Where to Invest Inheritance Amid Recession Risk

What pros wish you knew before moving a dollar

If you just came into money, or you’re rethinking your portfolio because every headline says “recession watch”, here’s the thing pros say before moving a single dollar: protect your options first. Not the fancy options on a screen. Your life options. The ability to change your mind without paying through the nose in taxes or selling at the worst moment. That’s the frame. And it’s way less glamorous than chasing the “where-to-invest-inheritance-amid-recession-risk” keyword you just Googled, but it’s how real portfolio managers actually talk when the room gets quiet.

Start with a simple cash flow map. Three buckets. No spreadsheets with 47 tabs, just this:

• 0-12 months: known bills, planned big spends, and a cushion for the annoying stuff that always pops up. Think living expenses, insurance, a car that’s starting to make that sound. Cash or T-bills only.
• 1-3 years: goals you can see coming but aren’t right now, tuition, a home down payment, starting a business. Short-duration bonds, CDs, maybe a balanced fund if you can stomach some bumps.
• 3+ years: long-term growth. Public equities, diversified credit, and only after that foundation, select illiquid stuff if it truly fits.

Preserve optionality. Which means, avoid illiquid commitments until your map is real. Don’t lock up capital for 7-10 years when you’re still figuring out taxes, career, or where you’ll live. Private funds with multi-year lockups can be fantastic, but they remove choices at exactly the time you need the most. I’ve sat in too many meetings where good assets had to be sold because the investor’s life changed, not the market.

Quick reality check on risk. Volatility isn’t the enemy. Forced selling is. J.P. Morgan’s 2024 Guide to the Markets shows the S&P 500’s average intra‑year drawdown was about 14% from 1980-2023, yet the index finished positive in roughly 32 of those 44 years. That’s normal noise. What kills returns is being forced to sell in a drawdown. Remember 2022? The S&P 500 finished down about 18% and the Bloomberg U.S. Aggregate Bond Index fell roughly 13%, a brutal combo when you needed cash and had to liquidate. Buffers prevent that.

Okay I’m a little fired up here because this part saves people real money: write guardrails before markets move. Put it on paper, even if it’s a notes app.

• Max loss you’ll tolerate: a portfolio-level drawdown threshold (say, 12-15%) that triggers a review, not panic selling.
• Rebalancing triggers: bands (e.g., +/-5% around target weights) or a quarterly schedule, automatic, boring, effective.
• Decision rules: who you call, how you document changes, and a 48-hour cooling-off period for big moves. Sounds silly. Works.

Taxes are one of the two killers. The other is forced selling. On taxes: know your rules up front. In the U.S., long‑term capital gains are typically taxed at 0%, 15%, or 20% depending on income, plus a 3.8% NIIT for higher earners (current law). Inherited assets generally receive a step‑up in basis at death, which can wipe out embedded gains, huge difference versus selling appreciated stock you bought years ago. Also mind simple stuff: FDIC insurance caps are $250,000 per depositor, per bank, per ownership category, spread large cash responsibly.

Small but important nuance: inherited money increases your risk capacity (what you can afford to lose without blowing up your life), but it doesn’t magically change your risk tolerance (what lets you sleep). If you white‑knuckle a 10% dip, owning a bigger pile won’t make a 20% dip feel better. Be honest about that. I’d rather see you run a slightly more conservative mix than abandon ship at the first squall.

What you’ll get from the rest of this piece: a simple 0-12/1-3/3+ year allocation sketch you can customize, how to size buffers so you’re never a forced seller, how to sequence moves to avoid tax surprises, and a few plain-English guardrail templates. I can’t promise perfect timing, no one can, and anyone who says otherwise is selling something, but I can help you set the table so timing matters a lot less.

Park it smart for 3-12 months: T‑bills, HYSAs, and insured cash

This is your safe landing zone while you think. If markets feel jumpy and you don’t want to take equity risk yet, short Treasuries and insured bank/credit union accounts do exactly what you need: preserve principal, earn some interest, and keep optionality. I’ve done this for clients (and myself) plenty, when you’re between decisions, cash-like is a feature, not a bug.

Go-to tool: 4-52 week Treasury bills. Bills come in 4-, 8-, 13-, 17-, 26-, and 52‑week maturities, auctioned frequently, and they trade at a discount, no coupon, you simply pay less than face value and receive par at maturity. Two practical perks: they’re backed by the U.S. government, and interest is exempt from state and local income tax. A simple parking plan: build a ladder so something matures every month. For example: buy 4-, 8-, 13-, and 17‑week bills today; when the 4‑week matures, roll it to the back of the ladder. That way, if your plan firms up in, say, February, you’ve got maturities coming due naturally without selling anything.

