What Happens to Your Advisor's Fee When You Inherit Money

A guide to understanding inheritance, evaluating your advisor, and keeping more of what you inherit.

By Scott Blandford, Founder & CEO, Truthifi · Reviewed by the Truthifi Team · Last updated July 31, 2026

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Start Here: Slow Down, Then Check the Fee

You've just learned that you've inherited money, maybe a lot. Your mind may be spinning. If you've lost someone close, you may be grieving. You may be unsure what to do. And you're probably wondering whether you can trust the financial advice you're getting.

Here's the step that often gets skipped: before you evaluate anything, slow down. Grief can blunt the part of your thinking that handles complex financial choices, the planning-and-comparing work your prefrontal cortex usually does. Waiting is a common rule of thumb in financial planning, since decisions rushed in early grief are widely seen as a frequent source of later regret. So the first thing to know is this: for most decisions, you have time.

That said, there's one financial fact worth understanding right away. When you inherit money, your financial advisor's fee probably goes up automatically, whether or not their workload changes. If your advisor charges 1% of your assets and you inherit $500,000, your annual fee just rose by $5,000. In an illustrative example that assumes 7% annual growth, that fee drag compounds into roughly $207,000 over 20 years. Two worked examples below put a number on it: the table models $500,000 that stays invested and grows, while the calculator models an inherited IRA drawn down under the 10-year rule, so their 20-year totals differ.

Is that fee justified? Sometimes yes. Sometimes no. Here's the honest framework: the question isn't just "how much?" but "how much for what?" and "is the value worth the cost?" A fee that looks high in isolation might be reasonable once you factor in the services delivered. A fee that looks affordable might not be, if services are limited. Plenty of advisors add real work or adjust pricing when a client inherits; the point is to make that conversation deliberate.

If you're reading as an executor, a trustee, or an experienced investor checking the math, you can skip ahead. The inherited IRA rules, the fee table, the calculator, and the red flags each stand on their own.

Whether you're choosing a financial advisor for inheritance planning or deciding about your parent's, the sections below build in order. First come the inherited IRA rules as they stand in 2026, then what an advisor should deliver, then the fee math and the calculator. Warning signs, a framework for deciding whether to keep your inherited advisor, switch, or supplement with a flat-fee specialist, and a timeline follow.

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You're Grieving — Here's What Many Financial Sites Don't Tell You First

Before the fee math, and before any decisions: understand what your advisor actually delivers when you inherit money. The value is real, but only if you know what to look for. (If the loss isn't recent, or you're settling an estate on someone else's behalf, the "Real Value" list below is the part to skim.)

Why Grief Affects Financial Decisions

Grief is not a character flaw. It changes how the brain handles stress. When we lose someone, our brain's executive function (the part responsible for planning, comparing options, and resisting pressure) can temporarily weaken. Bereaved people may take longer to work through complex decisions, and they can be more open to whatever advice is in front of them, good or bad.

This is why "wait six months" is such common guidance for inheritors. It's not an empty platitude; it reflects how stress can affect judgment.

A practical note: Slowing down is a reasonable choice. Most inheritance decisions have no hard deadline (inherited IRA distributions are the main exception, covered below). Your accounts won't evaporate if you don't restructure them immediately. Financial decisions made with a clear head usually hold up better than ones made in the fog of grief.

The Real Value of Inheritance Guidance

When your advisor earns a fee on inherited money, here's what you're potentially getting (if they're doing their job):

Tax Coordination. Inherited accounts trigger some of the most complex tax rules in the Internal Revenue Code. Stepped-up basis on taxable brokerage accounts can wipe out capital gains tax on appreciation that built up during your parent's lifetime, if it's handled right. Inherited IRAs have different distribution rules depending on whether you inherited from a spouse or a non-spouse, and the post-2019 rules, as refined by later IRS regulations, set your timeline. Your advisor's role: understand these rules, prioritize which accounts to liquidate first (minimizing tax), and decide which to keep growing tax-free.

