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Wealth Management

The 2019 Inheritance Checklist

By August 5, 2019No Comments
The 2019 Inheritance Checklist

Inheriting a large sum of money can be exhilarating.  After the initial excitement wears off, a large inheritance may prove slightly overwhelming as well.  Inheritances can move people into entirely different financial situations than what they may already be accustomed to.  This is new territory for most, and it usually comes without an instruction manual.  Asking for help is more than OK, it’s highly recommended in helping you to maximize and preserve your newfound wealth.  When facing something new, start at the beginning.  If you’ve received or are expecting an inheritance, utilize this checklist and see how well you’re prepared to move forward.

The Types of Inheritances

Inheritances come in many forms.  Beyond a lump sum of cash, an inheritance can take other forms, including financial vehicles you have no previous experience managing.  Gaining familiarity with the type of inheritance you’ll be managing can help you make informed and intelligent decisions with it.


Perhaps the simplest form of inheritance to receive, cash is typically transferred to a bank account upon execution of a will. In some cases, specific wills may have stipulations regarding disbursement.

Life Insurance

Life insurance policies typically pay out similar to cash inheritances and are generally exempt from income tax. A life insurance inheritance may be subject to other taxation.

Investment Accounts

Unlike cash inheritances, investments represent inherited assets. For many, this may be their first time managing an investment account.  Income through investments can vary greatly.


Trusts typically include specific instructions for disbursement, a task performed by a designated trustee. Trusts may bear a number of conditions which must be met in order to transfer any assets to a beneficiary.

Real Estate

Inherited real estate may be subject to regulations which vary by state. Real estate can be divided among multiple beneficiaries through a will, or by the courts in the absence of instruction.

Other Assets

Other inherited assets could include motor vehicles, annuities, jewelry and more. For help managing unique inheritances, reach out to a financial advisor for help.

Inheritance Tax, and other Taxes

For many, taxes are a source of concern when inheriting sudden wealth.  It’s completely understandable.  An inheritance can place you in new tax brackets and may be subject to taxes you’re unfamiliar with.  Failure to pay the right taxes can lead to uncomfortable outcomes most would prefer to avoid.

  • Federal Taxes. Good news!  Inheritances are typically not subjected to federal income taxes.  In cases of newfound wealth due to lottery winnings or a business sale, that may count as income in which case you would be subject to the appropriate taxes.
  • State Inheritance Taxes. More good news – for people in 44 states at least.  At the time of this writing in 2019, only six states maintain a tax on inheritance.  These include Iowa, Kentucky, Maryland, Nebraska, New Jersey, and the State of Pennsylvania.
  • Taxes on Inherited Investments. Investments are not subject to an inheritance tax upon receipt, but any distributions may be. Distributions from 401(k) accounts and IRAs may be subject to income tax.
  • Capital Gains Tax. This tax applies to those looking to sell inherited assets. Any financial gains made through the sale of an inherited asset are generally subject to capital gains tax.  To determine the taxable amount, subtract the asset value at the time of receipt from the asset value at the time of sale.
  • Estate Tax. Estate taxes are taxes levied on the estate, including any inheritances contained within, prior to the execution of a will. As a beneficiary, this may impact your expected inheritance, although once an inheritance is received it will not be subject to further taxation on the deceased’s estate.
  • Ad Valorem Taxes. Some types of inherited property may be subject to local taxes based on value, called Ad Valorem taxes. These are taxes levied at the time of sale, or on a calendar basis such as real estate tax.  Depending on the type of inheritance you’ve received, you may be subject to these taxes.


Potential Requirements for Beneficiaries

In some cases, persons receiving inheritances are bound to certain legal requirements, if they wish to receive the full amount.  Trusts and other inheritances may have specific instructions you’ll want to become familiar with early on.  For example, your inheritance may include:

  • Limits on how inheritance can be spent
  • Age restrictions on receiving an inheritance
  • Limited or set disbursement amounts
  • Achievement of certain accomplishments to qualify
  • Other inheritance-specific conditions

A misstep – whether conscious or not – can jeopardize an inheritance.  Speak to an advisor familiar with inheritances to help gain a full understanding of your new wealth.


Short- and Long-Term Planning

An immediate financial plan can help you preserve your inheritance, allowing you to approach long-term inheritance management at your leisure.  Craft both a short- and long-term plan with the help of a financial professional to get the most from your inheritance.

Short-Term Planning. First, get comfortable with your wealth.  Then, look at what you can do with it.  Big decisions can wait until you’re ready to make them.  Taking your time before moving large sums can help you gain confidence in your decisions beforehand.  For now, a low-risk account can preserve your inheritance until you’re ready to use it.  Depending on the type of inheritance you’ve received, the options available to you may vary.  An advisor can better illustrate the specific options available to you for the short-term.

Long-Term Planning. This is where you may have an opportunity to turn your inheritance into more.  The type of inheritance, restrictions, personal goals, risk comfort level and more can all impact long-term planning.  An inheritance can open the door to entrepreneurship, investment, retirement, education, and a plethora of other opportunities.  Restraint can pay off initially while you gain a clear understanding of what you’ve received, and what you can do with it.  Set up a meeting with a personal financial advisor to learn more about long-term financial planning.


Reviewing Old Financial Plans

If you already have a financial plan in place, an inheritance creates an unexpected variable meriting plan review.  Any previous college planning, retirement accounts, investments, and other financial strategies may need adjustments following an influx of sudden wealth.  Speak to your advisor about reviewing your old financial plan and developing new goals based on your updated situation.

An inheritance can and should be exciting!  Remove the fear of the unknown by becoming familiar with your inheritance, any taxes, and the options you have for the future.  For help managing your inheritance visit or call 847-292-4475.  If you’ve inherited a large sum or need to manage sudden wealth due to lottery winnings, the sale of a business, or another event, nearly all experts recommend speaking to a financial advisor as soon as possible.  Contact ProsperiFi to schedule a personal consultation with an experienced financial advisor today.


Bonus Section: Things NOT to do with your new Inheritance

A big sum of money unlocks more opportunities than many people are prepared to manage alone.  In too many cases, what seemed like a bottomless bank account becomes bankrupt, as even large sums of money can be spent with incredible speed.  While you’re out there making smart decisions with your wealth, be sure you:

AVOID going on a spending spree.  A large sum of money can change your perspective on spending.  Fight it.  Money spent cannot be recovered.  Spending money on luxury, frivolous, or unnecessary goods all removes capital you could be making investments with.

AVOID becoming a lender.  Inherit a large sum and it can attract the attention of others.  Leave the loans up to a professional financial institution and consider other forms of investment.

AVOID becoming a business tycoon.  At least, not until you’re ready.  Just like loans, prospective business owners may approach you for investment.  Decline for now.

Avoid the pitfalls too often associated with newfound wealth.  If you have any questions about managing your inheritance, contact ProsperiFi today.  We can help you understand what you’ve got coming, what the government might want, and what you can do with the rest.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There can be no guarantee that strategies promoted will be successful.

This information is not intended to be suitable for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.