How Do I Make The Most Of This Sudden Windfall?
How Do I Make The Most Of This Sudden Windfall?
I’m 40 and my mom just died — leaving me a $3.25M inheritance
Christy Bieber Sat, September 13, 2025 Moneywise
According to Northwestern Mutual, $90 trillion will transfer to younger generations in the coming years [1]. Rebecca, 40, says she has inherited $3 million in stocks and $250,000 in cash, and has a $100,000 mortgage and $25,000 in other debt. What should she do with such a large windfall to make sure she’s using it wisely?
Think Before Acting
When you receive a large inheritance, the first thing to consider is the tax implications. Federal estate taxes don't kick in until you inherit at least eight figures (the threshold in 2025 is $13.99 million), so you shouldn't have to worry about that. Some states also impose an inheritance or estate tax (Maryland imposes both).
If you inherit assets you plan to sell, there’s good news. The step-up basis at death resets the cost basis for the inherited assets to the fair market value at the time of death. This usually helps reduce the amount of capital gains taxes you will owe.
Beyond the tax implications, you need to make a smart plan for how to make the money last. An often cited statistic from a 20-year study by The Williams Group of 3,200 families says that 70% of the time family wealth is lost by the second generation, and this number jumps to 90% for the third generation.
If you don't want to become one of the majority who waste the funds, you should avoid jumping into spending the money or upgrading your lifestyle dramatically.
While it is probably a good idea to pay off your mortgage and other debt so you can avoid interest costs, you should refrain from doing things like immediately buying a bigger house or making other large purchases that eat away a big chunk of the money and require you to commit to higher ongoing expenses.
You should also avoid telling anyone other than your immediate family about the inheritance. If word gets out, you may find yourself targeted by people trying to get you to "invest" in their business venture, help them cope with "emergency" spending needs or any other excuse to access your funds.
What Should You Do With The Money?
The first thing you should do is pay off your debt and make sure you’ve built a sizable emergency fund, then invest every dollar, ideally in a mix of simple and safe investments.
TO READ MORE: https://www.yahoo.com/finance/news/m-40-mom-just-died-103000408.html