Expecting an Inheritance? What to Know Before It Arrives

An inheritance can change your life. It might arrive in the form of cash, investment accounts, real estate or even family heirlooms. For some women, it plays a role in retirement planning. For others, it comes as an unexpected windfall.

But here’s the truth that is often overlooked. Inheritances are not guaranteed. Even if your parents or grandparents have told you what they want to leave behind, life can shift. Medical bills, market downturns or changes to estate documents can shrink or wipe out an expected amount. That is why it is so important to approach inheritances as potential money, not promised money.

Let’s look at what to keep in mind if you are expecting an inheritance, how to prepare before it arrives and how to use it wisely if and when the time comes.

Inheritances and Retirement Planning

If you are counting on an inheritance as part of your retirement plan, the first step is to pause and rethink. Financial planners caution against relying on money that is not yet yours. A study by the Federal Reserve shows that while nearly 1 in 5 households expect to receive an inheritance, only about 1 in 3 of those expectations are realized. In other words, many people anticipate an inheritance that never comes or arrives in a smaller amount than they imagined.

That does not mean you cannot factor it into your planning at all. It just means you should treat it as a bonus, not a guaranteed foundation. Build your retirement strategy on what you know you control, like your 401k, IRA or brokerage accounts. If an inheritance does come, it can strengthen your plan instead of being the only thing holding it up.

Clarity Before the Money Arrives

If you have open and healthy communication with your family, it is wise to ask a few questions now instead of guessing later. Is there a will or a trust in place? Who is the executor? Do you know what type of assets might be passed down? If accounts exist, do you have beneficiary designations listed properly?

These conversations can feel uncomfortable, but they help prevent conflict later. A written will or trust document is the only way to ensure money or property is passed according to your family’s wishes. Without one, the state decides how assets are divided, which often leads to delays and disputes.

If you are expecting an inheritance from parents or grandparents, you may want to suggest they speak with an estate planning attorney. Simple steps like setting up transfer-on-death accounts or creating a living trust can make things smoother and help reduce taxes.

What to Do If You Receive an Inheritance Early

Sometimes inheritances arrive earlier than retirement age. If you inherit money in your thirties, forties or fifties, the decisions you make in those first months matter.

One smart move is to avoid rushing. It is tempting to make quick decisions, especially if you suddenly have more money than you ever have before. Instead, take a step back. Put the funds in a safe, interest-bearing account while you process the change.

Next, consider your financial priorities. Do you have debt to pay down? Would investing the money accelerate your retirement timeline? Would using part of it for a home purchase or education align with your long-term goals? Aligning your inheritance with your bigger life plan helps the money stretch farther and work harder for you.

Tax Implications to Know About

Inheritances are not always tax-free. How much you owe depends on what you inherit and where you live.

• Cash: In most states, receiving cash directly is not taxed, but interest you earn on that cash later is taxable income.
• Investment accounts: If you inherit a taxable brokerage account, you typically benefit from a step-up in cost basis. That means you pay capital gains taxes only on growth after you inherit the account.
• Retirement accounts: If you inherit a 401k or IRA, the rules are different. The SECURE Act requires most non-spouse beneficiaries to withdraw the full amount within 10 years, which can increase your tax bill if not planned carefully.
• Real estate: Properties also receive a step-up in cost basis, which can reduce the capital gains taxes if you sell. Still, you will need to budget for maintenance, property taxes and insurance.

Some states also have estate or inheritance taxes, so it is worth checking the laws in your state. An estate planning attorney or tax professional can help you understand how to minimize what you owe.

Best Practices for Planning Ahead

If an inheritance is likely in your future, you can prepare by:

• Keep saving for retirement as if no inheritance will come.
• Encourage your family to document their wishes through a will or trust.
• Ask about account titles and beneficiary designations to prevent delays.
• Learn the tax rules that apply to different types of assets.
• Have a financial plan ready so you know exactly where an inheritance would fit if it arrives.

Remembering the Bigger Picture

Talking about inheritances also requires sensitivity. Not every woman has access to generational wealth. In fact, research from the Federal Reserve shows that only about 20 percent of households in the United States ever receive an inheritance. That means the majority of people are building their futures without family money.

If you are in the position to receive an inheritance, it is a privilege. Recognizing that privilege does not take away from your hard work, but it does add perspective. It can also encourage you to think about how you might use part of your inheritance to create opportunities for others, whether that means supporting causes you care about, helping other women or building your own legacy for the next generation.

Moving Forward with Confidence

An inheritance can be life changing, but it is not something you should depend on. The best approach is to plan as if it will not happen, then create a smart strategy for using it if it does. That way, you protect your future either way.

Whether your inheritance arrives in your fifties or your seventies, or not at all, what matters most is that you have built a strong financial base for yourself. And when you do receive money, property or investments, you will be ready to put them to work in a way that supports the life you want.

You deserve to feel secure and confident in your future. Planning ahead, asking the right questions and remembering that this money or property is not a guarantee, gives you the power to make the most of it.