How to Deposit a Large Cash Inheritance

If someone close to you has died, the last thing you may want to talk about is money. However, in order to honor their final wishes, you’ll need to follow their will (if they left one) or potentially go to probate court. You may be left with a large cash inheritance when all is said and done. But, how do you deposit a large cash inheritance, and is there anything you should know before doing so?

A financial advisor can help you put an estate plan together to protect your assets for your family.

How to Deposit a Large Cash Inheritance

The best place to deposit the large cash inheritance is in a federally insured bank or credit union account. Putting the inheritance in a savings account is a good option for the short term. When the time is right, you should decide if there’s a better place for it, especially if your goal is to grow the money for a future purchase or goal.

How Big of a Cash Inheritance Should You Expect?

Federal Reserve data show that inheritance amounts vary widely and depend on household wealth and family circumstances. According to the Federal Reserve’s 2019 Survey of Consumer Finances, families who reported receiving an inheritance received an average of about $46,200, though this figure is skewed by much larger inheritances among wealthier households ¹ . Many inheritances are smaller than the average, and a significant share of families receive no inheritance at all.

The Federal Reserve also finds that inheritances are closely tied to factors such as parental wealth and education, which helps explain why inheritance outcomes differ across households. In addition, not all inheritances are received as cash. Many estates consist of assets such as homes, businesses or investments, which may require time and additional steps to convert into cash.

Do You Have to Pay Taxes on a Cash Inheritance?

Usually you don’t have to pay tax on cash inheritance at the state or federal level. There are two exceptions to this:

• Six states charge inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania all levy inheritance taxes on at least some heirs Typically, the closer the relationship to the deceased person and the inheritor, such as spouses, the less likely the heir is to owe a tax.
• Federal and state estate taxes: Federally, if you inherit over $13.99 million in 2025 ($15 million in 2026), you may have to pay estate taxes, which are different from inheritance taxes. Some states also levy estate taxes, each with their own thresholds.

What to Do With Your Inheritance

What you decide to do with your inheritance is up to you and what your financial needs are at the time. It’s best to put the money to work in a way that will benefit you and your family. Depending on the size of the inheritance, you may want to do some planning. Here are four suggestions to consider:

Take a Breath

If you’re inheriting cash, it often follows the death of someone close to you, and the distribution process can take time. Until the will is validated and the money is officially yours, it may make sense to avoid spending it, and even after receiving the funds, taking time to plan before making decisions can help you evaluate how the inheritance fits into your finances.

Pay Down Debt

Paying down high-interest debt with your inheritance is often a good idea. Credit card debt, student loans and auto loans can all have hefty interest rates. Paying these down, or off completely, can be a weight off your shoulders.

One caveat here is if you have a mortgage with a low interest rate. While you could do worse than investing in your home, you stand to gain more by putting that money in the stock market. For example, say you’re paying 5% interest. The stock market has an average return of 10%. That means that a well-placed investment will outpace the interest owed by 5%.

Hire a Financial Advisor

If you want to make the most of a cash inheritance, it’s a good idea to hire a financial advisor. A financial advisor will take your goals into account. For instance, they can help you set up a 529 college savings plan for your kids. Or, they could direct you on funds to invest in to plan for your retirement.

Make Other Investments

Unless it’s for emergencies, you may not want to leave that lump sum in a savings account. It may be better put to use in other investments to fund long-term goals, or put toward a down payment on a house or a home renovation.

Bottom Line

You can deposit a large cash inheritance into a savings account, either by check or by wire transfer to your bank. While the deposit itself is usually straightforward, deciding what to do with the money afterward often requires more thought.

Having a plan in place before receiving an inheritance can help you approach those decisions more carefully, particularly if siblings or other heirs are involved. Talking with family members about estate planning in advance may also reduce confusion and set expectations before major financial choices need to be made.

As one financial professional explains, “The initial landing zone for a large cash inheritance should generally be a high-yield savings account. This keeps the money safe, accessible and growing at a decent rate of return while you decide what to do with it next. If the inheritance is larger than $250,000, consider putting the excess amount in a savings account at a different bank to ensure you have adequate FDIC insurance coverage,” Tanza Loudenback, CFP®.

Tips for Managing a Cash Inheritance

• Take advantage of some expert advice by hiring a financial advisor. They can bring clarity to what you should do with your inheritance to meet your goals. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Be realistic about where you are in retirement planning. An inheritance can be a good sum to bolster your retirement account if you need it. Use our retirement calculator to see how much you’ll need.

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