What Every Woman Should Know About Inheriting Money

Hey everyone, today we're talking about what to do when you inherit money. Whether you're expecting an inheritance or think you might receive one someday, there are real opportunities here—but also risks that most people don't see coming.

My name is Vincent Grosso, and I help women achieve financial independence—the freedom to retire or work by choice. So, let's dive in.

The Problem

What we’re going to do first is look at some problems that come with inheriting money.

For a lot of people, inheriting money is lifechanging, but it also comes with risks, so I want us to look at some of those:

First up is, depending on the amount, it may seem like the amount of money received can never run out, but in reality, it’s really easy to overspend. I’ve seen it before when someone inherits money, spends without any budget or plan in place, and before they know it, the money’s gone. From past experiences, this typically happens to people who are already large spenders and don’t have a plan and budget in place. If you’re someone who is already conservative with your spending, this is probably gonna be less of a risk for you.

Second, there are tax implications and investment choices that can shrink the inheritance amount. Depending on how the money is received—cash, real estate, retirement accounts—the tax treatment can be very different. Some assets may be taxable right away, others may be taxable in the future, some don’t have any tax liabilities at all. So, it varies widely depending on how the money is being inherited. What you need to be careful with here is an account that is $500k, may end up being $300k after taxes. So be careful not to assume every penny of the inheritance will be yours to keep.

And once the money is in your hands, you face another decision: how to invest it. If you leave too much in cash, inflation can chip away at the value of your inheritance. Take on too much risk, that could cause painful losses. You really want to be in touch with your goals to know what your objectives for investing are and go from there. So, taxes and investment choices need to be planned for.

Third, is what’s called lifestyle creep. If you’ve never heard of this before, it happens when you raise your spending little by little—maybe it’s a bigger home, a nicer car, more frequent trips—because you feel wealthier with this inheritance. Sometimes people when they make more money at work get this, but it also happens with receiving an inheritance. At first it seems harmless, but over time, these higher expenses become your new normal. And a lot of times, once someone’s lifestyle gets a bit more expensive, it’s really hard to scale it back if circumstances change. And lifestyle creep can be sneaky because it can quietly erode wealth over time. You have a bigger purchase here and there, but adding everything together, it becomes more than you may realize over time. So definitely be careful.

And finally, without clear goals, money gets scattered, misused, and that’s when people spend reactively instead of intentionally. They might write checks to family and friends, I’ve seen people jump into a friend’s business idea without knowing anything about it or buy things they never really wanted—simply because the money is there. In many cases, I’ve seen the individual have great intensions giving money to people, but it doesn’t mean it’s something they can afford to do. They may technically have the money for it, but that money, in some cases, could have been used elsewhere to help themselves out like paying down debt or something like that.

The Solution

What we’re going to look at now is turning these challenges into opportunities.

The first risk we talked about was overspending. To avoid overspending, you need to set some limits for yourself. That means deciding up front how much is available for short-term use, how much should be invested, what is set aside for long-term priorities. Having those limits or structure in place is going to help guide how the inheritance will be allocated in an organized way, so you’re not spending in ways that negatively impacts your plan.

Second is getting clarity on taxes and creating an investment plan. So first, taxes, as we talked about before, various assets can be taxed differently. An inherited IRA, a brokerage account, an inherited Roth IRA, a house, can all have different tax liabilities but also even rules on how to draw the accounts down, or if they need to be drawn down at all. So, understanding what’s owed now versus later, or if there is anything taxed at all, is so important know. And not only important just for planning but also because there can be steep consequences if the rules aren’t followed. But once you know your tax liabilities, from there, you can build an investment plan that balances how much risk you’re able to take, how your investments should be allocated, where specific investments should be located as in should a specific investment be placed in a brokerage account, or IRA, things like that. For my clients, I provide an investment policy statement that outlines what accounts the person has, how the assets are split, what kind of tax category the account is, like tax-free, tax-deferred, or taxable, along with other details. What this does is lay out clearly for the client what their investments are doing, why, and so on. It just makes it extremely clear why they’re invested the way they are.

Third, is keeping that lifestyle in check. It’s perfectly fine to enjoy some of the money, but the key is spending with purpose. If you choose to upgrade parts of your life, that’s fine if you can afford it, but it shouldn’t be impulsive. Just before we talked about planning each dollar of the inheritance out, and this is part of where that comes into place. If you would like certain parts of your life to be improved, maybe you have an old car and would like to upgrade, or you’ve always wanted an updated kitchen, or a purse you dreamed about, a vacation, a monthly massage, whatever it is, just put in the plan first. What this is going to do is make sure, first, you can afford it, but also give you a perspective of where it may pull money from other parts of your plan, you may see this and think, “you know, now that I look at it this way, I don’t think it’s what I want to do, anymore” or “great, I’m fine with this and am going to go ahead with it.” Whatever way it is, it can allow you to be confident and in turn enjoy whatever it is you choose to purchase or do even more.

And finally, a very important step—define your goals. What matters most to you? Security? Travel? Helping family? Giving back? Once your goals are clear, the inheritance becomes a tool to support them, not something that controls you. I find when clients have clarity they avoid scattered decisions and feel confident because they know what matters most and what they should be planning for.

Takeaway

So here are the big lessons from what we just talked about.

First, don’t let sudden wealth trick you into overspending. It’s easy to treat a big inheritance like free money, but that’s how it disappears faster than you expect.

Second, make sure you understand the tax side and have an intentional investment plan. If you don’t, it could surprise you when it’s tax time and your investments could hurt, instead of helping you.

Third, if you want to upgrade parts of your life, that’s great, just do it with a plan. It’s okay to enjoy the inheritance but make those choices carefully so they actually benefit you instead of hurting.

And finally, let your goals lead the way. When you know what matters most to you, every dollar has a purpose, you have confidence, not confusion.

I’m hoping this was helpful and gave you some insight on what to do when inheriting money and until next time, I’ll see you on the next episode.