What to Do When you Inherit Assets

If you are expecting to inherit a sum of money, there are many key considerations to be aware of in order to make the most of your inheritance regardless of the amount.  As you can imagine, the decisions can be tough but as with anything, going in with a plan is the best course of action.


Communicate with the Executor or Trustee

If someone has passed and you’re expecting an inheritance, you will be notified by the person in charge of the estate. In the case of an estate that is being probated, the Executor will administer the estate.  When an estate is settled via a trust, it would be the trustee.   They are going to provide you with the information that you need, where to open accounts, what type of accounts, and any money or assets that you’re due, if they know.  Sometimes, they might not know the exact amount due to market fluctuations, possible sales of assets at unknown amounts or even taxes and fees that may be due from the estate.


Determine your Responsibility

Where are assets?

Depending on the type of asset, the type of account you need to open may be different.  If the estate has a bank account, it could be very simple in that the estate might just provide a check to you.  If the estate owns stocks or bonds, and they decide they are going to bequeath those positions to you, you will need a brokerage account to accept those positions.  If you are inheriting an IRA, then you may need to set up an Inherited IRA to accept those assets.  From there you can decide what to do with the IRA assets, whether you want to receive a distribution or if you want to stretch those distributions out according to allowable IRS guidelines.  There are some relatively complex rules governing the IRA along with potential tax implications.  Suppose you inherit a car, or a home.  You will have to update the title to those assets.  Make sure you register the car, properly insure any assets that need insurance, and update your estate plan!

Distribution requirement

As mentioned earlier, if you inherit an IRA or become an Income Beneficiary to a trust, receiving a distribution will be required.  It’s very important to know your responsibilities if you inherit an IRA.  Your distribution requirement is determined by your status of being an Eligible Designated Beneficiary or a Non-Eligible Designated Beneficiary assuming the person passed in 2020 or later.  An Eligible Designated Beneficiary is a spouse or minor child of deceased, disabled or chronically ill individual or an individual that is not more than 10 years younger than the IRA owner or plan participant.  It’s important to note, a minor child is required to take the distribution over ten years once they turn age of majority.  The Eligible Designated Beneficiary can take the distribution over their life expectancy, or the ten-year rule, whichever is longer.  You can always take more out if you need it, it just becomes taxable so try to time your distributions appropriately.   If you are going to receive distributions from a trust, they could be taxable income.  You would receive the proper tax forms but it’s important to know that up front for planning purposes.

A Non-Eligible Designated Beneficiary must take their distributions over the ten-year rule, which essentially means that all the funds must be distributed at the end of ten years.  You may need to take annual distributions during that 10-year period.  If the IRA was a pre-taxed account as opposed to a Roth IRA, then the distributions will be treated as ordinary income.

Set Up New Accounts

If you are required to set up a new account, you will need to provide your information along with identification.  Reach out to the firm to ensure you have the necessary documentation and any additional information such as your bank or beneficiary information.


Titling of Assets

When you inherit assets, you must determine how the assets will be titled.  You may be able to own certain assets individually, joint or through a trust.

If you do decide to title an asset in individual ownership, you should be aware it may pass through probate.  In order to prevent probate, make sure you add a beneficiary if you can, or have a trust own the asset.  The benefit to having one owner is that you can determine who the asset will go to and may be prevented from having been declared a spousal asset in the event of a divorce or passing.

If you choose to own an asset in joint titling, there is more than one way to title an asset jointly.

You can use Joint Tenants with Rights of Survivorship (JTWROS).  This means that upon your passing, the other joint tenant inherits 100% of the asset.

There is also the option of Joint Tenants in Common, in which your share passes to your estate, while the joint tenants inherits their share.

When using JTWROS, which is the most common, remember you’re giving up a portion of the asset to the other party, and that can pose a risk.  It’s important to think through how the title could affect those assets.  Although titling assets in joint name can help as both can access and use the asset, it would be inherited completely by the other party if something happens to you.  The new owner can determine the new beneficiary.  That could pose a problem in a second marriage if kids that are not yours inherit these assets.

Another method would be to title the assets via the use of a trust.  Perhaps the assets are required to move to a trust.  With proper planning, you can determine if a trust is a better way to title the assets such as in a second marriage situation, creditor and spendthrift protection.  As always, it’s important to have a discussion with professional guidance in order to ensure the titles align with your goals.



The federal government does not assess an inheritance tax and only six states have an inheritance tax as of this writing.  However, as referenced earlier, if income is received from the assets, then that income will accrue to you, and you will have to account for that income for tax purposes.  It’s important to be aware of the income and the tax nature of that income.  Make sure you have proper withholdings in place.  As with IRA’s, plan out when you can receive that income in the best year to the extent possible.


Set Goals

As with all planning, receiving any money is impactful to improving financial plans.   As with any financial plan, it’s important to set goals, determine where the money will go, whether it’s used to pay off debt, build an emergency fund, pay for or save for college, retirement, vacations, renovations, charitable causes or other purchases.  It may be that your goals are some or all of the above.   The appropriate type of account would be determined based on the stated goals.


Make Prudent Decisions

Work with professionals.

As with any asset, you should use this opportunity to improve your overall financial plan.  In order to make sure you have a second set of eyes and help with making sure you don’t make any mistakes, we would encourage you work with the proper professionals such as your Estate Attorney, Accountant and your Financial Planner.   It can be a blessing to receive a windfall, and the proper planning can avoid irreversible mistakes.