Just inherited money or property? Start by naming what you received

An inheritance is not one thing. Cash in a bank account, shares in a brokerage account, a retirement account and a life insurance payment each follow different rules. Which questions matter first depends on the type of asset, who the beneficiary is and when the person died. This guide helps you sort what you received and shows where the rules are written down.

Key takeaways

• Write down each asset separately. The rules for cash, investments, retirement accounts and life insurance are not the same.
• In most cases, property you inherit is not counted as your income. Income the property produces later, and money you take out of an inherited retirement account, can be.
• Retirement accounts have deadlines that depend on who you are in relation to the account owner and on the owner's date of death. Do not rely on a single "10-year rule" summary.
• For inherited investments and property, the IRS says the executor can tell you the date-of-death value.

This guide is for US readers. It covers federal income tax only, and state rules can differ. It is educational, not individual investment, tax or legal advice. Valora is not a registered investment adviser and is not arranging advisor matches or introductions at this time. No tax result, deadline or amount for your situation is offered here.

Start with a list: what exactly did you inherit?

Make a short list before you decide anything. For each item, note what it is, who holds it now, and who can tell you its status. Common items include:

• Money in a bank or other cash account.
• Stocks, funds or other investments in a brokerage account.
• An individual retirement account (IRA).
• A workplace retirement plan, such as a 401(k).
• A life insurance payment.
• A home or other property.
• Income paid to you from a trust.

For inherited investments or property, the IRS says the executor can tell you the value on the date of death. For anything else, ask whoever holds the asset what its status is.

Different assets, different first questions

What you received	First questions to ask	Where the rule is written
Cash or bank account	Has it actually been distributed to you? Is the estate still open?	Ask the executor or the bank.
Stocks, funds or property you may sell	What was the value on the date of death? Did the executor give you a Schedule A to Form 8971?	IRS: Gifts and inheritances.
IRA	Are you the owner's spouse, the owner's minor child, disabled, chronically ill, not more than 10 years younger than the owner, or none of these? Did the owner die in 2020 or later? Had the owner reached their required beginning date when they died?	IRS Publication 590-B.
Workplace plan (such as a 401(k))	What does the plan administrator say about your options and deadlines?	The plan administrator. Publication 590-B covers IRAs.
Life insurance payment	Were you named as beneficiary? Did the payment include interest?	IRS: Life insurance and disability insurance proceeds.
Income paid from a trust	What is the income, and how is it reported to you?	IRS Publication 525.
Home or other property	Who holds title, and who has authority to sell or transfer it?	Ask the executor and an attorney in your state.

Is an inheritance taxable income to me?

In most cases, no. IRS Publication 525 says that property you receive as a gift, bequest or inheritance isn't included in your income in most cases. The same publication then lists what can still be taxable:

• Income the property produces after you receive it, such as interest, dividends or rents, is taxable to you.
• If property is given to a trust and the income from it is paid, credited or distributed to you, that income is also taxable to you.
• If you inherited a pension or an IRA, you may have to include part of the inherited amount in your income. Publication 525 points to Publications 575, 590-A and 590-B.

Estate tax is a different tax. The IRS says the estate tax on Form 706 is levied on the entire taxable estate, not just on the share received by a particular beneficiary. The executor files that return. The IRS says a return is required when the estate is above a filing threshold for the year of death, and an executor can also file to elect to transfer the deceased spouse's unused exclusion (portability) to a surviving spouse, whatever the size of the estate. If you are unsure whether a return was filed, ask the executor.

What is my basis in inherited investments or property?

Basis is the starting number used to work out gain or loss if you sell. The IRS says the basis of property inherited from someone who died is generally one of the following:

• The fair market value of the property on the date of death.
• The fair market value on the alternate valuation date, but only if the executor files an estate tax return and elects that date.

If you sell inherited property, the IRS says the sale proceeds are generally included in gross income when you work out whether you must file, and you have a taxable gain if you sell for more than your basis. The IRS also says the executor can tell you the date-of-death value. If the executor gives you a Schedule A to Form 8971, you may be required to report a basis consistent with the estate tax value. A special rule applies when you or your spouse gave the property to the person who died within one year before the death.

Keep the executor's valuation paper with your records. A tax professional can apply these rules to your sale.

If you inherited an IRA

Inherited IRAs have several conditions. The IRS explains them in Publication 590-B (2025 edition), and the rules described here are those it gives for owners who died after 2019. Earlier deaths can fall under different rules. The rules depend on who you are, when the owner died and whether the owner had reached the required beginning date, which is the date by which the owner had to start taking required withdrawals.

