Common Mistakes to Avoid When Inheriting Wealth

Inheriting wealth is rarely simple. Along with the financial windfall often comes grief, confusion, and the weight of responsibility. Maybe you've recently lost a parent or loved one, and now you're faced with managing money you never expected to have. It's a lot to process, and it's okay to feel overwhelmed.

While I can't take away the emotional complexity of this moment, I can help you avoid some of the most common financial mistakes I see clients make during this transition. Here are six pitfalls to watch out for—and how to navigate them with intention.

1. Making Big Decisions Too Quickly

When money suddenly appears in your account, it's tempting to act fast. Maybe you've been dreaming of a new car, or you want to help family members, or you think you should invest it immediately before you "waste" it.

I get it. But here's what I've seen happen: clients who rush into major purchases or investments often regret those decisions within a year or two.

What to do instead: Give yourself permission to pause. Park the money somewhere safe—a high-yield savings account or money market fund—and take at least six months to breathe. Grief and major financial decisions don't mix well. You'll make better choices when you're not in the immediate aftermath of loss.

2. Underestimating the Tax Bill

This one catches almost everyone off guard. You inherit $500,000 and think, "Great, I have half a million dollars." But depending on what you inherited and how it's structured, you might owe significant taxes.

Inherited IRAs, appreciated stocks, real estate—they all come with different tax implications. I've had clients who sold inherited stock without realizing they'd trigger a huge capital gains tax, or who withdrew from an inherited IRA without understanding the new rules.

What to do instead: Before you touch anything, talk to a tax advisor. Seriously. The money you spend on good tax advice will save you many times over. Ask about the step-up in basis for inherited assets, required minimum distributions from retirement accounts, and timing strategies for selling assets.

3. Keeping Everything Exactly as It Was

Sometimes an inheritance comes with emotional attachments—maybe it's your parents' investment in the family business, or the stock portfolio your grandfather spent decades building. It can feel disloyal to change anything.

But here's the thing: what made sense for them might not make sense for you. If 80% of your inheritance is tied up in one company's stock or one piece of real estate, you're taking on more risk than you probably realize.

What to do instead: Honor their legacy by being a good steward of what they left you. That might mean diversifying those concentrated holdings into a portfolio that actually fits your life, your timeline, and your risk tolerance. You can respect their memory while also making smart financial choices for your future.

4. Going It Alone

I understand the hesitation to work with financial professionals. Maybe you're worried about fees, or you don't know who to trust, or you think you should be able to figure this out yourself.

But managing a significant inheritance involves navigating tax law, investment strategy, estate planning, and sometimes family dynamics. That's a lot for anyone to handle alone, especially while grieving.

What to do instead: Build a small team of trusted advisors—a financial planner, a tax professional, and an estate attorney. Ask friends for referrals, interview a few people, and choose professionals who listen more than they talk. The right team will pay for itself many times over.

5. Treating the Inheritance as Separate from Your Life

I see this often: people create a mental wall between their inheritance and the rest of their financial life. The inherited money sits in one account, untouched, while they continue to stress about retirement savings or put off important goals.

Your inheritance isn't separate from your life—it's part of your whole financial picture.

What to do instead: Take a step back and look at everything together. How does this inheritance change your retirement timeline? Does it mean you can finally start that business, go back to school, or work part-time? Can it fund your kids' education or allow you to be more generous with causes you care about? Let it integrate into your vision for your life.

6. Forgetting You'll Leave an Inheritance Too

Once you've inherited wealth, you're now the person who'll eventually leave assets to others. Without a plan, your heirs will face the same confusion and challenges you're experiencing now.

What to do instead: Update your estate plan within the first year. Create a will if you don't have one. Consider a trust if it makes sense. Name beneficiaries on all your accounts. Write down where things are and how to access them. Your future heirs will thank you.

A Story Worth Learning From

Let me tell you about a client I'll call Jennifer. She inherited $600,000 when her mother passed away. Still deep in grief, she made a series of quick decisions: paid off her house, lent $100,000 to her brother for his business (which failed), and invested heavily in a friend's startup.

When we finally met two years later, the inheritance was down to about $150,000, and she owed taxes on the inherited IRA distributions she hadn't planned for. She was devastated—not just by the financial loss, but by the feeling that she'd squandered what her mother had worked so hard to build.

We can't go back and change Jennifer's story, but we did create a solid plan for what remained. And her experience is exactly why I'm so passionate about helping people navigate inheritances thoughtfully.

Moving Forward with Intention

Inheriting wealth is a significant responsibility, but it's also an opportunity—to honor the person who left it to you, to create security for yourself, and to build the life you want.

Here's what I encourage:

Take your time. There's no rush. The money will still be there in six months when you're thinking more clearly.

Get support. Both emotional and financial. Talk to a therapist if you're grieving. Talk to a financial planner about the money.

Connect it to your values. What mattered to the person who left this to you? What matters to you? How can this inheritance help you live more intentionally?

Make a plan. Not because you have to have all the answers right now, but because having a roadmap makes the whole thing less overwhelming.

Be kind to yourself. You didn't ask for this responsibility. You're doing the best you can.

Let's Talk

If you've recently inherited wealth and you're not sure where to start, I'd love to help. At Intentional Wealth Partners, I work with people navigating exactly this kind of transition—helping you make sense of the numbers while honoring both the legacy you've received and the life you want to build.

Managing an inheritance isn't just about the money. It's about moving forward with clarity, confidence, and intention.

Ready to create a plan? Reach out to schedule a consultation. Let's figure this out together.