Before You Do Anything Else, Pause
An inheritance often arrives at the worst possible time — you’re grieving, you’re dealing with family dynamics, maybe you’re helping settle an estate that’s messier than anyone expected. And suddenly there’s money in your account or a deed with your name on it, and everyone around you seems to have an opinion about what you should do with it.
The most important thing you can do right now is slow down. Not forever — but long enough to make intentional decisions rather than reactive ones. Financial advisors often call this the “inheritance pause,” and it’s not just good money advice. It’s good estate planning advice too. Because what you do with an inheritance — how you title it, where you put it, whether you update your own documents — has real legal and tax consequences that are much easier to handle before you’ve already acted than after.
This checklist is designed to help you think through the estate planning side of inheriting, not just the financial side. Because they’re not the same thing, and most people only focus on one.
Step 1: Understand Exactly What You Inherited
This sounds obvious, but a lot of people skip straight to “what should I do with it” without fully understanding what “it” actually is. The type of asset you inherited determines almost everything — your tax obligations, your options, your timeline, and how it fits into your own estate plan.
If you inherited cash or a bank account, that’s relatively straightforward. But if you inherited a retirement account — a traditional IRA, 401(k), or similar — you’re working under specific IRS rules that require most non-spouse beneficiaries to withdraw the entire account within 10 years. Miss a required distribution and you’re looking at a significant tax penalty. The way you handle those withdrawals over the decade can make a real difference in how much of that inheritance you actually keep.
If you inherited real estate, you need to understand the stepped-up basis rule. When someone dies, the cost basis of their property “steps up” to the fair market value at the date of death. That means if your parent bought a house for $80,000 in 1985 and it was worth $350,000 when they passed, your basis is $350,000 — not $80,000. If you sell it shortly after for $355,000, you’re only taxed on that $5,000 gain, not the full $270,000 appreciation. That’s a significant tax benefit, but it requires getting a proper valuation done at the time of death, not months later. Or, your loved one may have left your the real estate in a Trust or Lady Bird deed, which helps you avoid certain stepped-up basis rules!
Inherited investment accounts (non-retirement brokerage accounts) also benefit from the stepped-up basis, which is another reason to move carefully before selling anything. Stocks, mutual funds, even a small business interest — all of these carry different rules, different holding periods, and different implications for your own estate.
Step 2: Don’t Commingle Inherited Assets If You’re Married
This is one of the most common and costly mistakes people make. In Michigan, an inheritance is generally considered separate property — meaning it belongs to you, not your marital estate. But that protection evaporates the moment you mix it with joint marital funds.
If you deposit an inherited $50,000 into a joint checking account you share with your spouse, that money can become marital property. If you use inherited cash to make improvements to a jointly-owned home, the contribution often gets absorbed into the marital asset. This matters enormously if you ever face a divorce — but it also matters for your own estate planning, because separate property and marital property are treated differently when it comes to what you can and can’t do with your assets in a plan.
This doesn’t mean you can’t use inherited money to benefit your family. It means you should be intentional and informed about how you do it, and ideally talk to an estate planning attorney before making those moves.
Step 3: Update Your Own Estate Planning Documents
Inheriting money or property almost always changes your estate. And if your estate has changed, your plan needs to catch up. A lot of people have old wills or no plan at all — and an inheritance landing in their lap without updated documents creates real problems for the people they love.
Your Will or Trust
If you have a Will, does it still reflect what you want given what you now own? If you’ve inherited a lake house that’s been in the family for generations, you may have strong feelings about who gets it next — and a generic will that just says “divide everything equally” may not accomplish that. A Revocable Living Trust can be especially useful for inherited real estate because it allows you to pass property to specific people without going through probate, and you can include conditions or instructions that a will can’t easily accommodate.
If you don’t have a Will at all, this is the moment to get one. An inheritance without a plan means Michigan’s intestate succession laws decide who gets your assets — and those laws don’t know or care about your actual wishes, your family dynamics, or the sentimental value of what you’re passing on.
