I Just Inherited Money in California—What Should I Do First?
Most people assume the biggest risk after inheriting money is making a bad investment. In reality, it’s making decisions too quickly before you fully understand what you’ve inherited. If you’ve recently received an inheritance, there is often pressure to do something smart right away. But the most important early decisions are not about picking investments. They are about protecting flexibility while you get your bearings.
If you are looking for a comprehensive, step-by-step approach to long-term planning, I walk through that in more detail here:
Inheritance Planning 101: A 10-Step Guide to Secure Your Financial Future.
This article focuses on something different. What actually matters in the first 30 to 90 days after you inherit money.
1. The First Mistake Is Moving Too Fast
There is a natural instinct to act quickly. You may feel like you should invest the money, pay something off, or make a “smart” move so it is not sitting idle.
In most cases, none of that is urgent.
What matters early on is understanding which decisions are reversible and which are not. Once you sell an appreciated investment, you cannot undo the tax impact. Once you make a large purchase or gift, that decision is final.
A better approach is to slow the pace down intentionally. Give yourself a window to understand what you have, what it means for your broader financial picture, and what decisions actually need to be made now versus later.
2. Before You Touch Anything, Know What You Own
Not all inherited assets behave the same way, and this is where mistakes often happen.
You may have inherited a mix of:
Cash accounts
Brokerage accounts with stocks or mutual funds
Retirement accounts such as an inherited IRA
Real estate
Concentrated positions in a single stock
Each of these comes with different rules and different tax considerations.
For example:
Brokerage accounts often receive a step-up in cost basis, which can reduce the tax impact of selling
Inherited retirement accounts have specific distribution timelines that need to be followed
Highly appreciated positions may carry embedded gains going forward
Before making any changes, take the time to understand how each account works and what the implications are of selling, holding, or transferring assets.
3. The California Tax Reality Most People Miss
California does not have a state inheritance tax, which leads many people to assume there are no major tax concerns.
That is not the full picture.
If you sell inherited investments after the date of inheritance, any new gains are subject to both federal and California capital gains taxes. And California does not offer preferential treatment for long-term gains the way federal tax law does.
For families in high-cost areas like Los Angeles, where portfolios and real estate values tend to be more significant, the impact can be even more meaningful.
This becomes especially important if you inherited:
Mutual funds with ongoing capital gain distributions
Concentrated stock positions
Real estate that may be sold later
The key is not to overreact to taxes, but to understand where they apply so you can avoid unnecessary costs.
4. Where the Money Should Sit Right Now
One of the most overlooked decisions is where the money lives in the short term.
What often happens is that assets remain scattered across accounts or get moved into a checking account without much thought. Neither is ideal.
Instead, think of this as a temporary holding period.
The goal is to:
Keep the funds safe
Earn a reasonable return on cash
Maintain flexibility while you make decisions
This may mean consolidating accounts or moving excess cash into a high-yield or short-term solution. The specifics matter less than the intention. This is not your long-term investment strategy. It is your decision buffer.
5. The Hidden Risk of “Leaving Everything As-Is”
Many people take the opposite approach and decide to do nothing at all.
That can feel safe, but it comes with its own risks.
When you inherit an account, you are also inheriting:
The existing asset allocation
The level of risk
The tax exposure
The investment strategy, whether it was intentional or not
What made sense for the person who left you the money may not make sense for you.
This is especially true with:
Legacy mutual funds
Concentrated stock positions
Portfolios that have not been reviewed in years
Doing nothing is still a decision. It just may not be a well-aligned one.
6. Big Decisions to Delay
There are a few common moves that are worth putting on pause, even if they feel productive in the moment.
These include:
Investing the entire amount immediately
Buying a home or making a major real estate decision, especially in markets like Los Angeles, where prices are high and timing matters
Making large gifts to family or friends
Paying off low-interest debt without evaluating the full picture
These decisions may ultimately make sense. The key is to make them from a place of clarity rather than urgency.
7. What Comes Next
Once you have taken the time to understand what you inherited and avoided early missteps, the next phase is building a thoughtful plan around it.
This typically includes:
Aligning the inheritance with your goals and priorities
Creating a tax-aware investment strategy
Integrating the assets into your broader financial plan
When you’re ready to build a more complete plan around your inheritance, I walk through that process step-by-step here:
Inheritance Planning 101: A 10-Step Guide to Secure Your Financial Future.
The Takeaway
You do not need to have everything figured out right away.
Handled well, an inheritance is not just about growing wealth. It is about creating flexibility in how you live your life and make decisions going forward.
The goal in the early stages is simple. Protect that flexibility while you get clear on what comes next.
Disclaimer: The blog post is for general informational purposes only. This article is not intended to be a substitute for specific financial, tax, or legal advice. Reproduction of this material is not permitted without written permission.