In any sudden money situation, including an inheritance, I advise beneficiaries to take a step back and remember CAULK to contain and manage an inheritance or other large windfall. Too much for you to remember? Reach out to Katherine to see how Sunnybranch can help you manage your inheritance.

C - Consider Your Impact

More than likely, your life is about to significantly change. Opportunities that seemed far out of reach may now be realistic possibilities. While these changes open new doors, they can also create unforeseen consequences.

Whether you quit your job, move to a new city, buy a luxury car, or decide to give your wealth away to a foundation, your decisions now will have ripple effects down the road.

Before making any decisions on how you will manage your inheritance, revisit your core values and consider the personal and community impact you want to create with your newfound wealth. Just because you have greater financial means, it does not make you a fundamentally different person.

A - Assemble Your Team

An inheritance often necessitates quickly assembling a team of professionals who are qualified to help you navigate the intricacies of managing a windfall.

Depending on your situation, your team may include a financial advisor, CPA, and attorney, among other professionals. This can often be a difficult and confusing step to navigate, especially for those who don’t have a network of wealthy friends or family to ask for referrals.

U - Understand Tax Consequences

What state a decedent lived in when they died, and where they owned property within the US, will determine whether you pay a specific “inheritance tax.” As of 2023, six states in the US have an inheritance tax for decedents who lived, or owned property in the state: Nebraska, Iowa, Kentucky, Pennsylvania, Maryland and New Jersey.

Inheriting from someone who did not live or own property in one of those six states does not mean that an inheritance will come to you tax free. 12 states and the District of Columbia have estate taxes to which a decedent’s estate may be subject. While those are taxes the estate pays, they may reduce your total inheritance. Estates larger than $12.92 million may also be subject to estate tax at the Federal level.

Some forms of inheritance are taxed when you receive them. Inherited IRAs, for example, are required to be distributed out to most beneficiaries within a 10-year period. These distributions are taxable as ordinary income to beneficiaries. Planning for those tax consequences is an important part of understanding how to manage an inheritance. Many inherited assets receive a step-up in basis, allowing heirs to sell them without incurring capital gains tax. This is not true of all inherited assets, however and inheriting a decedent’s cost basis will provide additional areas of tax planning for inheritors.

L - Leave Decisions for Later

Sudden money events are not necessarily happy occasions. Give yourself time to process complicated emotions before making any major life changes.

In the case of an inheritance, you may be mourning the person who passed and wondering how you are going to navigate this new challenge without them.

While it may feel like everything needs to get done yesterday, give yourself time and space to breathe and sit with your feelings.

A good rule of thumb is to wait for at least a year after any unexpected windfall before making life-altering changes. This gives you time to process your feelings, consider the impact questions above, and decide what next steps make the most sense for your new reality.

For those managing grief and an inheritance at the same time: you may not be ready to do anything with your wealth after a year, or two, or more. Grief is not linear and when it is tied up with money issues it can get complicated and emotionally confusing. Give yourself grace to manage the best way you know how and don’t beat yourself up if you don’t have the energy to get on top of everything within a set amount of time.

K - Keep in Quiet

It is generally wise not to spread news of your inheritance far and wide.

There are always bad actors looking to benefit from those who are unfamiliar with managing large amounts of wealth.

Depending on the nature of your interpersonal relationships, even trusting friends and family with details may lead to additional strife down the road.

Understand CAULK but feeling overwhelmed? Reach out to Katherine to see how Sunnybranch can help you manage your inheritance.

The timeline between a loved one’s passing and the point at which you inherit money can vary greatly. For uncomplicated estates that don’t pass through probate, the settlement timeline can be as quick as a few months. For probate estates or large, complicated estates the settlement timeline can be several years.

Inheritors of complicated estates that take a long time to settle should consider educating themselves about the terms of the estate and understanding what exactly they will inherit when the estate settles. The waiting period can be used as a productive time to start planning for how you will manage your inheritance when it arrives.

Dealing with the death of a loved one can be a difficult and emotional time. While the steps are not always the same, below is a general outline of the financial steps to take when someone dies. Many of these steps can be made easier by enlisting experts to help you understand and manage an inheritance and the estate settlement process.

1. Obtain a Death Certificate: You'll need multiple copies of the death certificate for various purposes, including settling the deceased person's affairs, claiming life insurance, and managing their estate.

2. Notify Key Parties: Inform the deceased person's employer, financial institutions, insurance companies, and any relevant government agencies of the death.

