Receiving an inheritance often comes during a period of grief, when making clear-headed financial decisions is the last thing on your mind. Understanding the process and having a framework for making good decisions can help you honor both the inheritance and your own financial wellbeing.
The First 30 Days: What to Expect
The inheritance process unfolds over time — you won't receive anything immediately. In the first month after a death, focus on:
- Participating in the funeral and supporting the family
- Understanding who the executor is and that they're handling estate administration
- If you're the executor, beginning the probate process (see our guide to how probate works)
- Not making any major financial decisions yet
When Will You Receive the Inheritance?
Different assets arrive on different timelines:
- Life insurance: Typically 2–8 weeks after filing a claim
- Bank accounts with POD designations: Within days to a few weeks after providing a death certificate
- Retirement accounts: Within weeks after filing an inheritance claim with the financial institution
- Probate assets (through the will): 6–18 months or more after death
Tax Implications for Heirs
Most inheritances are not subject to income tax. Key exceptions:
- Inherited traditional IRA/401k distributions: Taxed as ordinary income when you take distributions. Under the SECURE Act, most non-spouse heirs must distribute the entire account within 10 years. See our guide to retirement account inheritance.
- Capital gains on sold inherited assets: If you sell inherited property, gains above the stepped-up basis are taxable. For most short-term holds of inherited property, this is minimal.
- State inheritance tax: A few states impose taxes on heirs — check your state's rules. See our guide to inheritance and estate taxes.
Receiving Physical Assets: Personal Property
For personal property (jewelry, art, furniture, vehicles), the process depends on what the will says or how the family has agreed to divide things. Documenting high-value items with photographs and, for significant items, a professional appraisal, protects everyone involved and establishes the value for tax purposes.
Making Wise Decisions with Inherited Money
Don't Rush
The most important rule: don't make major financial decisions in the first 3–6 months after a significant loss. Grief impairs judgment. Park the money somewhere safe (a money market account, Treasury bills) while you grieve and think.
Assess Your Overall Financial Picture
Before deciding what to do with an inheritance, understand where it fits in your financial life: outstanding high-interest debt, emergency fund adequacy, retirement savings gaps, and long-term goals. A financial advisor can help if the inheritance is significant.
Consider the Legacy
Many people find meaning in using an inheritance in ways that reflect the values or wishes of the person who left it. This isn't required — the inheritance is yours — but it can make the decision feel more purposeful.
Paid Debt vs. Invest
High-interest debt (credit cards, personal loans) should generally be paid off first — the guaranteed "return" of eliminating high-interest debt often beats investment returns. After that, consider retirement accounts (max out if not already doing so) and other investment priorities.
When There's a Dispute
If you believe you've been unfairly excluded from or underrepresented in an estate, see our guide to contesting a will. But proceed cautiously — will contests are expensive, time-consuming, and damaging to family relationships.
For the complete picture of probate and inheritance, see our complete guide to probate and inheritance.