Financial Word of the Day: Inheritance

Larry Jones
Jun 23
2 min read

Updated: Sep 26

“What you leave behind matters—but what you understand about it matters even more.”

Definition of Inheritance

Let’s talk about inheritance—a word that often stirs up both gratitude and confusion. Simply put, inheritance refers to the money, property, or assets that a person leaves to their heirs when they pass away. It’s often distributed according to the instructions in a will or through state laws if no will exists.

In other words, inheritance is what someone gives you from their financial life when they’re gone—whether it’s a house, a stack of cash, or even Aunt Edna’s vintage coin collection.

Real-World Example:

Let’s say your grandfather passes away and leaves you $50,000 and his fully paid-off lake house. That’s your inheritance. It may come with emotional ties—but also with legal and tax implications (more on that in a second).

Why It Matters (A Lot More Than You Think)

Inheritance might sound like something only wealthy families deal with, but the reality is millions of everyday Americans will inherit something at some point in their life. It could be small, it could be sizable—but if you’re not ready for it, you can make poor decisions fast.

Here’s why you should care:

It can be life-changing — but only if handled wisely.
It may come with taxes, especially if it includes retirement accounts, investments, or property.
It can create family conflict — especially if expectations or wills aren’t clear.

Savvy Moves When You Receive an Inheritance:

Hit pause before you spend. Take a breath. Don’t rush to buy a Tesla or upgrade your kitchen the next day.
Meet with a financial advisor. There may be smarter ways to use the money—like paying off debt, investing, or funding your own retirement.
Understand the tax rules. For example, inherited IRAs have special withdrawal rules. Inherited property may get a “step-up” in basis, which affects capital gains taxes when you sell.
Watch out for scammers. Unfortunately, people who receive inheritances can become targets. Keep your plans (and your passwords) close.

In Conversation:

“After her mom passed, she received an inheritance—half in cash, half in rental property. She used part to pay off her student loans and invested the rest.”

Final Thought:

Whether you’re expecting to receive an inheritance someday or you plan to leave one, the key is preparation. Don’t let it catch you off guard. Talk with your family. Create (or review) your will. And make sure your legacy—financial or otherwise—lands in the right hands with clarity and care.