Where to hold them: TreasuryDirect works, but most folks prefer a brokerage account for easier rolling and secondary liquidity if you need to sell. Keep it plain, stick with T‑bills and/or a government money market fund as the settlement vehicle.

Insurance still matters for bank cash. FDIC and NCUA insurance cover $250,000 per depositor, per institution, per ownership category, and that cap has been $250k since 2010. If you’re parking a larger inheritance, split the balance across banks/credit unions (or use different ownership categories) to stay fully insured. It’s a bit of admin, but it’s cheap sleep. Quick example: $750k in cash could be spread $250k each across three banks in your name only; or you can mix individual, joint, and trust registration to raise coverage at a single institution, just be precise with titling.

HYSAs and MMFs as waystations. High‑yield savings accounts are fine for daily liquidity; rates reset quickly with short-term rates, and funds are FDIC/NCUA insured up to the limits above. Money market funds (MMFs) are not FDIC insured, different animal, but government MMFs invest in T‑bills, agency paper, and repos and must meet SEC liquidity minimums (the SEC raised daily liquidity to 25% and weekly to 50% in 2023). In practical terms: they’re designed to be steady for cash management, but they are securities, not bank deposits.

Name the dollars. Give each chunk a job so you don’t raid it: taxes due, near‑term purchases (home fix, tuition), and emergency fund. If you’re retiring soon, I like 12-24 months of core living expenses in T‑bills/HYSA. Labeling makes risk decisions easier because you’re not guessing which dollars are “investable.”

One human point, because I’ve made this mistake myself, if you might need the money inside 90 days, prioritize instant liquidity over squeezing an extra 10-20 basis points. Missing a tuition deadline or a house closing because a T‑bill matures next Thursday is not worth it. Park those under‑90‑day dollars in an HYSA or a government MMF that settles T+0/T+1. The rate spread is usually tiny, and the flexibility is huge.

How to build a quick ladder (example):

• Decide the runway (say, 6 months) and the monthly cash you might need.
• Buy equal slices of 4-, 8-, 13-, and 17‑week bills today; optionally add 26‑week if you’re closer to 12 months.
• Set calendar reminders on auction days to roll maturing pieces until you’re ready to redeploy.
• Keep a small buffer (1-2 months of spend) in an HYSA for immediate pulls.

Current backdrop, September 2025: Short-term Treasury yields still reflect the Fed’s stance and move quickly with rate expectations. I’m not going to quote an exact yield here, it changes week to week, but the point stands: T‑bills give you market-like cash yields without equity risk, and they reset fast as conditions evolve. If we get rate cuts later this year, the ladder naturally rolls into new levels without you micromanaging. If I’m misremembering the exact auction cadence on the 17‑week bill, pretty sure it’s weekly, you’ll still be fine sticking to the core tenors (4/8/13/26).

A recession‑resilient core (without hiding under the bed)

If cash is your on‑ramp, the core is your seatbelt. We want ballast when growth wobbles, but we also want real growth when the clouds lift. Sounds obvious, but people still reach for shiny stuff at the wrong time. So what’s the mix that holds up when headlines get loud? Here’s how I build it with clients and, frankly, in my own accounts when recession odds are getting argued about every week.

Don’t hide under the bed, build a core that can take a punch and still get you to the other side.

Core bonds matter again. Intermediate Treasuries and high‑quality investment‑grade corporates are your shock absorbers. And yes, 2022 hurt, the Bloomberg U.S. Aggregate Bond Index fell about 13.0% in 2022 (specifically −13.01%). That was a rare combo of aggressive Fed hikes + starting yields that were too low. Do I expect that every year? No. With higher starting yields in 2025, the math is more forgiving: carry cushions price moves, and duration hedges a growth scare. It’s back to normal bond behavior, give or take a tantrum.

Barbell the rates and credit risk. If you’re worried about policy path uncertainty, and who isn’t in Q3, pair short Treasuries with intermediate high‑quality bonds. Why? Short bills reduce rate sensitivity if we get a surprise jump in yields. Intermediates (Treasuries/IG) give you duration that usually rallies if recession headlines intensify. A simple split many of my clients like: 40-50% in short Treasuries (ladder or ETFs) and 50-60% in intermediate Treasuries/IG. You can nudge the mix if spreads widen, add a bit more IG, then take it down when spreads compress. Nothing fancy.