Behavioral Stability During Vulnerability. Behavioral-finance studies have found that DIY investors give up return to mistakes: buying high during euphoria, selling low during panic, overtrading, chasing performance. Estimates of that gap vary widely by study and period, and this article doesn't rely on any single one; it uses an illustrative drag of 1.2 percentage points a year. Treat it as a rough placeholder, so any dollar figure built on it below is an order-of-magnitude guide, not a forecast. When you're grieving, you're especially vulnerable to these mistakes. A good advisor's primary value during inheritance isn't stock picking. It's behavioral coaching. "Let's not rush this. Let's sit with the numbers for a few weeks." That kind of advice can keep you from emotional decisions you might later regret.

Distribution Strategy. You now have to choose: Do I take required minimum distributions from the inherited traditional IRA annually? Do I consolidate inherited accounts or keep them separate? Do I liquidate the inherited brokerage account all at once or phase it in? These aren't simple yes/no questions. They depend on your age, your timeline, your other income sources, and your heirs. An advisor helps you think through trade-offs.

Family Coordination. If multiple siblings inherited, your advisor can help facilitate conversation rather than resentment. "Here's what Mom had. Here's how it's distributed. Here's what each of you can access, and here's the tax consequence of different approaches." That clarity has value.

Whether your advisor is actually delivering this value is the question you'll evaluate later. But this is what you're potentially paying for.

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Inherited IRA Rules: 10-Year Rule, RMDs, and Stepped-Up Basis

The rules in force in 2026 look very different from the pre-2020 rules. If you haven't updated your understanding since 2020, you're working with outdated information. Here are the inherited IRA RMD rules that matter for your fee evaluation; the IRS covers the details in Publication 590-B.

The 10-Year Rule and Required Minimum Distributions (RMDs)

The change: Before 2020, you could "stretch" an inherited IRA across your entire lifetime. If you inherited an IRA at age 40, you could take tiny distributions and let the rest grow tax-deferred until age 85+. This was a major tax advantage.

That's gone (for most people). Under the SECURE Act, when the owner died after 2019, most non-spouse beneficiaries must fully empty an inherited traditional IRA by December 31 of the 10th year after the year of death. If the original owner had already started taking RMDs, IRS final regulations generally require annual withdrawals in years 1 through 9 as well. Count your 10 years from the year of death, not from when the account reached you.

What this means for your fee evaluation: If you inherit a $500,000 traditional IRA and your advisor charges 1% AUM, that $500,000 has to be drawn down over 10 years (roughly $50,000/year). Inside the IRA, your advisor is charging 1% of a shrinking balance, so the fee goes down year by year. This is different from inherited brokerage (where the balance may grow), and it affects whether the AUM fee is a good deal or not.

RMDs for certain beneficiaries. There are exceptions. If you inherited before 2020, you might be "grandfathered" in and not subject to the 10-year rule. "Eligible designated beneficiaries" also get different treatment: a surviving spouse, the owner's minor child, a disabled or chronically ill beneficiary, or someone not more than 10 years younger than the owner. The IRS rules are complex here. Check with an accountant or your custodian to confirm which rules apply to you.

Inherited Roth IRA vs. Traditional IRA Rules

Inherited Traditional IRA: You pay income tax on distributions. You can't convert it to your own IRA (though you can transfer it between custodians). RMD rules apply.

Inherited Roth IRA: You don't pay income tax on distributions. You must still empty it within 10 years. This is huge. Growth that happened inside the Roth generally comes out tax-free. An advisor who understands this might recommend keeping the Roth last (drawing down the traditional first) to maximize years of tax-free growth on the Roth.

Inherited from spouse (special rule). If you inherited from your spouse, you can treat the IRA as your own. You can convert it, roll it over, or take distributions on your own timeline (instead of the 10-year rule). This is a major advantage. Some advisors overlook this, or they don't explain that your options are different from other inheritors.

Stepped-Up Basis and Tax Savings Opportunity

Here's the short version; the service section below shows how an advisor puts it to work. Stepped-up basis applies only to taxable brokerage accounts and other taxable property. It does NOT apply to IRAs. But for inherited brokerage, it can change the math entirely.

Your inherited brokerage account's cost basis resets to fair market value (FMV) on the date of death. You can typically liquidate soon after with little or no capital gains tax. You can hold and rebalance with far less tax friction. You can do a lot of things that would trigger taxes if you had owned the assets yourself from the start.