3. Secure and Gather Financial Documents: Collect important financial documents such as wills, trusts, bank statements, investment account statements, insurance policies, tax returns, and property deeds.

4. Find the Will and Estate Documents: In addition to finding and reviewing a will, you will also want to review the decedent’s trust and any other estate planning documents.

5. Contact an Attorney and/or Executor: If there's a will, drafting attorney and person named executor should be contacted. The executor is responsible for carrying out the provisions of a descendents will, closing their estate, and distributing assets.

6. Notify Creditors and Debtors: Contact creditors to inform them of the death and discuss any outstanding debts. You'll need to address these debts as part of the estate settlement process.

7. Notify Life Insurance Companies: If the deceased person had life insurance policies, contact the insurance companies to start the claims process.

8. Address Social Security and Other Benefits: Notify the Social Security Administration and any other relevant agencies of the death. Surviving spouses or dependents might be eligible for benefits.

9. Notify Pension or Retirement Plan Administrators: If the deceased person had pension plans, retirement accounts, or IRAs, contact the plan administrators to discuss beneficiary options and distribution.

There is a difference between the steps in the estate settlement and inheritance process, although many inheritors think of them together.

The estate settlement process includes a decedent’s executor or personal representative managing the estate and making distributions in accordance with the decedent's will, trust, and other estate documents. If there is an irrevocable or testamentary trust in place, a trustee will also be participating throughout the estate settlement process. Settling the estate includes tasks such as inventorying and valuing assets, notifying creditors and settling debts, filing the estate tax return and final tax returns for the decedent, transferring real estate and other illiquid assets to inheritors, and making final distributions to inheritors.

Once you have inherited wealth, and an estate has closed, the next steps in the process are:

1. Understand what you have inherited: You may be dealing with a large cash inheritance, or you may have inherited a tangle of irrevocable trusts, business interests, and illiquid assets. Whatever you’re dealing with, you’ll want to find someone who can help you understand what you’ve inherited and what your options are.

2. Make as few decisions as possible: The moment of inheritance is not the best time to make huge life decisions. Focus on making your inheritance safe and taking care of any administrative items then take some time to sit and think about your best next steps.

3. Find a partner to help you along the way: Inheriting a significant amount of wealth is not a small matter. While that money can have a positive impact on you and your community, it likely also represents a huge change in your life and is often wrapped up in complicated feelings of grief, guilt, and confusion. Remember that you don’t have to be in this alone - try to find a partner who can help you navigate the steps of inheritance and build a plan to manage your inheritance.

What state a decedent lived in when they died, and where they owned property within the US, will determine whether you pay a specific “inheritance tax.” As of 2023, six states in the US have an inheritance tax for decedents who lived, or owned property in the state: Nebraska, Iowa, Kentucky, Pennsylvania, Maryland and New Jersey.

Inheriting from someone who did not live or own property in one of those six states does not mean that an inheritance will come to you tax free. 12 states and the District of Columbia have estate taxes to which a decedent’s estate may be subject. While those are taxes the estate pays, they may reduce your total inheritance. Estates larger than $12.92 million may also be subject to estate tax at the Federal level.

Some forms of inheritance are taxed when you receive them. Inherited IRAs, for example, are required to be distributed out to most beneficiaries within a 10-year period. These distributions are taxable as ordinary income to beneficiaries. Planning for those tax consequences is an important part of understanding how to manage an inheritance. Many inherited assets receive a step-up in basis, allowing heirs to sell them without incurring capital gains tax. This is not true of all inherited assets, however and inheriting a decedent’s cost basis will provide additional areas of tax planning for inheritors.

Receiving funds from an inheritance can be a lengthy and administratively burdensome process. The following steps generally need to be completed before funds are received.

After a death is confirmed, the executor or administrator of the estate will guide the estate settlement process, including valuing assets, managing probate, settling debts, and outlining a distribution plan.

When a distribution plan has been prepared, beneficiary identification will be verified before checks or electronic transfers are processed.

Funds from an inheritance may arrive months to years after a loved one passes away. In the meantime, it is advisable to put a plan in place to manage and grow your inheritance.

For inheritors who have only ever dealt with depositing paychecks and other small amounts of money, knowing what to do with a large cash inheritance can be a significant headache.