Equities: favor cash machines, spread the geography. In slowdown windows, firms with strong free cash flow, consistent profitability, and sensible balance sheets tend to hold up better than story stocks. I tilt toward quality and dividend growers, but I’m not allergic to tech, just want durable unit economics. And don’t keep it all in one country. Global diversification trims single‑country risk; you’ll still own the U.S., but you’ll also capture valuations and cycles in developed ex‑US and a measured slice of emerging. Have I seen home bias hurt people? Too many times.

Inflation hedges that actually hedge. TIPS have been around since 1997 and pay you real income by adjusting principal with CPI. They showed their usefulness when inflation spiked, headline CPI peaked at 9.1% year‑over‑year in June 2022. Not perfect every month, but as a sleeve inside the bond bucket, they’re a clean way to protect purchasing power without speculating on commodities. I usually park them in the intermediate part of the curve to avoid excess volatility. Small note: I always double‑check the accrual timing around year‑end because the tax treatment on phantom income can surprise, annoying but manageable in tax‑deferred accounts.

Crisis diversifiers, in moderation. Managed futures/trend strategies have historically helped in some equity bear markets. For example, the SG Trend Index returned about +27.3% in 2022 and roughly +20% in 2008 (strategy dependent, manager dispersion is real). Why? They can go long/short across rates, commodities, and FX, so big macro moves become potential returns rather than just pain. But, big but, keep any single “alt” slice small and liquid. I cap total alts at 5-15% and avoid complex lockups when recession odds are still being debated. If you can’t get out in a week, I probably don’t want it right now.

• Sample core mix (illustrative, not a prescription): 35-45% intermediate Treasuries/IG, 15-25% short Treasuries, 5-10% TIPS, 35-45% global equities tilted to quality, 0-10% managed futures/trend.
• Rebalance rules beat bravado. If equities slide and bonds rally, trim and reset rather than guessing the exact bottom, yea, I’ve tried to pick bottoms; not worth the ego bruise.

Current backdrop, September 2025: Rate cut odds later this year are still in play, rate volatility hasn’t totally chilled, and credit spreads are… fine, not screaming cheap. That leans me toward Treasuries for the ballast, IG for carry (selectively), and a visible quality tilt in equities. If you’re sorting where to invest an inheritance amid recession risk, this is the core I’d start from and then tweak for taxes and spending horizon.

Debt, housing, and private deals: when to say yes, or please, no

First things first: kill the expensive stuff. High-rate debt is the fire on the kitchen stove; the market portfolio is the smoke alarm. If you’re sitting on credit cards at 17-25% APR, paying them down is a risk-free “return” that beats basically anything legal on a risk-adjusted basis. For context, the average assessed credit card APR hovered around the low- to mid‑20s last year (the Fed’s G.19 data shows commercial bank credit card rates topping 22% in 2024), and banks didn’t suddenly get generous in 2025. Can you reliably earn 22% after fees and taxes, with no volatility? No. So the check you write to Visa is your best-performing “investment” today. Not glamorous, wildly effective.

Mortgages are trickier. Do you prepay? Maybe, after two things are squared away: your emergency fund and your tax‑advantaged contributions for the year (401(k)/403(b)/IRA/HSA). Then compare apples-to-apples: your after-tax mortgage rate versus what you can likely earn in bonds. Mortgage rates are still elevated; Freddie Mac’s survey has the 30‑year fixed hovering roughly in the mid‑6% to low‑7% range in September 2025, while the 10‑year Treasury is hanging around ~4.2-4.4% and quality intermediate IG still throws off mid‑5% yields depending on duration and spread. If your effective mortgage rate after any itemized deduction benefits is, say, 5.8% and your expected blended bond return is 4-5%, prepaying a slice can make sense. If your loan’s at 3% from 2021, I’d keep it and hug my coupons. I mean, 2022 reminded everyone that rate regimes can flip fast, the 30‑year mortgage went from ~3% in 2021 to >7% by late 2022. That whiplash is real.