Beneficiary Designations
Wills don’t control everything. Retirement accounts, life insurance policies, and certain bank and investment accounts pass directly to whoever is named as beneficiary — completely outside of your Will. If you’ve inherited a retirement account and you’re now rolling it over or managing it, make sure your own beneficiary designations on that account and on all your other accounts are current. A beneficiary designation that names an ex-spouse or a parent who has since passed can create a legal mess that costs your family time and money to sort out.
Powers of Attorney and Healthcare Documents
These aren’t directly tied to the inheritance itself, but if you’re sitting down to update your Estate Plan anyway — and you should be — make sure your Financial (Durable) Power of Attorney and Medical Power of Attorney (Patient Advocate Designation) are in place and name people you actually trust. An inheritance that goes unmanaged because you’re incapacitated and have no Financial Power of Attorney is a scenario that’s entirely preventable.
Step 4: Think About How This Inheritance Changes Your Exposure
More assets mean more at stake. If you’ve just inherited significant money or property, you may now have an estate that warrants protection strategies you didn’t need before.
For Michigan residents, the estate tax concern is largely federal — Michigan doesn’t have a state estate tax. But if your estate is now approaching or exceeding the federal exemption (currently over $13 million per person, though this is scheduled to drop significantly after 2025), estate tax planning becomes relevant in a way it may not have been before. Even if you’re nowhere near that threshold, an inheritance might push you into territory where a trust — rather than a simple will — makes more sense.
Asset protection is another layer worth thinking about. If you own a business, work in a profession with liability exposure, or are going through a divorce, how you hold inherited assets matters. Certain trust structures can provide a meaningful level of protection that simply owning assets outright can’t.
Step 5: If You Inherited Real Estate, Decide Deliberately
Inherited real estate deserves its own moment of careful thought because the options — keep it, sell it, rent it, co-own it with siblings — each carry completely different legal and tax consequences.
Selling quickly after inheriting usually makes the most sense from a tax perspective because of the stepped-up basis, but that’s not always the right call for everyone. If you’ve inherited a family home and you want to keep it in the family, a trust — either one you create or one that was already established — can be a powerful tool for preserving the property across generations without triggering costly transfers or probate every time ownership changes hands.
Co-owning property with siblings is one of the most common scenarios, and it’s also one of the most friction-prone. Without a clear agreement about expenses, maintenance, use, and what happens if one sibling wants to sell, these arrangements can unravel fast and sometimes end up in court. If you’re going to co-own inherited real estate, put an agreement in writing — and ideally structure the ownership through an LLC or a trust to give everyone clarity and protection.
Step 6: Work With the Right Professionals — In the Right Order
You’ll likely need to talk to a few different people: a CPA or tax advisor, a financial planner, and an Estate Planning attorney. The order matters more than most people realize.
Start with the estate planning attorney before you make major financial moves. The legal structure of how you hold, title, or transfer assets affects tax treatment, creditor protection, and your own planning options. Moving money into the wrong account or retitling property without thinking through the consequences is much easier to undo on paper than after the fact.
Your CPA should be involved early too, especially if you inherited a retirement account, a business interest, or appreciated real estate. Understanding the tax implications before you act — not after — is the difference between a strategic decision and an expensive mistake.
A financial planner can help you figure out how the inheritance fits into your overall financial picture, but again — know what you have and what your legal options are before you start making investment decisions.
This Is a Turning Point — Treat It Like One
An inheritance is often someone’s first real exposure to significant wealth, and for many people it’s the first time estate planning feels genuinely relevant to their own life. That’s actually an opportunity. The same issues that complicated the estate you just inherited — unclear beneficiary designations, no trust, jointly held property that caused drama — don’t have to be the issues your own family faces someday.
Use this moment to get your own house in order. Not just for the assets you inherited, but for everything you own and everyone who depends on you. At LADIES IN LAW®, we work with people across Michigan and California who are navigating exactly this kind of transition — and we make the process clear, personal, and actually manageable. If you’ve recently inherited and you’re not sure where to start, reach out. That’s exactly what we’re here for.
