What is considered a large inheritance?

The average American household inherits $58,000, according to 2023 data from the Federal Reserve, but this includes all families, so some large inheritances skew the data upward. Only one in five households in the U.S. has ever received an inheritance, so many get much less or nothing at all.

What should I do with an inheritance of $100,000?

If you inherit $100,000, you have a lot of options. You can pay off your highest-interest debts, save money for emergencies, or give some to charity. You might consider using it as a down payment on a house or adding it to your child's college fund. Most importantly, you should consult with a professional to help you navigate the benefits and consequences of your inheritance.

Do you have to report inheritance money to the IRS?

Many inheritances are not taxable since they're generally of a fairly small value, but if you have any doubt, you should ask a tax professional. Even if your inheritance isn't considered taxable by the IRS, it may still be taxable by your state or local government.

How do I get the most benefit from my inheritance?

Using an inheritance to improve your finances over the long term can give you the most value. You could do this by paying off high-interest debt or investing in assets that will increase your net worth, such as a home or stocks.

What to Do With an Inheritance

Making the Most of Your Inheritance

By Christy Bieber – Updated Mar 4, 2026 at 4:18 PM EST | Fact-checked by Parker Hicks

Key Points

Tax advisors and estate planners can help you make decisions when you receive an inheritance.
You can use your inheritance to pay debts or save money, or donate part of the inheritance to a cause your loved one cared about.
Inherited homes can be rented or sold, or you can move into the property yourself.

Deciding what to do with your inheritance can be complicated, whether you're inheriting cash, real estate, or other valuable items. Receiving a substantial windfall can create a lot of mixed feelings, especially if you were close to the person who left the inheritance to you.

Read on, and we'll go through what to expect from an inheritance and what you can do with one.

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A child's hands grasp a jar of pennies and their hands rest in an adult's hands. — Image source: Getty Images.

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Armed with that information, you can choose what to do with your found assets. However, don't make a move until you really understand your responsibilities, including any tax implications that may be involved.

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Asset

An asset is a resource used to hold or create economic value.

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Savings Account

A savings account is an account that earns interest with a financial institution.

Invest your windfall. If you're interested in investing your money in a way that helps it grow even faster than it would with a savings account, high-yield bonds can be a very safe option. If you're willing to take more risk, you could also consider investing in stocks or exchange-traded funds. These are all excellent choices if you're investing for retirement.

If you've never invested before, consult an expert before you drop all your cash into the next hot start-up. Some companies sound really good and innovative until you start examining their cash flow statements.

Note that the rules can differ if you've inherited a 401(k) or another retirement account, so consult with a tax professional in this situation.

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Otherwise, you might still be able to shelter some or all of the value from taxation. When you sell a home, you must report your gain or loss relative to the amount you paid for the house. For example, if your Great Aunt Mary bought her house for $50,000 in the 1990s and sold it before her death for $250,000, she'd have to pay tax on $200,000 worth of gain.

However, since you inherited it, the cost basis -- the value that the capital gain is based on (Great Aunt Mary's $50,000) -- doesn't apply in the same way. Your cost basis isn't her $50,000 but rather the value of the house on the day you inherited it: $250,000. So, if you turn around and sell the property for $250,000 in a month, you wouldn't necessarily owe any capital gains tax on the property.

You will still have to pay certain fees and taxes required by your state and municipality that are always part of a real estate transaction. But these are typically small compared to capital gains taxes.

Always consult with a CPA or attorney before making any serious financial decisions of this nature, as the rules change frequently. There may be additional considerations for your specific location or situation.

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Inheritance FAQs

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About the Author

Christy Bieber is a contributing Motley Fool retirement and Social Security expert covering retirement planning, 401(k)s, IRAs, and other personal finance topics. Christy has written about finance since 2008 and previously taught business courses at Bryant & Stratton College. She holds a law degree from UCLA and a bachelor’s degree in English, media, and communication with a certificate in business management from the University of Rochester. In law school, she earned three CALI Awards for Excellence for the highest scores in civil procedure and contract law exams.

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