How to Choose a Financial Advisor for an Inheritance: 4 Steps for High-Earning Families

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

To choose a financial advisor for an inheritance, first list what you inherited and which tax deadlines come with it, then hire a fee-only fiduciary who can show you, with your own numbers, how the inherited accounts fit with your paycheck, equity compensation and estate plan. Check every candidate’s registration and fee disclosures on the SEC’s public database before the first meeting. The right advisor for an inheritance is rarely the one with the best fund lineup. It is the one who sees the deadlines and tax costs you would otherwise miss.

This guide is written for a specific family: two working parents in California or Washington, household income between $750,000 and $3 million, children under 12, who have just inherited (or expect to inherit) a parent’s investment accounts, retirement accounts or home. At that income, an inheritance is mostly a tax and coordination problem, not an investing problem.

Step 1: Inventory what you inherited and the clock on each piece

Before you talk to anyone, write down each asset, how it is titled, and who is named as beneficiary. Different assets come with very different rules, and an advisor’s first job is to sort them correctly.

• The inheritance itself is generally not income to you. Federal income tax applies when you sell inherited property or take money out of an inherited retirement account, not when you receive it (IRS, Gifts and Inheritances).
• Taxable brokerage accounts and real estate usually get a new cost basis. The basis of inherited property is generally its fair market value on the date of death (same IRS page). Gains built up during your parent’s lifetime can disappear for tax purposes.
• Inherited IRAs and 401(k)s do not get a new basis. Every pre-tax dollar you withdraw is ordinary income to you. For most adult children, the IRS requires the entire balance to be paid out within ten years (IRS RMD FAQs). Whether you also owe yearly withdrawals inside those ten years depends on whether your parent had already reached their required beginning date; IRS Publication 590-B sets out the rules.
• Estate tax is generally the estate’s bill, not yours. For 2026 the federal basic exclusion is $15,000,000 per person (IRS). Washington also has its own state estate tax: if your parent lived in Washington, the state exclusion for 2026 is $3,076,000 for deaths from January 1 to June 30 and $3,000,000 for deaths from July 1 to December 31 (WA Department of Revenue). The executor generally settles that before assets reach you.

Bring this list to every advisor interview. How a candidate reacts to it tells you more than any marketing brochure.

Step 2: Define the job before you define the advisor

For a two-income household at your level, the inheritance lands on top of income that is already taxed at or near the top federal rates (35% and 37% for 2026). That changes what you need from an advisor. Write down, in one paragraph, what the inherited money is for. Common answers in families like yours:

• Pay for the children’s education without touching your own retirement savings.
• Reduce concentration in an employer stock you already hold through RSUs or ESPP.
• Buy optionality, such as one parent cutting back hours while the kids are young.
• Pass something on, with rules, to your own children later.

Then list the work that follows from those goals: planning inherited IRA withdrawals across ten tax years, coordinating with your equity grants, funding 529 plans, updating your own wills and trusts, and naming guardians. An advisor who only offers to “manage the portfolio” is answering a question you did not ask.

Worked example: a $900,000 household inherits $3.2 million

Assumptions (illustrative, not a recommendation): married couple filing jointly, $900,000 of taxable income from W-2 pay and RSU vesting, two children ages 4 and 7. A parent dies in 2026 and leaves them a $2,000,000 brokerage account (the parent paid $300,000 for the shares) and a $1,200,000 traditional IRA.

The brokerage account

The basis resets to roughly $2,000,000. If the couple sells soon after the date of death at about that value, there is little or no taxable gain. Compare a lifetime gift: had the parent given the couple the same shares while alive, the couple would have kept the parent’s $300,000 basis (IRS Publication 551). Selling would then trigger a $1,700,000 gain, which at this couple’s 2026 federal long-term rate of 20% plus the 3.8% Net Investment Income Tax would cost about $404,600 in federal tax alone, before any state tax. That reset is the cheapest chance this family will ever get to diversify, and a good advisor will point it out before anyone reinvests.

The inherited IRA

Spread evenly, the ten-year rule means roughly $120,000 a year of extra ordinary income before growth. Because their taxable income is already above the 2026 federal 37% threshold of $768,700, every dollar is taxed at 37%.

California 2026 brackets were not yet published when this was reviewed, so the table uses the 2025 schedule and assumes California taxable income is also $900,000. Washington has no individual income tax for 2026, and its capital gains tax exempts retirement accounts (WA DOR). But Washington has enacted a 9.9% income tax on AGI over $1,000,000 starting January 1, 2028 (WA DOR). For the Washington family, the timing of withdrawals inside the ten years is a real decision: taking more in 2026 and 2027 may cost less than spreading evenly, though DOR’s detailed guidance is still pending. For the California family, years with lower income, such as a year of parental leave or a sabbatical, are the natural place to take larger withdrawals.

