What to Do With an Inheritance: The First 90 Days

The first move is almost always to do nothing

Ask people who've gone through it, and one piece of advice repeats more than any other: don't decide anything big for months. Not because the money isn't real or urgent-feeling, but because grief and a sudden windfall are a bad combination for judgment. Recurring threads from people who've just inherited money, from $17,000 to several million, converge on the same pattern: park the money somewhere safe, keep living your normal life, and give yourself real time before making any purchase, career change, or investment decision you can't easily undo.

That advice is right, but "do nothing" isn't actually nothing. There's a specific, useful list of things to handle in the first 90 days that have nothing to do with deciding what the money means for your life. This is that list, plus the tax rules that determine how much of what you inherited you actually get to keep.

Weeks 1 to 4: administrative, not financial

The first month is about paperwork and logistics, not decisions.

Get certified copies of the death certificate. Order more than you think you need, typically 10 to 15. Banks, insurers, the DMV, and retirement account custodians will each want their own original certified copy, and reordering later is slower than ordering extra up front.

Find out if there's a will or trust, and who the executor or trustee is. If you're not the executor, your role is limited until the estate goes through probate (or, for assets in a trust, until the trustee distributes them). If you are the executor, this is the point to consider whether you need an estate attorney, especially for anything beyond a simple, uncontested estate.

Don't touch jointly titled accounts or retirement accounts yet, beyond notifying the institution. Moving too fast on an inherited IRA in particular can accidentally trigger a full taxable distribution instead of the tax-deferred transfer you actually wanted. More on this below.

Resist the urge to make any decisions about specific dollar amounts. You often don't have a final number yet. Estates take time to settle, debts and taxes get paid first, and the number you initially hear (a house's estimated value, a retirement account balance) is rarely the number that ends up in your hands.

Weeks 4 to 8: park the money, don't invest it yet

Once cash actually reaches you, whether from a bank account, a life insurance payout, or an early estate distribution, the right question in this window is where to park it safely while you figure things out, not where to invest it for the long term.

A high-yield savings account or a short-term Treasury bill ladder are the standard answers, and for good reason: FDIC-insured savings accounts have been paying meaningfully more than 4% APY through 2026, so parking the money isn't costing you real growth while you decide. The goal in this window is capital preservation, not returns. An inheritance invested into the market the week after a parent's death, then withdrawn in a panic three months later during a rough patch, is a worse outcome than money that sat in a savings account earning a modest, guaranteed return the whole time.

This is also the window to pay down anything with a clearly bad interest rate, credit card debt above 20% APR is the obvious candidate, since that's a guaranteed, tax-free "return" no investment can promise. Beyond high-interest debt, resist bigger financial moves until you've had time to think clearly, which brings up the tax mechanics that should shape those decisions once you're ready to make them.

The tax rule that changes everything: step-up in basis

If you inherit stock, a house, or almost any other appreciated asset (not a retirement account, more on that below), the asset's cost basis resets to its fair market value on the date the original owner died. This is governed by Internal Revenue Code Section 1014, and it's arguably the single most valuable tax provision most heirs never fully use.

Suppose your parent bought a house decades ago for $120,000, and it's worth $540,000 the day they die. Your basis in that house becomes $540,000, the fair market value at death, not the original $120,000 purchase price. If you sell it shortly after inheriting it for close to that value, you owe capital gains tax on little to none of the $420,000 of appreciation that happened during your parent's lifetime. Had your parent sold the same house the day before they died, they would have owed capital gains tax on most of that $420,000 gain. Death, in this narrow tax sense, erases decades of built-up gain.

The same applies to inherited stock, mutual funds, or any other appreciated capital asset owned individually or through certain trusts. This is exactly why rushing to sell everything in the first 90 days can be a mistake in the opposite direction: if you're going to sell an inherited asset anyway, understanding your stepped-up basis first, and getting a defensible fair market value for the date of death (a professional appraisal for real estate, the closing price for securities), protects you from overpaying tax on a sale.

One major exception: inherited traditional IRAs, 401(k)s, and other pre-tax retirement accounts do not get a step-up in basis. The IRS treats this as "income in respect of a decedent," meaning the tax that was deferred during the original owner's lifetime is still owed when you, the heir, eventually withdraw it. This is a different asset category entirely, and it comes with its own set of rules.

