What You Need to Know If You Have Been Left an Inheritance

Moneymagpie Team 7th Sep 2026 No Comments

Reading Time: 4 minutes

Losing a family member can be one of the most tumultuous periods of someone’s life. Yet, in the middle of working through grief and funeral planning, many people find themselves in the challenging and unfamiliar position of receiving a significant sum of money as an inheritance. Discovering that you’re the beneficiary of a substantial windfall can be overwhelming, so we’ve outlined some essential information to help guide you as you navigate this new scenario:

Connect with Experts
Understand Your Tax Obligations
Take Your Time Before Making Big Decisions
Check for Debts and Liabilities
Review Your Investment Options
Consider Your Long-Term Goals
Be Careful About Giving Money Away

Connect with Experts

If the extent of your wealth has always been your family home or weekly paycheck, receiving a large sum of money can feel strange. When you lack experience in best financial practices, connecting with experts in private wealth management, accounting, and taxes is crucial. Their knowledge and insight may put you in the best position to make responsible money decisions.

For example, experts in wealth solutions can help you explore investment management strategies, financial planning, estate planning, and tax strategies. You can also rely on an accountant to assist with inventorying assets, outgoings, and settling the liabilities of your deceased loved one. The more expert help you have, the more peace of mind you may experience, knowing you’re not navigating this new era of your life without support.

Understand Your Tax Obligations

Receiving money from a family member who has passed doesn’t automatically mean you’ll need to pay tax on it. Inheritance tax isn’t a federal tax, so it only affects residents of some states.

If you live in a state with inheritance tax, refer to your state’s specific laws, as they all vary. For example, immediate families in Kentucky are exempt from paying inheritance tax, but other family members, such as a distant cousin, must pay tax on what they receive. If you live in New Jersey, the tax rate ranges from 11% to 16%, depending on your relationship to the decedent and the size of the inheritance. Here, immediate family is also exempt, along with charitable organizations.

Outside of inheritance tax, you may have to pay tax on the income generated from your inherited assets, such as rent, interest, and dividends.

Take Your Time Before Making Big Decisions

You may feel a lot of pressure associated with a significant bank account deposit. You may even feel as though you need to quickly invest the money, spend it, give it away, or make major lifestyle changes. However, at the same time as you’re wrapping your head around your inheritance, you’re also still processing your loss.

With this in mind, it becomes important to give yourself time to understand exactly what you’ve inherited. This time may make it easier to make financial decisions with your head, rather than your heart.

Check for Debts and Liabilities

Many people don’t just receive an inheritance. They also receive an estate. This means you may also assume ownership and responsibility for debts, taxes, mortgages, and other liabilities.

Before making any significant financial decisions, find out whether the estate has any debts. The personal representative or executor of the will is typically responsible for administering the estate and addressing these obligations before the distribution of assets.

Review Your Investment Options

It can be tempting to simply leave your inheritance in your checking account. However, this is not the ideal long-term strategy. Depending on your circumstances and goals, you may want to explore wealth management strategies with a qualified professional, research retirement savings options, or consider diversified investments.

Diversified investments allow you to spread your money across a variety of asset classes, sectors, and companies to reduce risk. Wealth management professionals typically recommend:

Stocks
Bonds
Index funds and ETFs
REITs
Real estate

Consider Your Long-Term Goals

Receiving an inheritance doesn’t just make you comfortable today; it also provides you with an opportunity to improve your financial security in the years to come. For this to happen, you need to think about your financial goals, such as paying off debt, buying a home, building retirement savings, or funding education. Once you have goals in mind, making significant financial decisions may feel a little less overwhelming.

Be Careful About Giving Money Away

When you’re in the throes of grief, you may feel compelled to share your inheritance with others – be it friends or family. This is particularly true if they, too, are grieving. However, substantial gifts often come with legal, financial, and tax consequences. Allow yourself time to settle, grieve, and seek advice to ensure you’re not compromising your own financial security.

For many people, receiving an inheritance can be overwhelming, particularly when making important financial decisions during an emotional time. Seeking professional advice, understanding your tax position, developing a long-term plan, and avoiding rushed decisions can help you make the most of your inheritance. Essentially, thoughtful planning can give you greater clarity and confidence as you decide how your inheritance can support your financial future.

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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