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What Your Advisor Delivers When You Inherit Money: The Service Layer

Your advisor may be the most important investment you make during inheritance, if they're the right one.

Tax Planning and Stepped-Up Basis Coordination

You met stepped-up basis in the rules section above. Here's how it plays out in practice, and why it may be worth tens of thousands of dollars to you.

When someone dies, the cost basis of their taxable investment accounts resets to FMV on the date of death. In plain English: say your parent bought Apple stock at $50/share in 1995, and it's worth $240/share when they die. If you inherited it, your new cost basis is $240, not $50. If you sell soon after, you'd typically owe little or no capital gains tax. That $190/share gain? For capital gains purposes, it's generally erased.

This is a major tax advantage, and capturing its full value depends on knowing which assets received it and selling or holding them in the right order.

Your advisor's role: identify which assets in your parent's estate should be inherited (to capture stepped-up basis on the most-appreciated items) versus which should be sold during the estate settlement (to clear the inheritance and clean it up). Get the order wrong, and the lost tax value can run to tens of thousands of dollars on a large, appreciated estate.

This is value you can put a number on.

Inherited IRA vs. Inherited Brokerage. Stepped-up basis doesn't apply to IRAs, so for those accounts the advisor's work shifts to the distribution rules covered above: whether the IRA is traditional or Roth, whether you inherited from a spouse, and how the 10-year timeline applies. For a taxable brokerage account, the work is the asset-ordering decision just described: which accounts to draw from first, and which to hold for long-term growth.

Distribution Strategy and Behavioral Support

You may have heard a widely repeated claim that about 70% of family wealth is gone by the second generation. Treat it with caution. That number is usually attributed to the Williams Group's research on family wealth transfer, and financial journalists have questioned how it was measured, so it works as a directional warning rather than a precise rate.

Why might wealth slip away? Sometimes bad advice. Sometimes bad luck (market downturns). A common explanation, though, is behavioral error: the inheritor panics, makes a big decision during grief, doesn't diversify, or chases performance at exactly the wrong time.

This is where a good advisor's primary value isn't in stock-picking skill (which they may or may not have). It's in behavioral coaching. Vanguard's Advisor's Alpha research has estimated in past reports that advisors can add roughly 3% a year in net returns across several practices, with behavioral coaching among the largest. Vanguard describes that value as uneven: it shows up in bursts during market stress rather than every year. It's a separate estimate from the illustrative 1.2-point DIY drag above and measures something different, so the two shouldn't be added together or compared directly.

During inheritance, this value can be higher. You're grieving. You're uncertain. You're vulnerable to analysis paralysis or rash decisions. An advisor who can say "Here's what we're not going to do immediately: we're not going to liquidate everything, we're not going to chase performance, and we're going to give this 6–12 weeks to settle in" is providing value that's hard to quantify but easy to feel.

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What Happens to Your Advisor Fee When You Inherit Money

With the rules and the service layer in place, we get to the core question. Most financial advisor inheritance questions come down to this one: Does your advisor charge more when you inherit? And if so, how much?

How AUM Fees Work — and Why They Increase on Inherited Money

Many financial advisors charge AUM: a percentage of assets under management. It's often between 0.5% and 2%, depending on the firm, your account size, and the complexity of your situation.

Here's how it works: if you have a $500,000 portfolio and your advisor charges 1% AUM, you pay $5,000/year. If you inherit $250,000, your portfolio is now $750,000, and your fee is now $7,500/year. Your fee just went up by $2,500, whether or not your advisor's workload changed.

Why is this fee structure common? Advisors argue that larger portfolios require roughly proportional time: more positions to monitor, more tax optimization, more family coordination, more reporting. That's partly true. But it's also partly convenient, because percentage fees rise with client wealth whether or not the workload does.

Comparison to other fee models. Not all advisors charge AUM. Some charge (illustrative ranges; pricing varies by firm and region):

• Flat fees ($2,000–$5,000/year, regardless of portfolio size)

• Hourly rates ($200–$400/hour, usually 5–20 hours/year = $1,000–$8,000/year)

• Fee-only (hourly or project-based, with zero commission from product sales)

• Hybrid (small AUM + flat fee, or AUM with a maximum cap)

If your advisor charges AUM, inheritance usually means a sudden fee increase. If they charge flat-fee or hourly, inheritance changes little or nothing about your annual cost.

