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.
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.
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.
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. Example: You inherit and deposit cash that earns interest income. Include only the interest earned in your gross income, not the inherited cash.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
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.
To do this, you may want to keep the inheritance in a secure bank account for some time while you ponder over what to do with it rather than frittering it away. After you've taken an extensive account of your financial standings, the money can be withdrawn and put to use.
Small inheritance ($20,000)
Even if you receive a modest inheritance—you have many options. One idea is to fund an emergency savings account.
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.
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.
As long as the financial institution is insured by the FDIC or NCUA, the money you put into a deposit account at a bank or credit union is insured for up to $250,000 per depositor, per bank. If the bank collapses or fails, you can still get your money back within a few days of the bank's closure.
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.
You can deposit a large cash inheritance in a savings account, either through a check or direct wire to your bank. The bigger question is what you should do with it once it's deposited. While that is ultimately your decision, it helps to have a plan. The more prepared you are before you get the inheritance.
Keep it separate.
Therefore it is critical that any inheritance, or other gifts you receive, be kept separate from any marital funds. Preserve your funds in a separate account, in your individual name, and do not commingle any marital funds in the account.
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.
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.
Making a will to distribute your assets
Whether leaving assets to a spouse or civil partner, distributing assets to take advantage of tax-free allowances, or making gifts to charity, a valid will could help you to reduce or avoid Inheritance Tax altogether.
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%.
Immediately after receiving an inheritance, you should notify your local Social Security office.
Annual gift tax exclusion
The gift tax limit is $18,000 in 2024 and $19,000 in 2025. Note that this annual exclusion is per gift recipient. So, you could give away the limit to several different people in a single year and still not have to file a gift tax return and possibly pay the gift tax.