What to Do With a $750K Inheritance

A $750,000 inheritance can have an immediate impact on your finances. The first few decisions often determine how much of that money you can keep. And they usually happen before you make your first investment. One early mistake can increase your tax bill and leave you with a smaller inheritance.

What You Need to Do Before Investing

A $750,000 inheritance rarely arrives as one pool of money. It may include cash, investments, retirement accounts and real estate, each with its own tax treatment. Understanding those differences before making any decisions can help you avoid unnecessary taxes and preserve more of your inheritance. The table below compares the tax treatment of four common inherited assets.

A financial advisor can help you evaluate the tax rules for each inherited asset before you decide how to invest it.

One Tax Decision Can Cost You Thousands

A $750,000 inheritance doesn’t have to create a large tax bill. The outcome often depends on which assets you access first and how quickly you take the money.

Suppose your inheritance includes $450,000 in a taxable brokerage account and $300,000 in an inherited traditional IRA. Although both accounts hold investments, the IRS treats them very differently.

With the brokerage account, the investments generally receive a stepped-up cost basis. That means the account’s tax basis is typically adjusted to its value when you inherited it, rather than what your parents originally paid. As a result, selling soon after the inheritance generally would not trigger capital gains tax on the appreciation that occurred before you inherited the account.

The inherited IRA follows a different set of rules. Imagine you already have $100,000 of taxable income for the year. Adding the entire $300,000 IRA balance to that income would increase your taxable income to $400,000, exposing much of the distribution to higher federal income tax rates.

Using the 2026 federal income tax brackets, the additional IRA withdrawal would be taxed like this: ¹

• 22% on $5,700 = $1,254
• 24% on $96,075 = $23,058
• 32% on $54,450 = $17,424
• 35% on $143,775 = $50,321

That adds up to an estimated federal income tax of $92,057 before deductions, credits and any state income taxes are considered.

Most inherited IRAs don’t have to be emptied immediately, however. The IRS generally gives non-spouse beneficiaries up to 10 years to distribute the account. Stretching withdrawals across multiple tax years instead of taking the full balance at once can significantly reduce the overall tax cost.

Where Your Money Could Go Next

The next challenge is deciding what you want the inheritance to accomplish, because that should drive how you invest it.

Start by separating money you’ll need in the near future from money you can afford to leave invested. Keeping cash available for taxes, planned expenses or emergencies can reduce the chance that you’ll need to sell investments at the wrong time.

Then build your portfolio around your goals. Money intended to supplement retirement income may call for a different investment mix than money you’re setting aside for long-term growth or to leave to your own heirs.

A $750,000 inheritance should strengthen your overall financial plan, not become a stand-alone investment account. A financial advisor can help you build a strategy that fits your existing assets, goals and timeline.

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