The Cost of AUM on Inherited Assets Over Time

Let's do the math for inherited money that stays invested, such as a taxable brokerage account with no required drawdown. You inherit $500,000. Your advisor charges 1% AUM. Here's what you pay:

After 20 years, you've paid roughly $207,000 in advisory fees on an inherited $500,000. As a percentage of the original inheritance: 41%. That's significant. (The calculator below models an inherited IRA instead, where the 10-year rule forces withdrawals and taxes shrink the balance, so its totals come in lower.)

But here's the balancing question: What would you have paid doing it yourself?

Using the illustrative 1.2-percentage-point behavioral drag from above, a $500,000 portfolio would lose roughly $6,000/year to behavioral error. Over 20 years, that's about $120,000 as a simple, non-compounded estimate. The fee totals in this table and in the calculator below both compound, so the comparison is directional only: the trade-off depends on how much coaching you'd actually use.

The comparison isn't "advisor fee vs. zero." It's "advisor fee vs. behavioral cost of going solo."

When an Advisor's Fee Increase Is Justified (and When It's Not)

The answer turns on whether the work changed along with the balance.

When the fee increase makes sense:

• Your advisor is doing substantive tax planning (stepped-up basis optimization, distribution strategy, inherited IRA coordination).

• Your situation got more complex (you now have accounts at multiple custodians, or you inherited multiple types of accounts).

• Your family situation requires more oversight (you're coordinating with siblings, or you inherited a business interest that needs governance).

• The inherited advisor is providing behavioral coaching that prevents mistakes.

When the fee increase is hard to justify:

• Your inherited accounts are passive index funds in a brokerage (minimal work required).

• Your advisor is doing zero tax planning (just letting the account sit).

• You're inheriting in an account type where the advisor's work barely increases (e.g., they were already managing your parent's account, and now they're managing a slightly larger version).

• A flat-fee advisor could deliver a similar service for a fraction of the cost.

The test: Ask your advisor directly. "My portfolio just increased by $500,000 due to inheritance. How does this change the work you do for me, and how should my fee structure change?" Listen to the answer. If they can clearly articulate new services (tax planning, family coordination, complex distribution strategy), the fee increase might make sense. If they say "Well, it's just a larger portfolio," you might have a negotiation opportunity.

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Interactive Tool: Inheritance Fee Impact Calculator

Inheritance Fee Impact Calculator

Input your numbers:

• Inherited amount: $500,000

• Current advisory fee: 1.00%

• Current portfolio size: $500,000

• Account type: Inherited IRA (non-spouse)

• Distribution timeline: 10-year rule

• Distributions: taxed as income, then reinvested in a taxable account managed by the same advisor

• Comparison fee structures: All selected

Your Results:

Annual fee increase from inheritance: +$5,000/year (your advisory fee goes up $5,000 annually, with or without added services)

New total annual advisory fee: $10,000/year (was $5,000 before inheritance)

Cumulative AUM fees on inherited assets (10/20/30 years):

• 10 years: $61,000 (the inherited IRA itself is fully emptied by this point)

• 20 years: $138,000 (fees continue on the reinvested, after-tax distributions)

• 30 years: $235,000 (fees continue on the reinvested, after-tax distributions)

Fee as % of original inheritance: 27.6% over 20 years

How this squares with the table above: The table assumes the full $500,000 stays invested and grows untouched for 20 years, which is why its 20-year fee total reaches 41% of the inheritance. This calculator assumes an inherited IRA drawn down under the 10-year rule, with each distribution taxed before it's reinvested. A smaller balance carries forward, so the 20-year total lands lower at $138,000 (27.6%). Same fee rate, different account rules.

Side-by-side fee comparison:

• AUM (1%): $138,000 total over 20 years

• Flat-fee ($3,000/year): $60,000 total over 20 years

• Hourly ($300/hr, avg 5 hrs/year): $30,000 total over 20 years

• Robo-advisor (0.25%): $34,500 total over 20 years

• DIY ($0 fees, but 1.2pp illustrative behavioral drag): about $120,000 in behavioral costs over 20 years. This is a simple, non-compounded estimate, while the AUM and robo figures above compound, so treat the DIY line as directional only, not a like-for-like total.

