Simplifying Finances After an Inheritance

Meet Josh and Rachel

Josh and Rachel are a married couple in their late 40s with two teenagers approaching college age. Between demanding careers and family responsibilities, their finances had become scattered across multiple accounts at different institutions. They had old 401(k) plans from previous jobs, various investment accounts, and no clear picture of how it all fit together. They wanted help simplifying things and making sure they could fund college and retirement without sacrificing their current lifestyle.

Their Situation

Rachel’s father had recently passed away, and she inherited several accounts with different rules and tax treatment. She knew she needed to take action but felt overwhelmed trying to figure it out while grieving. Josh was also making a career transition, and they needed supplemental income to cover the gap. They weren’t sure how to withdraw money without creating a large tax bill.

How We Helped

We organized all of their accounts by tax treatment to give them a clear view of what they had. The IRA Rachel inherited required annual distributions, and the entire account needed to be withdrawn within 10 years. There was also a large taxable account with concentrated stock that, because of the step-up in cost basis at her father’s death, could be sold without triggering significant capital gains taxes.

We showed them that the required IRA distributions would likely cover their income gap during Josh’s transition. They could also use the step-up in basis to diversify the concentrated stock without a major tax hit. We helped them determine the right amount to contribute to their teenagers’ 529 plans and consolidated their scattered accounts to eliminate unnecessary complexity.

What Changed

Josh and Rachel gained clarity about what they owned and how the inheritance affected their income, taxes, and investment strategy. They felt less stressed knowing their accounts were organized and they had a plan connecting their immediate needs with their long-term priorities.

Insights for Your Own Plan

When you change jobs, it’s easy to leave behind an old 401(k). Over time, this creates unnecessary complexity. Consolidation can make your financial life easier to manage and give you a clearer picture of where you stand.

Losing a loved one is hard enough without learning complicated rules about inherited accounts and tax basis. Working with a professional can help you understand your options and make informed decisions without added stress during a difficult time.