Now the fun phone calls. Inheritances attract “opportunities” like a porch light attracts moths. A single rental that eats 60% of your windfall? A buddy’s startup at a $12 million “pre‑money” because his cousin built the deck? Hard pass. Avoid concentration. Avoid it twice. I’ve seen too many portfolios where one illiquid bet dominated the oxygen, and when oxygen ran out… well, you get it. Your north star here is liquidity and position sizing: no one private deal should be more than 5-10% of the inheritance, and even that upper bound is for folks with high income and a long runway.

If you do buy real estate, model the ugly, not the glossy. Use a base case with 10% vacancy, property insurance up meaningfully (state regulators and carriers have pushed premiums higher; coastal markets have seen 20-30% increases since 2020 in plenty of zip codes), and assume you can’t refinance on heroic terms. Don’t pencil cap rates with 2021 glasses. Ask: what if rates are still sticky next year? Answer: then your refi math needs a bigger cushion. Oh, and property taxes do not go down because your spreadsheet asked nicely.

Private credit and private equity? Read the docs, twice. Then read the fee section again. Typical private credit funds run about ~1% management fees with 10% carry; private equity can be 1.5-2% plus 20% carry, and that’s before fund‑level expenses. Capital calls show up when they show up; it’s not your timing, it’s theirs. Can you meet 3-5 years of calls without selling public assets at a bad time? If the answer is “maybe,” the real answer is no. Illiquidity can be a feature, but only if you’ve locked the rest of your plan. Also, distributions are lumpy; don’t promise tuition payments based on a waterfall you haven’t seen.

One more practicality that saves headaches: match horizon to liquidity. If you might need funds within 24 months, for a home, sabbatical, whatever, keep that slice in T‑bills, high‑quality short duration, or insured deposits. The rest can live in the “core” we outlined above. This is exactly the where-to-invest-inheritance-amid-recession-risk mindset: keep your fixed costs lower, your optionality higher, and your sleep better.

Rule of thumb: kill 20% APR debt now; max tax‑advantaged accounts; compare after‑tax mortgage cost to realistic bond returns; size illiquids at 5-10% max each; and read the capital call schedule like your vacation depends on it, because it might.

And look, I say this with humility. I’ve prepaid a mortgage too early. I’ve said yes to a “can’t‑miss” private deal that… missed. The edge isn’t clairvoyance; it’s patience, boring risk control, and the willingness to say “no” twice when the pitch sounds a little too perfect. Sometimes the best move is lowering your fixed costs this year and letting the rest compound, quietly.

Taxes you can’t ignore on day one

The wrong tax move can cost more than a bad stock pick. I’ve watched a family pay six figures in avoidable tax because someone hit “sell all” the week after probate. Don’t do that. Slow down, line up basis, beneficiary rules, and account locations before you reallocate a single dollar. With 5%ish T‑bills staring at you this year, the bar for making changes is already high, don’t add a tax own‑goal on top.

Step‑up in basis: Under current law, most taxable assets receive a step‑up in cost basis to fair market value at death. That means if Mom’s brokerage account held an S&P 500 fund bought at $150 and it was $480 on her date of death, your new basis is $480. Sell at $482, you’ve got a tiny gain. Sell at $480, zero. But, and there’s always a but, confirm the date‑of‑death value with the executor and the custodian before selling. Some assets have quirks (partnerships/MLPs, installment notes). And community property states can give a full step‑up on both halves; separate property states usually only the decedent’s half. Get it documented. In practice I ask for: (1) the estate’s valuation statement, (2) lot‑level basis import into the brokerage, (3) a note from the CPA in the file. Belt, suspenders, and a paperclip.

Inherited IRAs (SECURE Act): The SECURE Act (2019) replaced lifetime “stretch” for most non‑spouse beneficiaries with a 10‑year payout window. Translation: the account must be emptied by the end of year 10 after death. The IRS issued transitional relief on enforcing certain required distributions in 2022-2024 (see IRS Notices 2022‑53 and 2023‑54) for beneficiaries of decedents who died in 2020 or later, penalties were waived while they sorted the rules. We’re in 2025 now, so don’t assume relief continues. Verify this year’s requirements with a CPA and set an annual withdrawal schedule that lines up with your income. If you’re in a volatile-comp zone income‑wise, consider bunching withdrawals into lower‑income years to avoid poking the 3.8% Net Investment Income Tax.

