spreadsheet for inherited assets.
  3. Talk to the account custodians to understand distribution options.
  4. Consult a CPA about tax timing and potential conversions.
  5. If property is involved, get an appraisal and estimate carrying costs.
  6. Don’t sign estate or sale documents without legal review for complex assets.
  7. Create a short-term liquidity plan: emergency funds and immediate needs.
  8. Map the inheritance to your retirement goals and target allocation.
  9. Update your estate plan and beneficiary forms.
  10. Schedule a review with a fiduciary financial planner.

Where to learn more (authoritative sources)

Also see these related FinHelp guides for deeper detail:

Final notes and professional disclaimer

An inheritance can simplify or complicate your retirement path depending on asset mix and timing. In my experience advising clients for 15+ years, the best outcomes come from a calm, documented approach: inventory, tax analysis, and integration into a written financial plan.

This article is educational and does not substitute for individualized legal, tax, or financial advice. Talk to a CPA, estate attorney, and fiduciary financial planner who can review your documents and recommend steps tailored to your situation.