Inherited retirement accounts: the 10-year rule

If part of your inheritance includes a traditional IRA or 401(k) and you're not the deceased's spouse, the SECURE Act's 10-year rule applies. You must empty the account by December 31st of the 10th year following the year of death.

Whether you also owe annual required minimum distributions during years 1 through 9 depends on one fact: had the original owner already reached their required beginning date for RMDs (generally age 73) before they died? If yes, you owe annual RMDs in years 1 through 9, calculated off your own life expectancy, in addition to fully emptying the account by year 10. If the original owner died before reaching that age, you owe no annual RMDs during the 10-year window; you can let the account grow tax-deferred and take one lump distribution in year 10, or spread it however you like across the ten years. Either way, the account must be empty by the deadline. Missing a required distribution carries a real penalty, 25% of the amount you should have withdrawn, reduced to 10% if you correct it promptly, and after a multi-year IRS waiver on this specific penalty expired, it's back in force for 2025 and 2026 distributions.

Spouses get meaningfully more flexibility: a surviving spouse can generally roll an inherited IRA into their own IRA and follow the normal rules for their own age, rather than the 10-year rule. If that applies to you, talk to the account custodian about your options before defaulting into the non-spouse rules by accident. And regardless of which category you fall into, always request a direct trustee-to-trustee transfer of an inherited retirement account rather than taking a distribution yourself first. Taking the money out personally, even briefly, can trigger the full account as taxable income immediately instead of preserving the tax-deferred structure.

Does the inheritance itself get taxed?

For the overwhelming majority of people, no. There's no federal inheritance tax, and only a handful of states levy one (and even there, spouses and often children are exempt or taxed at low rates). Federal estate tax, which is paid by the estate before assets reach you, only applies to estates above the federal exemption, $15 million per individual for 2026, up from $13.99 million in 2025 per the IRS's 2026 inflation adjustments. Unless the estate you're inheriting from is worth eight or nine figures, federal estate tax isn't something you need to think about at all.

After 90 days: put a number on it

Once you have a real sense of what's actually landing in your accounts, and only then, it's worth recalculating your net worth with the new assets included. An inheritance changes your actual financial position substantially, and pretending it hasn't happened yet, or lumping it into "cash" without categorizing what it actually is (a stepped-up brokerage account, an inherited IRA on a 10-year clock, home equity in a property you now co-own with siblings), makes it harder to plan around later. Steady Wealth lets you add these as their own account types, so the inherited IRA on its 10-year clock stays distinct from ordinary savings instead of blurring into one number. This is also a natural moment to revisit your Freedom Number if the amount is large enough to shift your timeline, and to think through how the new assets fit your broader estate plan, since inherited wealth eventually becomes wealth you'll pass on yourself.

The 90-day structure isn't about rushing a decision. Handling the mechanical parts first, the paperwork, parking the cash safely, understanding the tax treatment of what you actually received, frees you to take real time on the decisions that matter, without a stack of unopened mail or an IRA deadline forcing your hand.

Frequently asked questions

How long should I wait before making any big decisions with inherited money?

Most financial advisors and people who've been through it suggest at least several months, often six months to a year for a genuinely large inheritance. There's no legal deadline forcing a decision (with the exception of the inherited IRA distribution rules above), so the constraint is entirely about giving yourself time to think clearly, not a rule you're at risk of violating.

Do I owe taxes on money I inherit?

Generally no, on the inheritance itself. Federal estate tax is paid by the estate, not the heir, and only applies to estates above $15 million per individual in 2026. You will owe ordinary income tax on distributions from an inherited pre-tax retirement account, since that money was never taxed in the first place.

What's the biggest mistake people make with an inheritance?

Two show up constantly: selling appreciated assets without understanding the stepped-up basis (potentially paying tax you didn't need to), and taking a personal distribution from an inherited retirement account instead of a direct trustee-to-trustee transfer (potentially triggering the entire balance as taxable income at once).

Should I pay off debt with inherited money?

High-interest debt, generally credit cards above 15 to 20% APR, is usually the right first move since it's a guaranteed, tax-free return no investment can match. Low-rate debt, like a mortgage under 4%, is a more genuine judgment call that doesn't need to be made in the first 90 days.