Sudden Wealth: What to Do When You Come Into $1M or More

An inheritance, a business sale, an IPO, a legal settlement. Sudden wealth is disorienting — and the first 90 days can be the most consequential of your financial life. Make the right moves and you preserve and grow it. Make the wrong ones and you lose 20–40% to avoidable taxes and fees before you even start investing. Here's the framework.

First: do almost nothing (days 1–30)

The most important thing you can do when money lands in your account is not act immediately. The financial services industry will find you fast — former colleagues, "financial advisors" with product quotas, family members with ideas. Before you make a single investment decision, take 30 days to park the cash safely and get educated.

Where to park it: A high-yield savings account or money market fund at a major institution (Fidelity, Vanguard, Schwab). Current HYSA rates in May 2026 reach 4–5% APY.¹ On $1M, that's $40,000–$50,000 per year while you plan. FDIC insurance covers $250,000 per depositor per institution — for larger amounts, spread across institutions or use a brokerage money market fund (SIPC-covered, typically invested in Treasury securities).

Windfall sources: what's different about each

The inherited IRA time bomb

If your windfall includes an inherited IRA or 401(k), this deserves special attention. Under final IRS regulations (T.D. 10001, effective 2025):³

• You have 10 years from the decedent's death to fully distribute the account.
• If the decedent had already reached their Required Beginning Date (age 73 for those born 1951–1959; age 75 for those born 1960+), you must take annual RMDs in years 1 through 9 — you cannot defer everything to year 10.
• Missing an annual RMD triggers a 25% excise tax on the missed amount (down from 50% under SECURE 2.0, but still severe).
• Each year's RMD = prior December 31 account balance ÷ your life expectancy factor from IRS Single Life Table I (IRS Publication 590-B), reduced by 1 each year.
• In year 10, the entire remaining balance must be distributed regardless.

The optimal strategy is to spread distributions across years to stay in lower brackets — coordinating RMD income with Roth conversions, tax-loss harvesting, and IRMAA thresholds. An inherited $800K IRA distributed over 10 years is manageable. The same $800K crammed into year 10 hits the highest brackets, triggers IRMAA surcharges two years later, and may push you off ACA subsidy cliffs.

The 90-day action framework

Days 1–30: Secure and stabilize

• Park cash in HYSA (up to $250K FDIC per institution) or brokerage money market fund earning 4–5% APY.
• Verify the tax treatment of your windfall — with a CPA or tax attorney, not an investment advisor.
• If inherited IRA: identify the decedent's Required Beginning Date and calculate year-1 RMD due December 31 of the year following death.
• Do not make any irreversible decisions. No annuities, no large real estate purchases, no loans to family members.

Days 31–60: Build the plan

• Find a fee-only advisor. A fiduciary, fee-only CFP who charges transparent fees and earns no commissions. This is the most important financial decision of your first 90 days. Interview 2–3 using NAPFA.org or XY Planning Network before choosing.
• Get an estate plan. A revocable living trust, durable POA, healthcare directive, and updated beneficiary designations. At $1M+, these are not optional. See our Estate Planning for New Millionaires guide.
• Max tax-advantaged accounts. 401(k) to $24,500, IRA to $7,500, HSA to $4,400/$8,750 (self-only/family). These reduce this year's taxable income — among the highest-return uses of money available.¹⁰
• Pay off high-rate debt. Anything above 7% is a guaranteed after-tax return that beats most assets in the current rate environment.

Days 61–90: Implement the investment plan

• Build an asset-location strategy across taxable, IRA, and Roth accounts. (Asset location guide)
• Decide on direct indexing vs. ETFs at your asset level. (Direct indexing guide)
• For concentrated positions: plan a staged diversification over 2–3 years to avoid bracket bunching. (Concentrated stock guide)
• Review insurance: umbrella liability, life insurance reassessment, disability coverage gaps. (Insurance review guide)

The 5 most common sudden wealth mistakes

1. Moving too fast. Earning 4–5% in a money market fund while you plan is a perfectly sound outcome for the first 30–90 days. Urgency is manufactured by people who want to sell you something.
2. Conflating an investment advisor with a tax advisor. Most wealth managers are not CPAs. Tax planning on a windfall — QSBS eligibility, installment sale elections, Roth conversion timing, inherited IRA scheduling — requires a CPA or tax attorney working in parallel with your investment advisor, not in place of one.
3. Lifestyle inflation before the plan is set. Buying the vacation home, the boat, or raising monthly burn before you have a modeled withdrawal rate creates obligations that are difficult to unwind if markets decline or income changes.
4. Lending money to family and friends. Research on sudden wealth events consistently shows that informal loans to family — which are rarely repaid — are among the most reliably wealth-destroying outcomes. If you want to give, give it as a documented gift with a clear annual limit. The $19,000 per-recipient annual exclusion (2026) is a reasonable framework.⁶
5. Missing the inherited IRA annual RMD. The first-year deadline is December 31 of the year following the decedent's death. The 25% penalty on missed distributions catches heirs who assume they have 10 years to figure it out.

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Sources

1. Bankrate — Best High-Yield Savings Accounts May 2026; Fortune — Top HYSA rates May 8, 2026. Range 4–5% APY as of May 2026.
2. IRC §1014 — Basis of Property Acquired from a Decedent. Stepped-up basis to fair market value at date of death; no capital gains on pre-death appreciation.
3. IRS Publication 590-B — Distributions from Individual Retirement Arrangements; T.D. 10001 (July 2024) finalized annual RMD requirement for years 1–9 when decedent was past Required Beginning Date.
4. IRC §4974 — Excise Tax on Insufficient Distributions. SECURE 2.0 reduced the penalty from 50% to 25% (further reduced to 10% if corrected within the correction window).
5. IRS Topic No. 409 — Capital Gains and Losses. 2026 LTCG rates 0%/15%/20% per IRS Rev. Proc. 2025-67; NIIT 3.8% under IRC §1411 above $200,000 single / $250,000 MFJ.
6. IRC §1202 — Partial Exclusion for Gain from Certain Small Business Stock. OBBBA (P.L. 119-21, July 2025) raised QSBS exclusion to $15M lifetime per issuer with tiered holding (3/4/5 years = 50%/75%/100%). Annual gift exclusion $19,000/recipient per IRS Rev. Proc. 2025-67.
7. IRS Topic No. 427 — Stock Options; IRS Publication 525 — Taxable and Nontaxable Income. RSU income includible in W-2 at vest; subsequent gain eligible for LTCG treatment if held 12+ months post-vest.
8. IRC §104 — Compensation for Injuries or Sickness. Physical injury/sickness settlement proceeds excluded from gross income. Punitive damages, emotional distress, and employment claims remain taxable.
9. IRC §121 — Exclusion of Gain from Sale of Principal Residence ($250K single/$500K MFJ); IRC §1250 — Depreciation Recapture (25% tax rate on prior depreciation deductions for real property).
10. IRS — 401(k) Contribution Limits 2026. $24,500 base; ages 50–59 or 64+: +$8,000 catch-up; ages 60–63: +$11,250 super-catch-up (SECURE 2.0 §109). IRA $7,500 per IRS.gov. HSA $4,400/$8,750 per IRS Rev. Proc. 2025-67.

Tax values verified against 2026 IRS guidance, OBBBA (P.L. 119-21, July 2025), T.D. 10001 (July 2024), and SECURE 2.0 as of May 2026.