The 5 Biggest Mistakes People Make After Receiving an Inheritance
Receiving an inheritance can be an emotionally fraught time. As you’re processing a potentially devastating loss, you’re also faced with navigating new financial circumstances. Whether your inheritance is modest or a sudden windfall, managing this money while grieving can be difficult, leaving you vulnerable to mistakes that could cut into the money your loved one left for you.
These errors are common, yet significant enough to add a financial headache to your preexisting grief. To help you steer clear of money pitfalls, MoneyLion chatted with experts who shared the biggest mistakes they’ve seen people make after receiving an inheritance.
1. They Move Too Quickly
The weeks and months after a loss can feel like a blur of activity, and being in motion can seem like a welcome distraction from your pain. You may keep moving financially as well, using your inheritance to check items off your personal money “honey-do” list before you’ve even had a chance to catch your breath.
For Linda Grizely, CFP, a personal finance expert at Linda Grizely Ventures, LLC, moving too quickly without fully considering what this new money means for you is a common — if understandable — mistake.
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“In the emotional aftermath of a loss, it’s easy to feel compelled to do something right away,” she said. “Whether that’s paying off debt, making a big purchase, investing the money or giving some of it away, it’s important to take time to process and understand what’s really been handed down and how it fits into the larger picture of your finances.”
She generally advises people to wait six to 12 months before making any major financial decisions. This window gives them space to grieve, reflect on their goals and gain clarity on how their inheritance may serve them.
“Inheritance isn’t just a financial event. It’s an emotional one,” she added. “Decisions made during heightened emotional periods are less likely to come from thoughtful intention.”
2. They Don't Integrate Inheritance Money Into Broader Financial Plans
Another error Grizely sees is when people fail to fully integrate their inheritance into their broader financial picture. When the money gets folded into everyday spending, it can be easy to lose sight of it — and of how it could support long-term goals.
Understanding how inheritance fits into your financial roadmap also means knowing what happens if you mix that money with other funds.
“It’s important to be mindful of how inherited money is held, as commingling those assets with joint or personal funds can have legal and tax implications depending on the situation,” Grizely said.
3. They Get Too Emotionally Attached to Inherited Investments
It’s hard to picture stocks or funds having the same emotional appeal as a cherished family heirloom — yet if they’ve been passed down from a beloved friend or family member, you can become profoundly attached to them. Grizely understands that. But holding onto investments solely because they feel like part of your loved one’s legacy can sometimes be a costly mistake.
“Changing or selling them can feel like dishonoring what was built,” she said. “But when those investments no longer align with your goals, risk tolerance or stage of life, holding on can end up doing more harm than good.”
4. They Delay the Paperwork
The last thing you want to contend with during any difficult time — let alone after the loss of a loved one — is extra paperwork. Yet if you bury your head in the sand when it’s time to deal with the administrative tasks that come with an inheritance, you could create unnecessary hardship for yourself.
David Perez, founder and CEO of Tax Maverick, emphasizes that while you consider how to use the money, you should also address the paperwork promptly. He says strict IRS clocks start ticking the moment a loved one passes away.
“For example, the estate itself is a separate tax entity. If the estate earns more than $600 in income, you must file Form 1041,” he said. “Even if no estate tax is due, you may still need to file Form 706 within nine months to transfer the deceased spouse’s unused tax exemption to the survivor — something called ‘portability.’”
Missing the nine-month window could mean the surviving spouse loses future tax protections. So even as you wait to make big purchases, you need to get started on your filing strategy as soon as possible.
5. They Don’t Get Help From Professionals
Perez recalls a quote from Jim Rohn: “If someone hands you a million dollars, best you become a millionaire, or you won’t get to keep the money.” In other words, sudden wealth can be fleeting if you lack the knowledge or skills to manage it — which is why you need people who can advise you.
“Work with professionals who are qualified to handle these assets. Do not just rely on friends. Make sure you are working with a tax advisor, not just a regular accountant,” he said. “An accountant will tell you how to pay the taxes; an advisor will show you how to maneuver the money to avoid them.”
The Bottom Line
Receiving an inheritance can trigger many difficult emotions, including reluctance to take the financial steps necessary to preserve your loved one’s gift. Avoiding these mistakes can help you honor their wishes — and using their gift as the seed to grow lasting financial stability is a fitting tribute.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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