A financial guide for heirs navigating inherited assets

ARTICLE | October 20, 2025

Inheriting significant assets often comes at a time of grief and uncertainty. Beyond the emotional weight, the financial responsibilities can feel overwhelming, especially when the next steps aren’t clearly defined. 

It’s not always as simple as receiving a check or taking ownership. Depending on the type of asset and how it was held, you could be facing complex tax rules, legal requirements, and time-sensitive decisions that directly affect your financial outcome.

While much of the guidance out there focuses on how to prepare your estate for others, very little is written for those who actually inherit it. Whether it’s real estate, investment accounts, or personal property, the way assets transfer, and how you respond, can have lasting consequences.

This guide will walk through several common asset types and what you should know as an heir.

Initial considerations: legal and financial realities are deeply connected

While this article is not legal advice, and the legal administration of an estate is beyond its scope, we do reference legal terms that affect how heirs receive assets and what the financial outcomes may be. Estate law and financial planning are inherently connected - and understanding that connection is key.

Inheritance is rarely as simple as being “handed” something. Every transfer of wealth involves a legal structure, be it a Will, Trust, or state intestacy laws, that shapes what heirs receive, when, and under what conditions.

The way assets are titled also matters. Some may transfer automatically, such as joint accounts or assets with a transfer-on-death (TOD) designation, while others require formal administration. These distinctions impact access, taxes, and timelines.

A note on taxes: it’s not just about the estate tax

Many heirs are told not to worry about taxes because the estate falls below the federal estate tax exemption. In practice, however, most of the tax consequences of inheritance happen elsewhere. Retirement accounts like IRAs often generate ordinary income when withdrawn. Real estate and investment assets can trigger capital gains if sold after appreciation. Medicaid estate recovery can reduce or reclaim inherited value, depending on how care was funded. And several states impose estate or inheritance taxes with much lower thresholds than the federal level.

The bottom line is that inheritance is not a passive event. It’s a series of legal, tax, and financial decisions that require coordination.

Inheriting real estate

Real estate can be one of the most valuable and financially involved assets an heir receives.

The way a property is titled determines how it transfers. Jointly held assets or those in a Trust may avoid probate, while solely owned property typically requires court administration. If real estate exists in multiple states, additional legal processes may apply, potentially complicating timelines and costs.

Financial responsibilities often begin immediately. Even without a mortgage, heirs may need to cover property taxes, insurance, maintenance, and utilities. In some states, inheritance may trigger a property tax reassessment, increasing the cost of ownership. If you’re also the executor, these expenses may need to be paid from estate funds before the estate is settled and the real estate is re-titled. Failing to do so can jeopardize property value or your fiduciary role.

From a tax standpoint, inherited real estate generally receives a step-up in basis to its fair market value at the date of death. That means if sold soon after inheritance, capital gains taxes may be minimal. But if the property is held and appreciates further, any future gain will be measured from the stepped-up value. A qualified appraisal or documentation at the time of inheritance is key to supporting that basis.

If the property is inherited jointly (often among siblings), disagreements over whether to sell, hold, or rent are common. When a consensus isn’t reached, partition actions (court-ordered sales) can force liquidation, often at less-than-optimal terms.

Bank accounts and personal belongings

Bank accounts and personal property may appear simple, but can involve different transfer rules depending on how they’re owned.

Accounts with a payable-on-death (POD) or transfer-on-death (TOD) designation generally bypass probate and go directly to the named beneficiary. Joint accounts usually pass to the surviving co-owner, though state laws (especially in community property states) can influence how these transfers are treated.

Accounts held solely in the decedent’s name without a designated beneficiary typically require probate. These funds are often inaccessible until the court appoints an executor and authorizes distributions. In the meantime, banks may freeze the account, even for close family members.

While less complex than real estate or investment assets, these accounts still benefit from early attention, especially when cash flow or liquidity is a concern.

Personal property

Personal belongings like vehicles, collectibles, artwork, and furniture often carry both emotional and financial weight. These items can become flashpoints among heirs if expectations aren’t clearly communicated. 

Some assets may require appraisal, especially if the estate is subject to federal or state estate taxes. But even in modest estates, documenting value can prevent conflict. For example, if a Will directs equal shares among heirs, disputes may arise if one receives a high-value item like a classic car without a valuation to support its worth.

Most everyday items have no tax consequence. However, higher-value assets sold later may trigger capital gains, though they generally receive a step-up in basis to fair market value at the date of death.

The executor is typically responsible for inventorying, securing, and distributing personal property. If you’re both executor and heir, it’s important to manage potential conflicts of interest and document your decisions carefully. Without careful attention, disputes can arise that often undermine the overall fairness of the estate settlement.

Investment and retirement accounts

Non-retirement investment accounts

Brokerage accounts (holding stocks, bonds, or mutual funds) generally receive a step-up in cost basis at death. This means gains are reset to the fair market value on the date of death, often allowing heirs to sell assets shortly after inheriting with little or no capital gains tax.

However, once the assets are retitled to a new account in the heir’s name, any future appreciation will be taxable when sold. 

Retirement accounts

The tax treatment for retirement accounts is very different. Traditional IRAs and 401(k)s do not receive a step-up in basis, and distributions are generally taxed as ordinary income. For many heirs, this turns a large inherited account into a potential tax trap if not managed carefully.

Under the SECURE Act, most non-spouse beneficiaries must fully withdraw inherited IRA funds within 10 years. While annual distributions aren’t required, lump-sum withdrawals can trigger higher tax brackets (something worth modeling out with your CPA).

Spousal beneficiaries have more options: they can roll the account into their own IRA or treat it as an inherited IRA and follow a different distribution schedule, depending on age and income needs.

Regardless of beneficiary type, inherited IRAs must be retitled, and this isn’t automatic. The process typically involves submitting a death certificate and other estate documentation to the custodian. Improper titling or delays can limit distribution options or trigger unintended tax consequences.

Employer-sponsored plans, such as 401(k)s, follow similar tax rules but may have additional administrative requirements. Some plans restrict rollover options or mandate lump-sum distributions. Early coordination with the plan administrator and your advisor is key.

Inheritance demands intention 

Every type of inherited asset comes with its own set of rules, risks, and decisions. Often, the most costly mistakes aren’t due to negligence; they happen because heirs don’t know what questions to ask or when to act.

There’s no one-size-fits-all approach. What makes sense for one heir may be the wrong move for another. That’s why early coordination with a CPA, estate attorney, and financial advisor is so important. These professionals can help you evaluate not just what you’ve inherited, but how it fits into your broader financial picture.

If you’ve recently inherited assets (or expect to), don’t wait to start the conversation. The goal isn’t just to protect what you’ve received. It’s to use it well, with the same care and intention that likely went into building it in the first place.