Most of the people I work with who receive an inheritance are in their 50s or 60s, and the money comes from their parents. It arrives alongside a loss, and often at a point in life that is already full: their own retirement on the horizon, children launching or still in school, and sometimes a surviving parent or in-law to care for.
An inheritance changes the balance sheet. It can also change your plans, your taxes, and some of your family relationships. Not every decision has to be made quickly. But a few deserve attention sooner than people expect.
What do you want this money to do?
I tend to see two different reactions. Some clients want to pay their parents' legacy forward to their own children and grandchildren and want to think about updating their estate plan to reflect that. Others want to put it to work now: paying down debt, upgrading their lifestyle, or retiring earlier than planned.
Neither reaction is wrong. Most families end up somewhere in between. What matters is deciding on purpose rather than by default.
If early retirement is on the table, it is worth testing the numbers before giving notice. An inheritance can make an earlier retirement possible, but the money then has to support more years without a paycheck.
The deadline that catches people: inherited IRAs
For most adult children inheriting an IRA or 401(k) from a parent who died in 2020 or later, the account must be emptied by December 31 of the tenth year after the death.1
Also, annual minimum withdrawals may also be required if the parent died on or after the date their own required withdrawals had to begin. Some exceptions apply. Confirm your schedule with the account provider, including any withdrawal still due for your parent's year of death.2
Withdrawals from inherited IRAs are generally taxable income.3 For a large account, that matters. Waiting until the final year can push a big withdrawal into a high tax bracket, especially if it lands during your peak earning years. Planning withdrawals around your other income, including any lower-income years before or after retirement, can help manage the tax while meeting the deadlines.
Other inherited assets work differently. Inherited stocks and real estate generally receive a new tax basis, the starting value used to calculate gain or loss, equal to their value at death.4 Always a good idea to include your CPA as a part of these decisions from the start.
The family house
In my experience, real estate causes more family friction than any other inherited asset. A vacation home or beach house that once belonged to Mom and Dad may now be owned by two or three siblings, each with different finances, schedules, and feelings about the place.
The questions arrive quickly. Who pays for the roof, the taxes, and the insurance? Who gets the house for the Fourth of July? And if one sibling wants out, what is their share worth, and who can afford to buy it?
These conversations are easier before there is a disagreement. Some families put a written agreement in place that addresses shared costs, use, and how a buyout would be valued and paid for. An attorney can help draft it and assess whether holding the property through an entity makes sense. Others decide that selling is the best way to keep family relationships intact. Either can be the right answer.
When the balance shifts between spouses
A meaningful inheritance can change the dynamic in a marriage. Suddenly, more of the household's assets are tied to one spouse than the other. For couples in their 50s who have always thought of everything as “ours,” that can raise questions neither expected to ask.
In Virginia, an inheritance received by one spouse is generally separate property if the couple later divorces. Mixing it with marital assets or adding a spouse's name can affect that treatment, though records tracing the inheritance and whether a gift was intended also matter. Whether to keep it separate is a personal decision. It is better made deliberately than by accident, and an attorney can explain how the rules apply to you.
In a second marriage, these questions tend to carry more weight. Each spouse may have children from an earlier marriage, and questions about whose assets are whose can be more sensitive. An inheritance is often a good reason to revisit the estate plan, including beneficiary designations, to clarify how you want to provide for your spouse and children.
Sudden wealth from a settlement
Not all sudden wealth comes from an inheritance. A legal settlement can bring a large sum at once, often after a long and difficult process. Many of the same principles apply: take time before making big commitments, and confirm the tax picture first.
Different parts of the same settlement can be taxed differently. Payments for physical injuries or sickness are generally excluded from income, while punitive damages and interest are generally taxable.5 Review the agreement with your attorney and CPA before making commitments.
Where to start
Start by confirming deadlines and immediate responsibilities, including inherited-account withdrawals and any property shared with family. Then give yourself time to decide how the inheritance fits your life.
If you have recently received an inheritance or settlement, or expect one, our team is glad to help you sort out what needs attention now, what can wait, and what comes next.
About the author
Andy Foldenauer, CFP®, is a Senior Vice President - Financial Advisor and Senior Portfolio Manager with RBC Wealth Management in Richmond, Virginia. He and his team work with individuals and families through major life transitions, including retirement, the sale of a business, an inheritance, divorce and the loss of a spouse. To start a conversation, contact the team at (804) 225-1483 or andy.foldenauer@rbc.com.
Sources
- IRS Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs), 10-year rule and eligible designated beneficiaries. See also IRS, “Retirement plan and IRA required minimum distributions FAQs” (applies to 401(k) and other defined contribution plans). Accessed October 21, 2026.
- IRS Publication 590-B (2025), beneficiary distributions when the owner died on or after the required beginning date, and the owner’s required distribution for the year of death. Accessed October 21, 2026.
- IRS Publication 590-B (2025): “Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive.” Accessed October 21, 2026.
- IRS Publication 551 (December 2025), Basis of Assets, “Inherited Property.” Accessed October 21, 2026.
- IRS Publication 4345 (Rev. 9-2023), Settlements – Taxability. Accessed October 21, 2026.