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Signs Your Advisor Is Taking Advantage of Your Inheritance

Many financial advisors serve inheriting clients well. But here are the warning signs specific to inheritance that suggest yours might not be.

Red Flag #1: Pushing an Annuity Immediately After Inheritance

Annuities are insurance products that can make sense in specific situations. But if your advisor is aggressively recommending an annuity within weeks of your inheritance, it's worth asking questions.

Why this happens: Commissions on some annuity products can run several percent of the amount invested, paid up front, compared with a 1% annual advisory fee. The exact figure varies widely by product type. On a large inheritance, that's a meaningful incentive.

When annuities might make sense: Very High Net Worth situations where you're trying to protect a legacy from market volatility, or for specific legacy goals. But these are edge cases, not the default.

What to ask: "What other structures did you consider, and why is an annuity better than keeping the inherited funds in a diversified portfolio? How will you be compensated?" If the advisor gets defensive or can't clearly explain the choice, that's a flag.

What to do: Get a second opinion from a fee-only fiduciary advisor. Ask them to review the annuity recommendation.

Red Flag #2: Recommending Concentrated Bets in Company Stock

Another temptation: inherited accounts often contain concentrated company stock. When your parent worked at Microsoft for 30 years and the account is 60% MSFT, inertia is the path of least resistance. Leaving the position alone takes little work and avoids a hard conversation, while a diversification plan takes analysis and execution. The professional recommendation should usually be thoughtful diversification. Instead, your advisor might suggest staying concentrated "because Microsoft is a great company" or "because the dividends are strong."

When concentration might make sense: Rarely in inherited accounts. Stepped-up basis often removes the usual tax objection to selling, which makes inheritance one of the cheapest moments to diversify. Spreading the money across many holdings limits how much one company's bad stretch can dent your inheritance, while a 60% position ties your outcome to a single stock.

What to ask: "What's the downside risk if Microsoft faces a major headwind? What does your analysis show about the risk/return of staying 60% concentrated?" If the answer is vague, ask to see that analysis in writing. A good advisor should have a thoughtful answer or be willing to diversify.

Red Flag #3: Resisting Fee Negotiation After Inheritance

After inheritance, your assets increased, and your fee went up automatically. This is a natural time to renegotiate. Some advisors resist.

Why this happens: The AUM fee model creates incentives to view inherited assets as permanent and off-limits from negotiation.

What you should know: Many firms use tiered pricing. A typical tiered schedule might look like this (illustrative):

• 1.0% AUM on the first $1 million

• 0.75% AUM on $1–3 million

• 0.50% AUM above $3 million

If your total portfolio (yours + inherited) now crosses into a lower tier, you would typically expect to pay the lower rate. If your advisor resists negotiation, it may be worth exploring whether another firm's tiered pricing would better align with your portfolio size.

What to ask: "Do you have tiered pricing? Where does my total portfolio fall, and what rate applies?" If they say they don't have tiers, you can still ask for a fee reduction. Many advisors treat fee conversations as a routine part of the relationship.

What to do: Get a Fee X-Ray diagnostic from an unbiased tool. See what you're paying across your connected accounts. Then bring the number back to your advisor. "I just realized I'm paying $12,000/year in combined advisory and fund fees. Is that in line with market rates, or is there room to negotiate?"

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Should You Keep the Inherited Advisor? Evaluation Framework

Keeping your parent's advisor might be the right choice. But it should be an active decision, not a default.

Questions to Ask Your Inherited Advisor

"What services were you providing to my parent?" Get specifics. Tax planning? Quarterly reviews? Behavioral coaching? Business succession planning? Understanding what was actually delivered helps you decide what's relevant to you.

"Are you the right fit for my situation and goals?" Your parent's situation might be completely different from yours. They were maybe in distribution phase (spending down assets). You might be in accumulation phase (building wealth). They might have had a spouse and children to coordinate. You might be single. Ask whether the advisor's expertise matches your actual life stage and goals.

