Estate Planning After an Inheritance: What to Do Next
eceiving an inheritance can be both a gift and a responsibility. While it may come during a difficult emotional time, an inheritance also creates an important planning moment—one that many people overlook. Whether you’ve inherited cash, real estate, investments, or a business interest, your estate plan should be reviewed and updated promptly. Failing to do so can lead to tax issues, asset exposure, and unintended consequences for your own loved ones. Here’s what you should consider after receiving an inheritance.
1. Pause Before Making Major Decisions
One of the most common mistakes after an inheritance is acting too quickly.
Before:
Spending large sums
Retitling assets
Making gifts
Paying off debts
Take time to understand what you inherited and how it fits into your broader financial and estate plan. Decisions made in haste can be difficult—or impossible—to undo.
2. Review How the Inherited Assets Are Titled
Inherited assets may come to you in different ways:
Individually owned
Jointly owned
Through a trust
With beneficiary designations
Each method has different legal and tax implications. How an asset is titled affects:
Creditor exposure
Divorce risk
Estate taxes
Control during incapacity
How the asset passes at your death
3. Update Your Estate Plan Immediately
An inheritance often changes the size and complexity of your estate. Your existing plan may no longer reflect your wishes—or may be incomplete.
Key documents to review:
Will or revocable living trust
Beneficiary designations
Powers of attorney
Healthcare directives
Trust structures (if applicable)
An outdated plan can unintentionally disinherit loved ones or cause unnecessary probate and tax issues.
4. Consider Asset Protection Strategies
Inherited assets can be vulnerable to:
Creditors
Lawsuits
Divorce
Long-term care costs
Estate planning tools such as trusts can help protect inherited wealth while still allowing you to benefit from it. Asset protection planning is most effective before a problem arises—not after.
5. Understand the Tax Implications
Many inherited assets receive favorable tax treatment, but misunderstandings are common.
Important considerations include:
Step-up in basis for inherited property
Capital gains taxes if assets are sold
Income taxes on inherited retirement accounts
State estate or inheritance taxes (if applicable)
Proper planning can preserve more of what you’ve inherited for the long term.
6. Revisit Your Beneficiaries and Legacy Goals
An inheritance may prompt new questions:
Do you want to leave assets to children or grandchildren?
Should distributions be equal or equitable?
Do you want to include charitable giving?
Should inheritances be protected from misuse or creditors?
Estate planning after an inheritance is an opportunity to be intentional about the legacy you’re building—not just the one you received.
7. Coordinate With Your Overall Financial Plan
Estate planning should work hand-in-hand with:
Retirement planning
Insurance planning
Business planning
Long-term care planning
Inherited assets should complement—not complicate—your financial future.
8. Avoid Common Post-Inheritance Mistakes
Some frequent errors include:
Adding joint owners “for convenience”
Gifting assets without tax planning
Failing to fund a trust
Leaving beneficiaries unchanged
Assuming “I’ll deal with this later”
These missteps can create long-term problems for you and your heirs.
Final Thoughts
An inheritance is more than a transfer of wealth—it’s a transition of responsibility. Updating your estate plan ensures that what you’ve received is protected, aligned with your goals, and passed on intentionally.
Good estate planning doesn’t start at death—it evolves with life’s changes.
If you’ve received an inheritance, now is the time to review your plan.