With a $100,000 inheritance, first pause for 90 days, parking the money in a high-yield savings account while you grieve and plan. Then, focus on stabilizing your finances by paying high-interest debt (like credit cards), building an emergency fund, boosting retirement savings, or investing for long-term growth, potentially using a portion to honor the deceased through charity or self-investment like education.
Medium inheritance ($100,000)
If you receive a larger inheritance, first consider the recommendations above—fund an emergency savings account or pay off credit cards and loans. You can also use a portion of the money to pay off all or part of your mortgage or pay down student loan debt.
You can deposit a large cash inheritance into a savings account, either by check or by wire transfer to your bank.
A large inheritance is generally an amount that is significantly larger than your typical yearly income. It varies from person to person. Inheriting $100,000 or more is often considered sizable. This sum of money is significant, and it's essential to manage it wisely to meet your financial goals.
In most cases, an inheritance isn't subject to income taxes. The assets passed on in an investment or bank account aren't considered taxable income, nor is life insurance.
Ideas for what to do with your inheritance
Sometimes, what to do with an inheritance is as much about what you should not do with your inheritance money.
The "$10,000 bank rule" refers to federal laws requiring financial institutions and businesses to report large cash transactions (deposits, withdrawals, payments) of over $10,000 in currency to the government to combat money laundering and financial crimes. Banks file Currency Transaction Reports (CTRs) for cash activity over $10,000, while businesses file Form 8300 for similar payments, both sending info to FinCEN and the IRS to track illicit funds.
$100,000 can earn anywhere from tens of dollars to several thousand dollars in interest per year, depending on the investment, with high-yield savings accounts and Certificates of Deposit (CDs) recently offering 4% to over 5% ($4,000-$5,000/year), while average bank accounts pay much less (around $610/year at 0.61%), and some high-risk investments could potentially yield more.
What would you do with a £100k inheritance?
How does the IRS learn about inherited assets? Inherited assets may appear through estate filings, financial institution reporting, probate documents, property title transfers or tax reporting by executors and trustees.
While state laws differ for inheritance taxes, an inheritance must exceed a certain threshold to be considered taxable. For federal estate taxes as of 2024, if the total estate is under $13.61 million for an individual or $27.22 million for a married couple, there's no need to worry about estate taxes.
One of the most common – and most costly – mistakes you can make when receiving an inheritance is failing to seek professional guidance. Inheriting assets often involves navigating complex tax laws, understanding investment options, and making estate planning updates.
Give more money away
Lifetime gifting is a straightforward way to begin reducing your IHT bill. By gifting money during lifetime, that would have been part of an inheritance anyway, you reduce the size of your estate so that there is smaller amount subject to IHT on your death.
The best way to avoid the inheritance tax is to manage assets before death. To eliminate or limit the amount of inheritance tax beneficiaries might have to pay, consider: Giving away some of your assets to potential beneficiaries before death. Each year, you can gift a certain amount to each person tax-free.
Capital gains tax (CGT) is paid either by the deceased estate or by the beneficiary. Never both. But which one applies depends on who sells the asset and when. This distinction matters more than people realise.