"What does my total all-in cost look like?" Ask for a Fee X-Ray. You want to know: advisory fees, fund expense ratios, trading costs, custodian fees, everything. If the advisor can't or won't give you this number, that's a red flag.

"Can we do a full evaluation using a structured framework?" The advisor-evaluation guides in Truthifi's education library cover investment philosophy alignment, fee fairness, communication style, performance benchmarking, and conflict-of-interest assessment. Use a framework like that as a systematic check, not a gut check. You can also look up the firm's disclosures and any disciplinary history on the SEC's Investment Adviser Public Disclosure site.

When to Keep Your Parent's Advisor

Keep them if:

• Strong relationship built on trust and transparency

• Demonstrated value in tax planning, behavioral coaching, or family coordination

• Transparent fees with room to negotiate

• Clear alignment on investment philosophy and goals

• They actively ask you about your situation (not just pushing their existing approach)

The continuity advantage: Depending on the firm and how long it served your parent, the advisor may hold records that can be hard to rebuild. These can include the date-of-death valuations behind your stepped-up basis, original cost-basis files for older holdings, and notes on why beneficiary designations were set up as they were. Ask for copies before you decide anything. They're useful whether you stay or leave, and an advisor who hands them over readily is showing you something about the relationship.

The monitoring angle: If you keep your inherited advisor, Truthifi can sit alongside them as an independent check. According to Truthifi's own platform data, current as of this article's July 31, 2026 review, Truthifi connects to 18,000+ financial institutions and runs 130+ diagnostic checks on your connected accounts. Those checks surface fee issues such as advisory charges and fund expense ratios in the newly inherited accounts. Your advisor handles strategy and behavioral coaching; you bring the findings to your annual fee review. That's oversight built on data, not distrust.

When to Switch or Supplement

Switch if:

• Fee is clearly misaligned with services (you're paying 1.5% AUM for a passive index strategy that should be 0.25%)

• Advisor resists transparency or negotiation

• Your life stage or goals are fundamentally different (you need different expertise)

• Family governance needs more sophistication (multiple heirs, complex estate, business interests)

The supplement option: You don't have to go all-in on a new advisor. Consider working with your inherited advisor for behavioral coaching and relationship continuity, while supplementing with a flat-fee tax specialist for tax planning. Some inheritors find this hybrid a good fit, since much of the tax work is front-loaded into the first year or two.

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What to Do With Your Inheritance: A Timeline (30 Days, 6 Months, 1 Year)

The short version: for most major decisions, you have up to a year, and it's worth using it. Inherited IRA distributions run on their own clock, so check those first.

First 30 Days: Resist Pressure, Gather Information

Don't:

• Liquidate everything immediately (you may trigger taxes unnecessarily, especially in inherited IRAs)

• Make major investment changes (markets were up/down, and you're reacting emotionally)

• Sign new advisory contracts (advisor pressure is often highest right now)

• Assume the inherited advisor is right just because they were managing your parent's account

Do:

• Give yourself room to grieve

• Inventory all inherited accounts (brokerage, IRA, property, business interests, insurance, everything)

• Request statements from all custodians

• Ask your inherited advisor: "Walk me through everything my parent had, and what needs immediate action." Listen for urgency vs. routine. Most things can wait.

• Set up Truthifi and run a diagnostic on your connected accounts (see how Truthifi keeps your accounts secure)

• Gather tax documents (date of death statements, cost basis information, distribution rules for inherited IRAs)

Advisor conversation to have: "I'm in information-gathering mode right now. I'm grieving, and I'm not making major decisions for a few weeks. Can you prioritize what genuinely needs action now vs. what can wait?"

A good advisor will usually respect this. If you get pressure instead, that tells you something.

Weeks 4–12: Understand the Numbers and Evaluate Your Situation

Understand the rules. You've gathered statements. Now understand them:

• Which accounts are inherited IRAs (10-year rule) vs. inherited brokerage (stepped-up basis)?

• Which are traditional vs. Roth?

• What are the required minimum distributions, if any? (IRS Publication 590-B is the reference.)

• What's your timeline for this inheritance (do you need the money now, or is it long-term wealth)?

