By Iván M. Mendoza, CFA, CFP, CLU, ChFC, CDFA
When a parent passes away, sorting through their finances can quickly become overwhelming. There may be bank and investment accounts, retirement plans, insurance policies, and years of paperwork to work through, all while you’re grieving and trying to understand what needs your attention first.
If you’re figuring out what to do when you inherit money, you don’t need to make every decision right away. The first few months after receiving an inheritance are a good time to identify what your parents owned, shield the assets that are already there, and give yourself some breathing room before making financial decisions that can wait.
The First 90 Days Set the Tone
Most of the work in the first 90 days is administrative, not financial. Before any money moves, you need an accurate list of what you’re holding: taxable brokerage accounts, IRAs, old 401(k)s, savings bonds, life insurance policies, and any real estate or business interests. Contact each institution directly rather than relying on your parent’s old notes, since account titling and beneficiary designations can change how quickly (or how slowly) you gain access.
Financial institutions that handle retirement or insurance accounts often move at their own pace. Many still require a medallion signature guarantee, a stamped authentication from a bank or brokerage that confirms your identity in person before they will release inherited assets. It’s a slower process than a notary, and it can usually only be completed where you already hold an account, so plan for a few weeks of back-and-forth rather than a same-day transfer.
Resist the pressure to consolidate, invest, or spend inherited assets right away. Nothing about an inheritance improves by moving too fast in the first month.
One Family’s Scattered Inheritance, Simplified
One client came to us after her mother passed and left behind accounts at a dozen different institutions. She started the process alone, calling one company at a time and working through a list of medallion guarantees, transfer forms, and hold requirements that seemed to grow every time she called. Weeks later, she reached out again, this time asking for help managing what she now knew she could not sort out by herself.
Once we sat down together, we counted 19 separate accounts between her existing holdings and what she had inherited from her mother. Some of them, including two old employer retirement plans and her checking and savings accounts, stayed exactly where they were because moving them served no purpose. The other 15 accounts, spread across a dozen institutions, were consolidated into three: one inherited IRA, one inherited Roth IRA, and one individual taxable account.
She now reviews her plan twice a year instead of tracking a dozen logins, and part of that plan includes lifetime gifts to her daughter’s young family. The relief she described wasn’t centered around the size of the inheritance. It was the ability to finally see everything in one place, with someone who could tell her which of those 19 accounts actually needed attention. Our estate planning process starts with exactly that kind of inventory.
What to Avoid in the First 90 Days
A few decisions in this window are hard to undo. Cashing out an inherited retirement account can trigger a tax bill in the same year, even though nothing about the money changed hands. Most non-spouse beneficiaries who inherit an IRA are now required to withdraw the full balance within 10 years, and the timing of those withdrawals affects how much tax you owe. That’s a decision that should be made with your tax preparer, not your bank teller.
Avoid financing a large purchase against the promise of inherited funds still moving through probate or account transfers. Those transfers regularly take longer than expected, and a purchase made against money that has not arrived yet can leave you short.
Above all, avoid handling a dozen scattered accounts by yourself simply because that is how your parents managed things. Their system worked for them, but it doesn’t usually work for the person left untangling it afterward.
What to Do When You Inherit Money: Your Next Step
What to do when you inherit money comes down to one principle: slow down long enough to see everything you have inherited before you touch any of it. That means an inventory of every account, a plan for taxes tied to retirement assets, and a conversation about what the money is for, whether that is your own retirement, your children’s education, or continuing something your parents started.
Just inherited? Start with a plan, not a purchase. Schedule a Fit Meeting and our team can help you sort out what needs attention first.
Frequently Asked Questions
What is a medallion signature guarantee, and why does my bank want one?
A medallion signature guarantee is a certified stamp, usually available only at a bank or brokerage where you already hold an account, that confirms your signature and identity before an inherited account can be transferred. It exists to protect against fraud, and it typically takes longer to schedule than a standard notarization. This kind of administrative complexity catches most new inheritors off guard, which is exactly why building an early inventory of every account matters so much.
Do I have to keep my inherited accounts at the same institutions my parent used?
No. Once assets are legally transferred into your name, or into an inherited account in your name, you can move them to a custodian of your choosing. Many families use the transfer as a chance to consolidate accounts scattered across several institutions into fewer, better-coordinated ones.
How long do I have to decide what to do with an inherited IRA?
Most non-spouse beneficiaries are required to withdraw the full balance of an inherited IRA within ten years under current IRS rules, though the exact requirements depend on your relationship to the original owner and their age at death. Getting the timing wrong on any retirement account distribution can turn into an expensive, avoidable tax mistake, so it’s a good idea to review your options with an advisor before you take a single distribution.
About Iván
Iván M. Mendoza is the Managing Principal and a Financial Advisor for Mendoza Private Wealth, a fee-only boutique, private wealth management practice with a focus on research, planning, and investment management. Working with clients in Miami and throughout South Florida, Iván provides investment and wealth planning advice to individuals and families and to their respective trusts, estates, foundations, endowments, and pension plans.
