If you’re in line to receive a significant inheritance, your feelings may range from exhilaration to relief, not to mention a great deal of sadness for the loved one who has passed. Indeed, a large infusion of cash or assets can be overwhelming.

Generally, when you receive an inheritance, there’s no need to act quickly. Take some time to reflect on the significance of the inheritance on your financial situation. Also, consult with a team of trusted advisors (including an attorney, accountant, and financial advisor); and carefully review your options. These advisors will be invaluable as you form a plan to manage your newfound wealth. Let’s look at several steps to take after learning that you’ll be receiving an inheritance.

Determine the Net Proceeds

If your loved one’s estate is still being administered, don’t spend your inheritance — or make any financial commitments based on it — until you understand what your net proceeds from the estate will be. Once all fees and taxes are accounted for, the final settlement may be less than you expect.

If you’re receiving your inheritance through a trust, talk to the trustee, familiarize yourself with the trust’s terms, and be sure you understand the timing and amount of distributions and any conditions that must be satisfied to receive them.

Factor in Any Tax Consequences

An inheritance generally isn’t subject to income tax, but depending on the types of assets you inherit, they may have an impact on your tax situation going forward. For example, certain income-producing assets — such as real estate, an investment portfolio or a retirement plan — may increase, perhaps substantially, your taxable income.

If you inherit an IRA or a qualified retirement plan account, such as a 401(k) plan, be sure you understand the rules regarding distribution of those funds. The treatment of an inherited IRA or qualified retirement plan, such as a 401(k), depends in part on your relationship to the deceased. If you inherit an IRA or 401(k) from your spouse, you can usually roll the funds over into your own IRA and allow them to continue growing tax-deferred (or tax-free in the case of a Roth account) until you withdraw the funds in retirement.

Depending on the size of the inheritance, the additional money may also have an impact on your estate plan. If it increases the value of your estate to a point where estate taxes become a concern, talk to your advisor about strategies for reducing those taxes and preserving as much wealth as possible for your heirs.

Evaluate Whether Additional Insurance Coverage Is Required

After receiving a large inheritance, you may need to adjust your insurance coverage. For example, if you inherit real estate or valuable personal property, you may need to increase your property and casualty coverage.

In addition, because greater wealth makes you a more attractive target for lawsuits, you should consider purchasing an umbrella liability policy or increasing the coverage of an existing policy. You may also wish to purchase additional life insurance.

Assess How the Inheritance Will Affect Your Financial Plan

Treating an inheritance separately from your other assets may encourage impulsive, unplanned spending. A better approach is to integrate inherited assets into your overall financial plan.

Consider using some of the inheritance to pay down credit cards or other high-interest debt or to build an emergency fund. The rest should be available, along with your other assets, for funding your retirement, college expenses for your children, travel or other financial goals.

In addition, it’s important to keep working. Few windfalls are large enough to see anyone through to retirement or death. Until you have a solid handle on the amount available after taxes and debt and have identified solid financial goals, you won’t know if you can quit your job.

In addition, think about where you’d like to be five, 10 or 20 years into the future. Consider revising your financial plan to help you move toward your goals — whether that means retiring early, starting a business or something else.

Finally, be careful when asked for money. Friends and family members may expect to share in your bounty, and charitable organizations may ask for donations. The ability to support worthwhile causes or loved ones in need is a real benefit of a windfall. At the same time, if you accede to every request, you’ll quickly deplete the funds.

Develop a Plan

Inheriting a windfall can be a blessing, but without solid planning it could create income and estate tax issues. To help answer your questions, contact your estate planning advisors. They can help you address the inherited assets in your estate plan.