Who you are. Publication 590-B separates these cases:

• You are the owner's surviving spouse.
• You are an "eligible designated beneficiary" other than a spouse. The IRS defines this as the owner's surviving spouse, the owner's minor child, a disabled individual, a chronically ill individual, or any other individual who is not more than 10 years younger than the owner.
• You are an individual who is not an eligible designated beneficiary.
• The beneficiary is not an individual, for example the owner's estate.

A surviving spouse who is the only beneficiary may be able to elect to be treated as the owner of the IRA instead of as a beneficiary. Whether that fits depends on the spouse's own situation. Publication 590-B explains the choice.

The 10-year rule. For an owner who died after 2019, Publication 590-B says the 10-year rule requires the entire balance to be withdrawn by December 31 of the year that contains the 10th anniversary of the owner's death. For example, if the owner died in 2025, the deadline is December 31, 2035. The publication says it applies in two cases:

• You are an eligible designated beneficiary who elects the 10-year rule, and the owner died before their required beginning date.
• You are a designated beneficiary who is not an eligible designated beneficiary, whether or not the owner had reached the required beginning date.

Publication 590-B also says that if the owner died before their required beginning date and the 10-year rule applies, no distribution is required for any year before the 10th year. It does not make that statement for an owner who had already reached the required beginning date. If the owner had, yearly withdrawals can also apply. Check the publication and your IRA custodian for your case before assuming either way.

If the owner had already reached the required beginning date. The IRS says you, as beneficiary, are responsible for taking the owner's required withdrawal for the year of death. For later years the schedule depends on your category and on life-expectancy tables in the publication.

If the beneficiary is an estate. Publication 590-B says a different rule applies when the owner died before the required beginning date and the beneficiary is not an individual: the five-year rule. When the owner died on or after that date, the owner's life expectancy is used.

Missing a deadline has a cost. The IRS says an amount still in the IRA after the 10-year deadline is subject to an excise tax. The publication also says to review the IRA's plan documents or ask the custodian about the 5-year or 10-year provisions of your particular IRA.

Taxable distributions from an inherited traditional IRA are generally income to you, which is why Publication 525 points you to Publication 590-B.

Bottom line

Name each asset first, then ask the party that holds it what applies. Inherited property is not income to you in most cases, but income it produces and retirement-account withdrawals can be. For an inherited IRA, your relationship to the owner and the owner's date of death decide the deadline, so read Publication 590-B and ask the custodian before you move anything.

If the payment was a life insurance policy

The IRS says life insurance proceeds you receive as a beneficiary because the insured person died are generally not includable in gross income, and you do not have to report them. Any interest you receive is taxable. The IRS also lists an exception for a policy that was transferred to you for cash or other valuable consideration.

Documents to collect and who to ask

• The executor's contact details and any statement of what has been distributed.
• Date-of-death values for investments and property, and any Schedule A to Form 8971.
• Account statements for any inherited IRA, with the owner's date of birth and date of death, and the beneficiary form on file.
• For a workplace plan, a letter from the plan administrator about your options.
• For a life insurance payment, the claim paperwork and any interest statement.
• Any trust statements showing income paid to you.

Ask the executor about estate matters, the plan administrator or custodian about the account, and a tax professional about your return. An attorney in your state can answer questions about property and title.

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Common questions

Do I pay income tax on money I inherit?

In most cases, IRS Publication 525 says property you receive as an inheritance isn't included in your income. Income the property produces later is taxable to you, and parts of an inherited pension or IRA can be.

Does the person who inherits pay estate tax?

The IRS says estate tax is levied on the entire taxable estate and not just on the share received by a particular beneficiary. The executor files the return.

What is basis, and why does it matter?

Basis is the starting number used to work out gain or loss if you sell. The IRS says the basis of inherited property is generally the fair market value on the date of death, or on the alternate valuation date if the executor files an estate tax return and elects it.

How long do I have to empty an inherited IRA?

It depends on your category and on the owner's date of death. For an owner who died after 2019 and many beneficiaries, the IRS describes a deadline of December 31 of the year containing the 10th anniversary of the owner's death. Eligible designated beneficiaries and spouses can have other options. Yearly withdrawals can also be required. Read Publication 590-B and ask the custodian.

Is life insurance I received taxable?

The IRS says the proceeds are generally not includable in gross income, and any interest is taxable.

What should I send through the inquiry form?

Describe the question you want to ask. Do not submit tax returns, account statements, account numbers or other confidential financial documents.

Sources

Internal Revenue Service: Publication 525, Taxable and Nontaxable Income, Publication 590-B, Distributions from Individual Retirement Arrangements, Gifts and inheritances, Life insurance and disability insurance proceeds, Instructions for Form 706 and the Is the inheritance I received taxable? interactive tool.