A federally insured bank or credit union account can be a good, safe place to park the money while you make your decisions. Paying off high-interest debts such as credit card debt is one good use for an inheritance.
Deposit the money into a safe account
Your first action to take when receiving a lump sum is to deposit the money into an FDIC-insured bank account. This will allow for safekeeping while you consider how to make the best use of your inheritance.
While you can absolutely put your inheritance money in a traditional savings or checking account, doing so means you'll miss out on no-risk earnings. High-yield accounts allow you to leverage compound interest and earn off your balance over time. These include: High-yield savings accounts.
The worst things you can do with an inheritance are spend it on assets you can't maintain, sit on it, or invest it all in one place. The wisest thing you can do is speak to a financial planner, preferably before you even inherit the money.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income.
Ideas for what to do with your inheritance
Pay off high-interest debt. Create an emergency fund of at least 3–6 months of essential expenses. Revisit your investment plan with an advisor. Invest in yourself by going to back to school or taking a sabbatical.
To safely deposit a large amount of cash, visit a brick-and-mortar branch operated by your financial institution. Contact your financial institution if you plan to make a sizable deposit, said Christopher Naghibi, executive vice president and chief operating officer at First Foundation Bank.
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.
A financial advisor can help you put an estate plan together to protect your assets for your family. The best place to deposit the large cash inheritance is in a federally insured bank or credit union account.
Upon receiving a large sum of money, before you book that dream holiday, it's worth considering where the money should be held. A savings account is a common choice, offering a secure place to keep your money while earning a decent rate of interest.
CD Inheritance Basics
Federal deposit insurance makes CDs as safe as anything you can do with your money. However, CD interest rates, while often higher than a savings account, are likely to lag behind inflation.
Immediately after receiving an inheritance, you should notify your local Social Security office.
Any tax due will normally be taken out of the deceased's estate, and the executor will usually take care of it. This means you won't need to declare inheritance money to HMRC – an inheritance isn't classed as income, and therefore isn't taxable.
Form 8971, along with a copy of every Schedule A, is used to report values to the IRS. One Schedule A is provided to each beneficiary receiving property from an estate. Form 8971 instructions PDF. This item is used to assist in filing Form 8971.
Consider stocks, bonds and funds. While in theory it is possible to hold cash or have your inheritance windfall sit in a money market account, that would not be an ideal strategy. To realize the biggest benefit from your windfall, you should take a look at investing in stocks, bonds and funds.
Law of Dominance
This is also called Mendel's first law of inheritance. According to the law of dominance, hybrid offspring will only inherit the dominant trait in the phenotype. The alleles that are suppressed are called the recessive traits while the alleles that determine the trait are known as the dominant traits.
You must report any income you receive passed through from the estate to you and reported on a Schedule K-1 (1041) on your income tax return. In addition, any property you receive from the estate will typically be considered valued at its fair market value at the date of the original owner's death.
Another key difference: While there is no federal inheritance tax, there is a federal estate tax. The federal estate tax generally applies to assets over $13.61 million in 2024 and $13.99 million in 2025, and the federal estate tax rate ranges from 18% to 40%.
The best place to deposit the large cash inheritance is in a federally insured bank or credit union account.
Can IRS seize inherited property? Yes, the IRS can seize inherited property for unpaid taxes after following its standard process of notices. Can the IRS take inheritance money? Yes, the IRS can take inheritance money for unpaid taxes.