Account location: bonds vs. stocks, Roth vs. traditional: Coupon income is taxed at ordinary rates (up to 37% federally, plus state), while long‑term capital gains and qualified dividends generally face 0%/15%/20% rates federally. So, when possible: put bonds/TIPS in tax‑deferred (traditional IRA/401(k)); put broad equities and equity index funds in taxable or Roth; keep the highest expected return, highest turnover strategies in Roth where future gains are tax‑free. It’s not perfect, municipal bonds belong in taxable, and if your bracket is low this year, a Treasury ladder in taxable at ~5% can still beat after‑tax returns elsewhere, but the general alignment improves after‑tax compounding. The point is location. The point, slightly differently, is putting the right stuff in the right box.

Harvesting, not hacking: In taxable accounts, use tax‑loss harvesting to offset realized gains and up to $3,000 of ordinary income per year. The wash‑sale rule disallows the loss if you buy a “substantially identical” security 30 days before or after the sale. Easy fix: sell your S&P 500 fund; buy a total market fund or a 500‑adjacent ETF for 31 days; then re‑evaluate. And yes, dividends reinvesting can trigger accidental wash sales, turn off DRIPs on positions around harvest time. I learned that one the annoying way.

Model state taxes and the NIIT: Big portfolios get bitten by the stuff people forget. The 3.8% NIIT applies when modified AGI exceeds $200k single/$250k married filing jointly (those thresholds are set by statute and haven’t been indexed). Combine that with state taxes and the bite gets real: California’s top rate is 13.3% (ordinary income; CA taxes capital gains as ordinary), New York’s top rate is 10.9%, and New Jersey’s is 10.75%. Stack 20% federal long‑term cap gains + 3.8% NIIT + a 10%+ state and you’re looking at ~34%+ effective on gains. That changes the math on “should I realize this today?”

Quick checklist before reallocating:

• Get written confirmation of step‑up basis by lot and import it into the custodian.
• Identify inherited IRA types (spouse vs. non‑spouse) and build a 10‑year draw plan; check 2025 rules with a CPA.
• Place bonds/TIPS in tax‑deferred, equities in taxable/Roth where you can; treat munis as taxable‑account natives.
• Queue tax‑loss harvests, mind 30‑day wash‑sales, and pause DRIPs temporarily.
• Run a model with federal + state + 3.8% NIIT before realizing large gains.

And just to be clear: this isn’t about being clever. It’s about being organized. The market can be up, down, or sideways, but the tax code is always taking attendance. Get this part right on day one and you give the portfolio a real head start, like an actual, measurable after‑tax head start.

Putting money to work: lump sum, DCA, and simple hedges

You’ve done the tax prep. Now the part that actually moves the needle: getting invested without letting headlines yank the wheel. Quick evidence check first. Vanguard ran a study in 2012 across the U.S., U.K., and Australia and found that lump‑sum investing beat dollar‑cost averaging about two‑thirds of the time (roughly 66%) over rolling periods. Not shocking, markets go up more than they go down over most long windows. But, and this is real life, not a white paper, DCA helps behavior. If staging the buys keeps you from bailing at the first 3% drawdown, that’s worth more than the theoretical edge in a spreadsheet.

So here’s the middle path I like, especially with recession chatter on/off every other week and yields still elevated versus the 2010s. Compromise: put 40-60% to work now, then DCA the rest over 6-12 months on preset dates. No news triggers, no vibes. Calendar it, say, the 5th business day each month. If you want to be mildly valuation‑aware, you can tilt the monthly tranche a bit more toward bonds on weeks when the 10‑year jumps. Speaking of which, the 10‑year Treasury has been hovering around the mid‑4s lately, I think it printed near 4.3% earlier this month; don’t quote me to the second decimal, but it’s in that zip code, which means duration isn’t dead. It actually pays again.

Rebalancing rule that won’t drive you nuts: use +/-20% relative drift bands by asset class and check quarterly. Example: if your target for U.S. large cap is 30%, you rebalance if it moves 20% off that target, so below 24% or above 36%. That gives you room to let winners run but still forces you to buy low/sell high a few times a year. Set it, calendar it, and stop tinkering on Wednesdays just because a CPI whisper hits Twitter.

Hedges you can live with: keep it simple and cheap. Two that pass the sleep test for most folks:

• Duration as a hedge: own intermediate Treasuries (or even a barbell of short + long) against equity drawdowns. When growth scares show up, long Treasuries often rally. Not always, but often enough. In 2022 that correlation failed; in 2023-2025 it’s been mixed but better as inflation cooled toward ~3%.
• Managed futures sleeve: a small 5-10% allocation to a low‑cost managed‑futures fund can help during trendy selloffs or commodity spikes. It’s not magic; it’s a diversifier that sometimes ziggs when everything else zags.

