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Life event guide

Inheriting Money: Your First 90 Days

Inheriting money often comes at a hard time. The good news is that very little has to be decided right away. This guide covers what to do first, what can wait, and the tax rules that surprise people most.

In one minute

  • In most cases, an inheritance itself isn't counted as taxable income for federal taxes.1 California has no inheritance tax.4
  • Inherited property generally takes a new tax value as of the date of death, which can reduce taxes if you sell.2
  • Inherited retirement accounts are different: withdrawals are usually taxable, and most non-spouse heirs must empty the account within 10 years.3
  • Give yourself time. Park the money somewhere safe before making big decisions.
Weeks 1 to 4

First steps

  1. Get several certified copies of the death certificateBanks, insurers and investment firms will each ask for one.
  2. Find out how each asset passesSome go straight to named beneficiaries, some through a trust, and some through probate. The executor or trustee can explain which is which.
  3. Contact the companies holding accountsAsk what they need to transfer an account or pay a claim. Don't cash out retirement accounts until you understand the tax rules below.
  4. Put cash somewhere safe and boringAn FDIC-insured savings account gives you time to think.
  5. Keep a simple fileSave statements and values as of the date of death. Your tax preparer will need them.
The rules that surprise people

Taxes on what you inherit

The inheritance itself

In most cases, property you receive as an inheritance isn't included in your income for federal tax purposes.1 But income it produces later, like interest, dividends or rent, is taxable to you.1

Selling inherited property

Your tax "basis" in inherited property is generally its fair market value on the date of death.2 If a parent bought a house decades ago and you sell it soon after inheriting, the taxable gain is measured from the date-of-death value, not the original price.

California

California doesn't have an inheritance tax or estate tax.4 Very large estates may owe federal estate tax, but that's paid by the estate before you receive anything. Check estate tax exposure

Inherited IRAs and 401(k)s

Retirement accounts follow different rules

Money withdrawn from an inherited traditional IRA or 401(k) is usually taxable income to you. For deaths after 2019, most beneficiaries must withdraw the entire account within 10 years.3

Some beneficiaries have more flexibility:3

  • A surviving spouse
  • A minor child of the account owner
  • Someone who is disabled or chronically ill
  • Someone not more than 10 years younger than the account owner
Why timing matters: taking a large inherited IRA in one lump sum can push you into a higher tax bracket. Spreading withdrawals over several years may lower the total tax. A CPA can model your options before you request a payout.
Months 2 and 3

What can wait

Most big decisions don't need to happen in the first 90 days. It's okay to wait on:

  • Selling an inherited home
  • Paying off a mortgage or other debts
  • Investing a lump sum
  • Gifts or loans to family and friends
  • Large purchases

When you're ready, a good order is: understand the taxes, set aside an emergency fund, decide on debts, then build a longer-term plan with your CPA and financial professional. It's also a good time to update your own will, trust and beneficiaries.

Want help thinking it through?

A short, no-pressure conversation can help you organize what you've inherited and the questions to bring to your CPA.

Book a time with Kevin Kevin is not a CPA or attorney. Tax and legal questions should go to licensed professionals.
Keep reading
GuideWhat Is Probate in California? GuideWill or Trust? ToolPlanning for Retirement? Start Here

Sources

  1. Internal Revenue Service, Publication 525, Taxable and Nontaxable Income (2025), "Gifts and inheritances." Accessed November 9, 2026.
  2. Internal Revenue Service, "Gifts & inheritances" FAQ (basis of inherited property). Page updated September 29, 2026; accessed November 9, 2026.
  3. Internal Revenue Service, "Retirement plan and IRA required minimum distributions FAQs" (10-year rule and exceptions). Page updated January 29, 2026; accessed November 9, 2026.
  4. California Legislative Analyst's Office, analysis of A.G. File No. 2017-038, November 30, 2017. Accessed November 9, 2026.