Calculate cost scenarios. Run the Inheritance Fee Impact Calculator. Model out:

• Cost of staying with inherited advisor (AUM model)

• Cost of switching to flat-fee advisor ($2,000–$5,000/year)

• Cost of supplementing with a tax specialist for planning

• Cost of DIY (plus behavioral drag costs)

This is no longer abstract. You're comparing specific dollars.

Evaluate advisor fit. Use the questions above. Ask for a meeting. Bring the Fee X-Ray diagnostic. Ask hard questions. See how your advisor responds.

Consider tax planning. If inherited accounts have appreciated assets (stocks, mutual funds), consider timing of liquidation. If there's stepped-up basis opportunity, understand whether your advisor is capturing it. If there's an inherited IRA, understand the distribution strategy.

Cross-link to estate planning. If the inheritance is large ($1M+), consider talking to an estate planning attorney. Beneficiary designations, trust structures, tax strategy: these matter. Related guides are in Truthifi's education library.

6 Months: Make Strategic Decisions

By now, you should have:

• Full understanding of what you inherited

• Clear picture of costs under different scenarios

• Evaluated your inherited advisor

• Thought through your goals (do you need income from this, or is it long-term wealth?)

Now decide:

• Inherited IRA decision: Do you consolidate accounts across custodians, or keep them separate?

• Advisor decision: Keep, switch, or supplement?

• Tax strategy: If inherited brokerage, are you capturing stepped-up basis efficiently?

• Distribution strategy: If inherited IRA, what's your distribution plan (annual, lump-sum, keep it invested)?

• Beneficiary designations: Review them and update them to match your current wishes.

Action items:

• If switching advisors, start the transition process (move custodians, consolidate accounts)

• If keeping your inherited advisor, renegotiate fees if appropriate

• If doing DIY + Truthifi monitoring, consider whether a lower-cost custodian fits the inherited accounts

• File tax returns reflecting inherited accounts (custodians will send 1099s; make sure they're accurate)

1 Year: Structure for Long-Term Oversight

You've made decisions. Now structure for the long haul.

If you kept the inherited advisor:

• Establish annual fee review meetings ("Is this fee fair for what you're delivering?")

• Before each of those meetings, pull Truthifi's fee and performance diagnostics on your connected accounts

• Create a family governance document (if multiple heirs, document decisions made and why)

• Schedule annual reviews with your estate planning attorney (beneficiaries, trust structures, legacy goals)

If you switched advisors:

• Ensure full transition complete (all accounts moved, old advisor closed out)

• Record a starting snapshot of the new accounts in Truthifi (the baseline you'll measure future reviews against)

• Establish performance benchmarking (compare your advisor to appropriate benchmarks: 60% stock / 40% bond allocations, for example)

• Set annual review schedule

If you're doing DIY + Truthifi:

• Establish a monthly review habit (a quick look at the Truthifi dashboard)

• Revisit annually (tax planning, rebalancing, beneficiary designations)

• Consider supplementing with a fee-only tax specialist for major changes

• Build a filing system for inherited account records (you'll need them for your own heirs)

Legacy structure:

• Document your decisions (so your heirs understand what you did and why)

• Update your own beneficiary designations (clear designations make the next transfer simpler for your heirs)

• Consider your own estate planning (if you're suddenly HNW due to inheritance)

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FAQ: Inheritance and Advisor Fees

Quick answers to the most-asked questions.

Do I owe income taxes on inheritance?

Inheritance is generally not taxable income at the federal level. In most cases, you receive the money free of federal income tax. However, distributions from inherited IRAs ARE taxable (for traditional IRAs). And if inherited accounts generate income (dividends, interest, capital gains), that income is taxable going forward.

Is inheritance considered taxable income?

No. The inheritance itself is not income. But inherited IRAs and inherited investment income are taxable depending on the account type.

Can I move an inherited IRA to my own IRA?

Only if you inherited from your spouse. Otherwise, no. You can move it between custodians (to consolidate or simplify), but it must remain an inherited IRA with its own beneficiary designation.

How much will my financial advisor's fee increase if I inherit money?

If your advisor charges AUM (percent of assets), your fee increases by the percentage they charge × the inherited amount. If you inherit $500,000 and they charge 1%, your fee increases by $5,000/year. If they charge flat-fee or hourly, the increase is minimal or zero.

