What is the 10-year rule for inherited IRAs?

Under the SECURE Act, most non-spouse beneficiaries must fully distribute inherited retirement accounts within ten years of the original owner’s death. Spreading those taxable withdrawals across the right years can meaningfully reduce the total tax you pay.

Should I use an inheritance to pay off my mortgage?

Sometimes — it depends on your interest rate, your other goals, your tax picture, and how the money could otherwise be invested. We’ll model both paths so you can make the decision with real numbers instead of a gut feeling.

What if I inherited real estate, art, or a business interest?

Illiquid assets raise their own questions: valuation, step-up in basis, insurance, upkeep costs, and whether to keep, rent, or sell. We help you analyze each asset and fold it into your overall financial plan.

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Inheritance

If this is your first time coming into significant wealth you’ll need a knowledgeable financial advisor to help you with the many moving parts. Perhaps you were left investment accounts, retirement assets, insurance proceeds, real estate, fine art, or other assets. You do not want to try to figure things out on your own. If your predecessor had an estate plan things will need to be done one way, if not, things will need to be handled a completely different way. We do not bill you hourly like attorneys and accountants do, so let us help you figure out a plan of attack on our dime not yours.

What to do first when you inherit money

The most important first step after inheriting wealth is usually to slow down. Very few decisions are truly urgent, and rushed choices — paying off the wrong debt, selling the wrong asset, or making large gifts — are hard to undo. We help you take inventory of everything you’ve inherited, understand how each asset is titled, and identify the handful of deadlines that actually matter.

Some of those deadlines are significant. Inherited retirement accounts have required distribution rules, certain elections are time-limited, and the step-up in cost basis on inherited investments and real estate affects when and how it makes sense to sell.

Inherited IRAs and retirement accounts

The rules for inherited IRAs and 401(k)s differ dramatically depending on whether you’re a surviving spouse or a non-spouse beneficiary. Under the SECURE Act, most non-spouse beneficiaries must fully distribute an inherited retirement account within ten years — and every withdrawal from a pre-tax account is taxable income.

That makes distribution timing one of the biggest tax planning opportunities of an inheritance. We model withdrawal schedules against your other income to help you empty inherited accounts in the most tax-efficient way possible, coordinating with your CPA along the way.

Turning an inheritance into a long-term plan

Once the mechanics are handled, the real question is what this wealth should do for your life. Pay down the mortgage? Invest for retirement? Fund your children’s education? Buy real estate? Give to charity? We build a comprehensive financial plan and investment portfolio that puts your inheritance to work in line with your own objectives — not your predecessor’s.

And because we don’t bill hourly like attorneys and accountants, you can work through the plan of attack on our dime, not yours.

Free downloads

Guides on this topic

How To Handle A Big InheritancePDF download

How To Divide An Inheritance EquallyPDF download

FAQs

Inheritance questions, answered

Massachusetts has no inheritance tax, and inherited cash or property generally isn’t income to you. But withdrawals from inherited pre-tax retirement accounts are taxable income, and estates above certain thresholds may owe estate tax before assets are distributed. We’ll map out what applies to you and coordinate with your tax professional.

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LitchfieldFinancial

What to do first when you inherit money

Inherited IRAs and retirement accounts

Turning an inheritance into a long-term plan

And because we don’t bill hourly like attorneys and accountants, you can work through the plan of attack on our dime, not yours.