8 Smart Financial Moves To Do If You Inherit Money

Receiving an inheritance can be both a blessing and a challenge. While it’s an opportunity to improve your financial future, it can also feel overwhelming—especially if emotions are tied to the loss of a loved one. The last thing you want to do is make impulsive decisions that could deplete your newfound wealth too quickly.

If you’ve recently inherited money, taking a thoughtful and strategic approach can help you maximize its impact. Here’s what you should do to protect, grow, and use your inheritance wisely.

Table of Contents

1. Take a Deep Breath and Pause

It’s tempting to make quick financial moves, but don’t rush into any major decisions. Give yourself time to process the emotional and financial aspects of your inheritance.

Avoid making large purchases immediately.
Hold off on financial commitments or gifting money to family and friends.
Park the funds in a high-yield savings account while you decide on your next steps.

Taking a moment to assess your situation can prevent costly mistakes.

2. Understand the Type of Inheritance You Received

Not all inheritances come in the form of cash. Understanding what you’ve received will determine your next steps.

Cash inheritance – The most flexible but requires careful allocation.
Real estate – Decide whether to keep, sell, or rent the property.
Investment accounts – Stocks, bonds, and retirement accounts have different tax implications.
Life insurance payouts – Usually tax-free, but still require smart planning.

If you’ve inherited assets like stocks or property, consulting with a financial advisor can help you understand tax implications and investment strategies.

3. Pay Off High-Interest Debt

One of the best ways to maximize your inheritance is to eliminate high-interest debt, such as:

Credit cards
Personal loans
High-interest car loans

Paying off debt reduces financial stress and frees up more of your income for future goals. However, before wiping out all debt, ensure you have a plan that balances debt repayment, savings, and investments.

4. Build or Strengthen Your Emergency Fund

If you don’t already have three to six months’ worth of expenses in an emergency fund, now is the time to secure your financial safety net. Life is unpredictable, and having liquid savings can help you avoid going into debt when unexpected expenses arise.

Keep your emergency fund in a high-yield savings account where it earns interest but remains accessible.

5. Invest for Long-Term Growth

Rather than spending your inheritance all at once, consider investing a portion to grow your wealth over time.

Popular investment options include:

Retirement accounts (401(k) or IRA) to secure your future.
Stock market investments for long-term growth.
Real estate investments for passive income.

A smart investment strategy depends on your risk tolerance, financial goals, and current assets. Seeking guidance from a professional like Matthew Dixon TruNorth can help you create an investment plan that aligns with your future objectives.

6. Consider Tax Implications

Depending on the amount and type of inheritance, taxes may apply. Some key tax considerations include:

Estate tax – Typically applies only to very large estates.
Capital gains tax – If you inherit stocks or property and later sell them for a profit, you may owe taxes.
Retirement account withdrawals – Inheriting a 401(k) or IRA may come with required minimum distributions (RMDs).

Consulting with a tax professional can help you understand any tax liabilities and how to minimize them.

7. Give Thoughtful Gifts (If You Choose To)

Many people feel a desire to share their inheritance with loved ones or charitable causes. While generosity is admirable, be sure to:

Set a budget for gifting.
Understand gift tax limits (for 2024, up to $18,000 per person is tax-free).
Consider donating to a charity or cause that aligns with your values.

Giving should be a conscious choice, not an emotional reaction.

8. Plan for Your Own Estate

Receiving an inheritance is a reminder of the importance of estate planning. Now is a great time to:

Create or update your will.
Designate beneficiaries on retirement and investment accounts.
Consider trusts to protect assets for future generations.
Ensure your power of attorney and healthcare directives are in place.

Planning ahead helps protect your legacy and ensures your loved ones are cared for.

Conclusion

Inheriting money is a unique opportunity to strengthen your financial future—but only if managed wisely. By pausing, planning, and making informed decisions, you can use your inheritance to create long-term financial security.

If you’re unsure of the best steps to take, working with a financial advisor can provide clarity and help you make the most of your wealth. Taking the right approach now can turn your inheritance into a lasting financial advantage for years to come.