A loved one died and left you an inheritance. Now what?

Be aware, if the original account owner died before the starting date for required minimum distributions (RMDs), the beneficiary can wait until year 10 to pull money out. To empty the

account by year 10, however, you may want to withdraw some each year. If you wait until the last year, you could end up with a big tax bill. If you inherit a Roth IRA and you’re a non-spouse

beneficiary, you face the same time limit: You must empty the account by year 10. But spouses who inherit Roth IRAs have several options, including designating themselves as the account

owner and taking RMDs over their lifetime. Roth distributions are not taxed. Surviving spouses could also put the money into their own 401(k) or IRA, roll the funds into an inherited IRA or

take a lump-sum distribution. If you take a lump sum distribution, you won't incur an early withdrawal penalty, but the money will be taxed as ordinary income, which could push you into

a higher tax bracket. For any of these assets, consider working with a tax professional to help you understand your options and avoid penalties. 3. REAL ESTATE You may find that you’ve

inherited real estate, such as a family home. You might be able to benefit from a step-up in basis if you sell the home, since the value of the property resets to its fair market value when

the owner dies. Say the house that your grandfather bought originally cost $100,000, but today it’s worth $500,000. You could sell the home right away for that amount without incurring a

capital gains tax, says Kevin Hegarty, a CFP in Garden City, New York. If the value rises before the sale closes, though, you’ll owe taxes on any increase. There are special tax rules for a

surviving spouse. You have the option of selling the house within two years from the date of your spouse’s death and claiming a $500,000 exclusion. After that, you can only apply your half

of the exclusion, or $250,000, but half the house will receive a step-up basis. (In community property states, both halves receive the step up.) Taxes aren’t the only costs to consider.

You’ll need to maintain the house, as well as pay bills for insurance and property taxes. And if the property is co-owned by other family members, be sure to reach an agreement about its

sale or use, Hegarty recommends. 4. LIFE INSURANCE AND ANNUITIES For those who receive a life insurance death benefit, the amount is generally not taxable. (One exception: If you receive the

payout in installments, rather than a lump sum, you may have to pay tax on any interest earned on the principal.) And if you live in one of the handful of states with an inheritance tax, it

will generally not apply, since a life insurance policy is typically considered separate from the estate, says Mark Luscombe, a CPA and principal analyst at Wolters Kluwer Tax &

Accounting.