Can I fire my parent's financial advisor?

Yes. They work for you. If you're unhappy with fees, service, or alignment, you can switch. The process typically takes 4–6 weeks (account transfer time).

What happens to my inherited IRA if I inherited from my spouse?

You have special options. You can treat it as your own IRA, roll it over to your own IRA, or leave it as inherited. You get to choose. Non-spouse beneficiaries don't get this choice.

Do I pay capital gains taxes on inherited money?

Not on the inheritance itself. But if inherited accounts generate capital gains after you inherit, those are taxable. If inherited brokerage, you get stepped-up basis (cost basis resets to FMV at death), so there's usually no capital gains tax on inherited appreciated assets if you sell them immediately.

What is stepped-up basis and how does it benefit inherited accounts?

Stepped-up basis resets the cost basis of inherited taxable brokerage accounts to fair market value on the date of death. If your parent bought Apple at $50 and it's worth $240 when they die, your new cost basis is $240. Sell soon after, and you'd typically owe little or no tax on the $190 gain. This applies only to taxable brokerage, not to IRAs.

Should I hire a financial advisor if I inherit money?

It depends on complexity. If you inherited a simple amount ($100K–$500K) in one account type, some investors manage it themselves with Truthifi monitoring (though professional guidance can add significant value in tax planning). If you inherited complexity (multiple accounts, multiple types, significant wealth, family coordination), an advisor can add real value. The inheritance alone isn't a reason to hire; hiring makes sense when the value of the advice exceeds the fee.

How do I evaluate whether my inherited advisor is right for me?

Ask: Did they deliver value to my parent? Are they the right expertise for my goals and life stage? Do I know my total cost? Is there room to negotiate? Use the evaluation framework in the "Should You Keep the Inherited Advisor?" section.

What should I do immediately after inheriting money?

Give yourself room to grieve and slow down. Inventory accounts, get statements, and learn the rules. Expect some pressure, and hold off on major decisions for at least 4 weeks if you can.

How long can I wait before making decisions about inherited money?

Generally, a full year for most decisions. Exception: inherited IRAs run on the 10-year rule, and some beneficiaries also owe annual RMDs during it. Check whether RMDs apply to your inherited accounts. Otherwise, you have breathing room.

What are the inherited IRA RMD rules?

Most non-spouse beneficiaries must fully empty an inherited traditional IRA within 10 years. If the original owner had already started RMDs, annual withdrawals are generally required during that period too. Inherited Roth IRAs must also be emptied within 10 years, but those distributions aren't taxed. A spouse can treat an inherited IRA as their own. If you inherited before 2020, you may be grandfathered under older rules, so confirm with an accountant or your custodian. IRS Publication 590-B has the details.

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Closing: From Grief to Clarity

You came to this article grieving, uncertain, or simply checking the math. You're leaving with something more useful: numbers you can put in front of your advisor.

Time helps with both the fee question and the grief question. The same months that let the shock settle also let you watch what your advisor actually does with the larger balance. A few quarters of that record will tell you more than any pitch meeting.

Grief and financial clarity can coexist. You can honor your parent, mourn their passing, and still ask hard questions about fees. You're protecting what they left you.

Your next step: Run a diagnostic on your inherited accounts. See your true total costs. Then make an active decision (keep, switch, or supplement) based on facts, not fear.

One more thing to weigh: whatever fee terms you settle on this year become the starting point your own heirs inherit, along with the advisor and the paperwork. Negotiating them now is the first piece of estate planning you'll do with this money.

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About the author

Scott Blandford is Founder & CEO of Truthifi and writes these education articles. The Truthifi Team reviews each article for accuracy, sourcing and clarity before publication.

Disclaimer

This article is for informational purposes only and should not be construed as financial, tax, or legal advice. Truthifi is not an investment adviser and doesn't give investment, tax or legal advice. Inheritance involves complex tax and legal considerations that vary significantly based on individual circumstances. Before making decisions about inherited accounts, consult with a qualified financial advisor, tax professional, and estate planning attorney. Truthifi is not a fiduciary unless you have a signed advisory agreement with Truthifi, which this article does not constitute. The examples and calculations are illustrative and may not reflect your specific situation.

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