As of 2023, high interest rates make holding large amounts of cash in FDIC-insured accounts a compelling option for cash inheritances. At Sunnybranch, I offer my clients cash management solutions through StoneCastle, an FDIC insured deposit solution that yields a competitive market rate (5% as of September 1, 2023) and offers FDIC insurance on balances of up to $25 million. StoneCastle also offers an impact solution for inheritors who want their cash to create a positive impact while they are deciding on their next steps.

The time it takes to receive a life insurance payout can vary depending on several factors, including the insurance company's policies, the specific circumstances of the policyholder's death, and the completeness and accuracy of the documentation provided by the beneficiaries. It can be helpful to have someone on your team who can help you maintain open communication with the insurance company, respond promptly to requests for information, and ensure that all necessary documentation is provided to expedite the payout process. For those doing it on their own, the process usually follows the below steps.

Filing a Claim: When the policyholder passes away, the beneficiaries or the policyholder's estate need to file a claim with the insurance company. This typically involves submitting a death certificate and other required documents.

Review and Verification: The insurance company will review the claim and may request additional information or documentation to verify the claim's validity. They may also investigate the circumstances of the policyholder's death if it falls under certain conditions, such as a contestable period (usually the first two years of the policy).

Beneficiary Verification: The insurance company will verify the identity and status of beneficiaries to ensure they are entitled to the payout.

Policy Review: The insurance company will review the terms and conditions of the policy to determine the payout amount, taking into account factors like the policy's face value, any riders, and any outstanding loans or premiums.

Processing Time: Once the claim is approved and all necessary documentation is provided, the insurance company will begin processing the payout. The length of this process can vary depending on the company's internal procedures and workload.

Payout Method: As a beneficiary, you can choose how you want to receive the payout. Common options include a lump sum payment, periodic payments, or setting up an annuity.

Payment Delivery: After processing, the insurance company will initiate payment to beneficiaries. The time it takes for the beneficiaries to receive the funds can depend on the chosen payout method as well as the additional administrative steps involved.

Straightforward life insurance claims are usually processed relatively quickly, often within a few weeks to a couple of months. However, complications, disputes, or investigations may mean the process takes longer. It can be helpful to have someone on your team who can help you maintain open communication with the insurance company, respond promptly to requests for information, and ensure that all necessary documentation is provided to expedite the payout process.

As of 2023, Oregon does not have an inheritance tax. But that doesn’t mean an inheritance will come to you tax free. Oregon does have an estate tax on estates valued more than $1,000,000. While those are taxes the estate pays, they may reduce your total inheritance. Estates larger than $12.92 million may also be subject to estate tax at the Federal level.

Some forms of inheritance are taxed when you receive them. Inherited IRAs, for example, are required to be distributed out to most beneficiaries within a 10-year period. These distributions are taxable as ordinary income to beneficiaries. Planning for those tax consequences is an important part of understanding how to manage an inheritance. Many inherited assets receive a step-up in basis, allowing heirs to sell them without incurring capital gains tax. This is not true of all inherited assets, however and inheriting a decedent’s cost basis will provide additional areas of tax planning for inheritors.

As of 2023, Washington state does not have an inheritance tax. But that doesn’t mean an inheritance will come to you tax free. Washington state does have an estate tax on estates valued more than $2,193,000. While those are taxes the estate pays, they may reduce your total inheritance. Estates larger than $12.92 million may also be subject to estate tax at the Federal level.

Some forms of inheritance are taxed when you receive them. Inherited IRAs, for example, are required to be distributed out to most beneficiaries within a 10-year period. These distributions are taxable as ordinary income to beneficiaries. Planning for those tax consequences is an important part of understanding how to manage an inheritance. Many inherited assets receive a step-up in basis, allowing heirs to sell them without incurring capital gains tax. This is not true of all inherited assets, however and inheriting a decedent’s cost basis will provide additional areas of tax planning for inheritors.

As of 2023, California does not have an inheritance tax or an estate tax. But that doesn’t mean an inheritance will come to you tax free. Estates larger than $12.92 million may be subject to estate tax at the Federal level. While those are taxes the estate pays, they may reduce your total inheritance.

Some forms of inheritance are taxed when you receive them. Inherited IRAs, for example, are required to be distributed out to most beneficiaries within a 10-year period. These distributions are taxable as ordinary income to beneficiaries. Planning for those tax consequences is an important part of understanding how to manage an inheritance. Many inherited assets receive a step-up in basis, allowing heirs to sell them without incurring capital gains tax. This is not true of all inherited assets, however and inheriting a decedent’s cost basis will provide additional areas of tax planning for inheritors.