What can I do with a small inheritance?
Christopher Harper
Updated on April 01, 2026
How to Invest an Inheritance
- Good Growth Stock Mutual Funds. Invest in good growth stock mutual funds through an individual or joint taxable brokerage account.
- Real Estate Bought With Cash. Depending on the size of your inheritance, you may be able to purchase a rental property outright.
Do I need to report inheritance money?
Inheritances are not considered income for federal tax purposes, whether you inherit cash, investments or property. However, any subsequent earnings on the inherited assets are taxable, unless it comes from a tax-free source.
Do you have to pay inheritance tax if a relative leaves?
More distant relatives and nonrelatives may pay from 10 to 16 percent tax. If you inherit property, there is a potential that you will have to sell the property in order to pay the tax. If you know ahead of time that you will be a beneficiary in a will, discuss your situation with a tax professional to plan for the potential tax hit.
How much can you gift to a relative to avoid inheritance tax?
Gifts to relatives that are $14,000 or less annually as of 2017 have no tax consequences to either the giver or the recipient. That amount will rise to $15,000 in 2018. Gifting prior to death is often an effective way to avoid inheritance tax issues. For example, gifts to grandchildren prior to death can help remove the threat of inheritance tax.
How long does it take for an inheritance to be spent?
Research shows the average inheritance is spent within five years. Here are six steps to invest smartly and avoid the most typical inheritance pitfalls. On average, an inheritance is gone in about five years because of careless debts and bad investment behaviors.
How much tax do siblings have to pay on inherited property?
Siblings of the deceased may pay from 5 to 10 percent tax on the inherited amount. More distant relatives and nonrelatives may pay from 10 to 16 percent tax. If you inherit property, there is a potential that you will have to sell the property in order to pay the tax.
