People who inherit money often feel pressure to do something with it quickly: pay off the mortgage, help a sibling, invest it before the market moves.
That pressure rarely comes from the money itself. Most inherited assets can sit safely for months while you grieve, learn what you have and decide what you want. The handful of decisions with real deadlines are worth knowing, so you can let the rest wait.
The first 90 days
| When | What to do |
|---|---|
| Right away | Keep paying your own bills. Put inherited cash in a federally insured account in your own name. Make no big commitments. |
| First month | Get a list of everything you’re inheriting, how it’s titled and its value at the date of death. Talk to the executor about timing. |
| First two months | Learn the rules for each asset, especially inherited IRAs. Talk to your CPA about this year’s taxes. |
| By month three | Decide what the money is for: security, debt, a goal, a gift, the next generation. Then build the plan. |
Each kind of inheritance works differently
Cash
Not taxable to you. Keep it insured: the FDIC covers $250,000 per depositor, per bank, per ownership category.
Stocks and funds
Generally take a new tax basis equal to their value at death, so selling soon after may create little gain.
Traditional IRAs and 401(k)s
Withdrawals are taxable income. Most heirs must empty the account within ten years, some with yearly withdrawals.
Roth IRAs
Usually tax-free withdrawals, but most heirs still must empty them within ten years.
A house
Also gets a new basis. Keeping it means taxes, insurance and upkeep. Selling within a year or so often means little tax.
Life insurance
Death benefits are generally income-tax-free to the beneficiary.
Do you owe tax on an inheritance?
There’s no federal inheritance tax, and New York doesn’t have one either. Estate taxes, where they apply, are paid by the estate before you receive anything.
What you may owe is income tax on three things: what the money earns after you get it, withdrawals from inherited retirement accounts, and gains above the stepped-up value when you sell.
The inherited IRA is where the real tax decisions are. Emptying a large inherited IRA all at once can push you into the top brackets. Spreading withdrawals over the years allowed often costs far less.
Protect it
- If you’re married, keep the inheritance in an account in your own name. In New York, an inheritance is generally separate property, unless it gets mixed with marital money.
- Name your own beneficiaries on every inherited account.
- Be careful lending or giving money to family until you know what you want to keep.
- Expect calls from people with products to sell. Nothing good requires a decision this week.
Mistakes that are hard to undo
- Cashing out an inherited IRA in one year
- Depositing an inheritance in a joint account and losing its separate-property status
- Selling inherited investments in a hurry, or holding them forever because selling feels disloyal
- Paying off a low-rate mortgage with money you later need
- Making permanent gifts before you have a plan for yourself
How Morrowgate helps heirs. Greg starts with a list of everything you inherited and how each piece is taxed, and handles the deadlines with your CPA. Then he helps you decide what the money is for and builds the plan around it. Inherited accounts are titled correctly and held in your name at Fidelity, with Schwab available.
Questions heirs ask
Do I have to pay taxes on an inheritance in New York?
Not as an inheritance. New York has an estate tax, paid by the estate, but no inheritance tax. Income from the money, inherited IRA withdrawals and some gains are taxable to you.
Should I pay off my mortgage with my inheritance?
Sometimes. It depends on your rate, your other savings and how much flexibility you want. Make that decision after the first few months, not the first few days.
Can my spouse claim my inheritance in a divorce?
In New York, an inheritance is generally separate property, but keeping it separate matters. Mixing it with marital assets can change that.
How long can I leave inherited money in cash?
As long as you need to decide well. Keep it insured and earning something. A few months in a safe account costs little.
Where this guidance stops
This article is general education on receiving an inheritance: how the rules and the options generally work.
It is not tax, legal or investment advice, and nothing here is a recommendation for your situation. Rules change and outcomes turn on the facts, which is why a CPA and an attorney look at a family’s own numbers before anything is done.
Sources
- IRS: Gifts and inheritances
- IRS: Retirement topics, beneficiary
- FDIC: Deposit insurance
- New York Domestic Relations Law § 236