You Just Inherited Money. Here's the Order of Operations

Inheritances arrive attached to grief, which is precisely why they deserve a pre-written order of operations: the widowed and bereaved make worse financial decisions not from incompetence but from exhaustion, and the financial industry knows it. The core good news first: most inherited assets, homes, taxable investments, cash, arrive free of income tax with a stepped-up basis. The complications concentrate in retirement accounts, and in the human tendency to do something big too soon.

First Ninety Days: Stabilize, Don't Decide

Park liquid proceeds in Treasury money funds; leave investment accounts invested; pay nothing off and buy nothing large. The only genuinely urgent items: secure property and insurance on inherited real estate, keep any estate administration moving (the executor's job, per the executor guide), and calendar the few real deadlines, notably December 31 deadlines on inherited-IRA distributions in some years and disclaimers, which must generally happen within nine months if a beneficiary wants to redirect an inheritance tax-efficiently. Everything else, the house question, the job question, the generosity impulses, waits six months by policy, per the windfall sequence.

Learn Each Asset's Tax Label

Taxable assets (house, brokerage): stepped-up basis to date-of-death value, so selling soon after death triggers little or no capital gain, sell decisions can be made on the merits, not tax fear. Roth accounts: income-tax-free, though non-spouse heirs must empty them within 10 years, let them grow the full decade. Pre-tax IRAs and 401(k)s: every withdrawn dollar is ordinary income to you, and most non-spouse heirs must empty the account within 10 years of death, with annual required distributions in many cases when the original owner had begun RMDs. That 10-year clock is a planning problem: a $900,000 inherited IRA drained carelessly can spend years in your top bracket.

The 10-Year Clock, Played Well

Spread pre-tax inherited-IRA withdrawals deliberately across the decade against your own income path: take more in your low-income years (sabbaticals, early retirement, between bonuses), less in peak years, and never default to a year-ten lump. High earners staring at a large inherited IRA sometimes pair withdrawals with offsetting moves, bigger 401(k) deferrals, charitable bunching, timed around year-end planning. Spouses have better options and should almost always evaluate them before touching anything: rolling into their own IRA (RMDs on their schedule) versus staying a beneficiary (penalty-free access before 59½), a genuinely consequential election.

Then Integrate It into Your Plan

After the quiet period, deploy by the standard sequence: taxes reserved, high-interest debt, reserves, tax-advantaged space, then investment per your written policy, resisting both the memorial-portfolio urge (keeping Dad's stock picks as loyalty, see concentration) and the windfall lifestyle ratchet. Update your own estate plan, inheritances change the numbers, and if the amount is transformative, this is the natural moment for a full plan: the best tribute to money someone spent a lifetime building is a plan worthy of it.

Tony Colunga · Founder, Attend Wealth

Tony leads Attend Wealth, a fee-based wealth management firm in Atlanta serving professionals, families, and business owners. Advisory services are held to a fiduciary standard. More about Attend