No sudden moves
The death of a loved one often comes with a substantial administrative burden. Aside from planning a funeral and memorial service, Jessie will need to get copies of the death certificate, contact his dad’s insurance company and notify his dad’s bank and various government agencies.
Fortunately, his dad’s insurance company provided a checklist of what needs to be taken care of and his financial advisor is helping with some of the notifications and documentation requirements. If these resources aren’t available to you, there are several checklists and guides available online.
Once Jessie has taken care of these tasks, he can start to think about how to deal with his inheritance. Most financial advisors suggest that any money from joint accounts or insurance policies should be put in an account and left untouched until you have time to think about how you’re going to deal with it.
During the first few months, or even after that, Jessie will still be dealing with his grief and a heightened emotional state usually isn’t the time to make major, life-altering decisions.
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Learn moreBuild a team
Once he’s ready, Jessie should look to assemble a team of trusted advisors, including a financial advisor, accountant and lawyer who can help him develop a plan for the inheritance. If he decides to sell his dad’s house, he’ll also need to enlist the help of a real estate agent.
Early on, he needs to ascertain how much he’ll be inheriting and when he’ll receive this money. Some or all of the assets may be subject to probate — the legal process of administering the estate — and others may need to be liquidated to pay off any debts. This process can take months or longer. Retirement accounts such as 401(k)s and IRAs provide options for how you receive the money and may be subject to required minimum distributions.
He’ll also need to consider legal and accounting fees, probate costs and taxes, as well as costs associated with selling the house (if he chooses to sell it). Jessie’s dad didn’t have any outstanding debts, but it’s not uncommon that some debts will need to be paid by the estate before the beneficiaries are paid.
Jessie will need to file a final income tax return for his dad and pay any taxes owing from the estate. Since his dad’s estate is smaller than the $13.99 million threshold to pay federal estate taxes in 2025, he won’t have to pay these taxes. And, since he lives in Florida, he won’t be subject to state inheritance or estate taxes, which exist in several states.
Distributions from his dad’s tax-deferred accounts will be taxable, which Jessie should consider when deciding how and when to access those funds. However, withdrawals from his dad’s Roth accounts won’t be taxable. The tax basis for his dad’s house will be the fair market value at the time of his death, so if Jessie sells fairly soon he shouldn’t have to pay capital gains tax on it. If this value appreciates while he waits to sell, the sale may be subject to capital gains tax.
Plan for the future
Once Jessie has clearer insight on how much he’ll receive and when, he can then take stock of his current financial situation. A net worth tracker may be helpful here.
His dad’s house is conveniently located for Jessie’s work — and it’s paid off — so if he keeps it, he could live mortgage-free. Though he’s responsible with money, it’s taken him some time to get his pharmaceutical sales career off the ground and he’s just starting to build his own nest egg. He has some credit card debt and needs to top up his emergency fund, so it may be wise to use some of his inheritance for these.
It’s also important to Jessie that he honors his dad’s legacy, so he may want to give a percentage of the liquid assets to charities that were important to his dad. And he may want to consider using a small amount of money to treat himself. For instance, now might be a good time to take his dream trip to Nepal.
The rest of the money could be invested for retirement, but he may want to work with a financial advisor to determine the best investment strategy to reach his goals.
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