Where the money could go for the kids

Each parent can give $19,000 per child in 2026 under the gift tax annual exclusion, or elect to front-load up to $95,000 per child into a 529 plan as five years of exclusions, which requires filing Form 709 (Form 709 instructions). Together, this couple could move up to $190,000 per child into 529s in one year. California allows no state deduction for 529 contributions, so the benefit is the federal and state tax-free growth for qualified education costs.

An advisor worth hiring will build this kind of year-by-year map in the first few meetings. Ask to see one.

Step 3: Check registration, fiduciary status and fees in public records

Every SEC-registered investment adviser and broker-dealer with retail investors must give you a short relationship summary, Form CRS, covering services, fees and costs, standard of conduct, conflicts of interest and disciplinary history (SEC Form CRS FAQ). Before a first meeting:

1. Look up the firm and the individual on the SEC’s Investment Adviser Public Disclosure site and on FINRA BrokerCheck. Read any disclosures, not just the count.
2. Download Form CRS and the firm’s Form ADV Part 2A brochure. Find the fee schedule and the conflicts section.
3. Confirm whether the person is acting as a fiduciary on all of your accounts, all of the time, or only on some. A professional registered as both a broker and an investment adviser can act in different roles on different accounts.
4. Write down exactly how they are paid: a percentage of assets, a flat annual fee, hourly, or commissions.

Fee structure matters more with an inheritance because the asset base jumps overnight. On the $3.2 million in our example, an assumed fee of 1% of assets would be $32,000 in the first year, and it grows as the account grows. A flat fee for the same work does not rise just because a parent died. Neither model is wrong, but you should compare the dollar amount to the work you listed in Step 2.

Step 4: Interview with questions that expose depth

Generic questions get generic answers. Use the inventory from Step 1 and ask:

• “Walk me through how you would schedule withdrawals from this inherited IRA over ten years, given our income and the state we live in.”
• “We hold a large position in my employer’s stock through RSUs. How would you use the stepped-up brokerage account alongside it?”
• “Who coordinates with our estate attorney and CPA, and who does the paperwork?”
• “What changes in our own estate plan now that our net worth has gone up, including trusts for our children and guardianship?”
• “What will you send us in writing after each decision?”

Strong candidates answer with numbers and name the trade-offs. Weak candidates pivot to investment performance or a product. If you are also talking to an attorney, our guide to questions to ask an attorney about an inheritance covers the legal side.

Common mistakes we see with inheritances at this income

• Leaving the inherited IRA alone until year ten. A single large withdrawal in the final year can push far more income into the top brackets than necessary.
• Reinvesting the brokerage account in the parent’s old holdings out of loyalty. The basis reset is the moment diversification is cheapest.
• Retitling assets without checking beneficiary forms. Your own accounts may still name each other only, with no contingent beneficiary or trust for the children. See naming a trust as beneficiary of a brokerage account.
• Hiring the parent’s advisor by default. They may know the accounts, but your tax picture, state and goals are different.

What to write down for your children

An inheritance is also a record of your parent’s choices, and of yours. Write a one-page note: what you inherited, what you decided to do with it and why, and what you chose not to do. As Kevin Luu puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.” A short note filed with your estate documents gives them that. Our family governance work is built around this kind of documentation.

Frequently asked questions

Do I pay income tax on money I inherit?

Generally not on the inheritance itself. You pay tax when you sell inherited property for more than its stepped-up basis, or when you withdraw pre-tax money from an inherited IRA or 401(k), which is taxed as ordinary income. Any federal or Washington estate tax is generally paid by the estate before distribution, not by you as the heir.

Should I hire my parent’s financial advisor?

Only after you check them the same way you would check anyone else. Your parent’s advisor knows the accounts, which helps in the first months, but the job is now different: your income, your state, your equity compensation and your children’s needs. Ask them for the same ten-year withdrawal plan and fee comparison you would ask of a new candidate.

Is a fee-only advisor better for an inheritance?

A fee-only advisor is paid only by you, not by commissions on products, which removes one category of conflict. It says nothing about competence. You still need to confirm fiduciary status, read Form CRS and Form ADV, and see whether the advisor can actually plan withdrawals, taxes and estate updates around your situation.

Next step

Write the one-page inventory from Step 1 this week and look up each advisor candidate on adviserinfo.sec.gov before you meet. For the estate and tax side, our estate planning and tax management pages explain how Age Five Family Office™ handles this work, and the Tax & Wealth Assessment is there if you want a second opinion. This is general education, and the right move depends on your family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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