What I’d avoid unless you really know what you’re doing: expensive, decaying option overlays that require constant rolling and perfect timing. Protective puts can work tactically, but bleed is real and, candidly, most investors won’t maintain them consistently. If you insist, cap the premium outlay to something tiny, like under 1% of portfolio per year, and treat it as insurance, not alpha.

Document the playbook. Literally write it down:

1. What you’ll buy: target weights by asset class and the funds/ETFs you’ll use.
2. When you’ll buy: 40-60% day one, then 6-12 monthly tranches on preset dates.
3. What would make you stop: e.g., a 10% market drop during the DCA window does not halt the plan; only a personal constraint does (cash need, tax rule, or portfolio hits target early). Define it now.

Headlines are not signals. Your calendar is the signal. Your drift bands are the signal.

One last bit from the desk: this year has been choppy around rates, with the Fed signaling it’s closer to neutral than a year ago, and growth data still decent but not on fire. That’s exactly the kind of tape where partial lump sum + scheduled DCA shines. You get invested, you keep discipline, and you let rebalancing and boring hedges do their quiet work.

Keep your powder dry: the 12‑month checklist I give clients

This is the boring routine that actually keeps people out of the ditch while TV folks debate recession odds for the hundredth time. It’s calendar-first, not headline-first. You’ll notice I repeat that a lot because it works.

• Q1 (set the table)
  • Verify titling & beneficiaries: every account, brokerage, IRA, 401(k), bank, trust, has correct ownership and up-to-date beneficiaries. After inheritances, people forget this. That’s how assets end up in probate.
  • Cost basis statements: confirm step-up basis on inherited taxable assets and fix any missing lots with your custodian now, not during April chaos.
  • Cash buckets + T‑bill ladder: set 6-12 months of spending needs in a checking/MMF bucket; then ladder 4-6 rungs of T‑bills (e.g., 4, 8, 13, 17, 26, 52 weeks). It’s dull, it’s defensive, and it buys you time when markets wobble.
• Q2 (get to target)
  • Move to your target asset mix using the playbook you wrote, no vibes. If you’re dollar-cost averaging, continue the tranches you already scheduled.
  • Fill tax-advantaged accounts for the year: 401(k)/403(b)/457, IRA/Roth IRA (mind the income limits), and HSA if eligible. Use payroll deferrals or lump-sum if cash is ready, just hit the IRS limits for 2025 and set auto-increase for next year. Quick note: if you did a backdoor Roth last year, document basis on Form 8606 again. Future-you will thank present-you.
• Q3 (tighten bolts)
  • Audit fees & liquidity: expense ratios, advisory fees, fund-level transaction costs, and cash drag. If an ETF is charging you 60 bps to own the S&P 500, that’s a hard pass in 2025.
  • Risk guardrail: cap any single bet, single stock, sector, private deal, crypto, whatever, at <10% of the portfolio. I’ve seen “it’s different” stories end the same way. Concentration is optional; diversification is required.
• Q4 (taxes and tuning)
  • Tax review: harvest losses to offset gains (mind wash sales), push highly appreciated positions to charities if you’re gifting anyway, and if you’re over 70½ and charitably inclined, use Qualified Charitable Distributions from IRAs to satisfy RMDs tax-efficiently.
  • Rebalance back to targets. Do it on a date, not a feeling.

Anytime rule: if markets drop 20%+, rebalance to targets rather than guessing bottoms. For context: the S&P 500 fell about 19% in 2022 (price return), and long Treasuries didn’t save you that year, rare, but it happened. Different story in 2008: the S&P 500 fell roughly 37% while long-term Treasuries rallied sharply (many long-duration Treasury funds were up 20-30% that year). Point is, assets zig and zag at different times; your job is to keep the mix in bounds.

Two more pieces. First, keep a written Investment Policy Statement, two pages, plain English. What you own, why you own it, how you’ll rebalance, and what would make you sell. It beats reacting to headlines, by a mile. Second, circle back to the Q1 basis note: if you inherited assets, make sure every lot reflects the correct date-of-death value. I know I’m repeating myself. I’ve just watched that one turn simple taxes into a novella.

And yes, this is a lot. The point isn’t perfection, it’s rhythm. This year the Fed is closer to neutral than last year, growth is fine-not-great, and rates are still doing that two-steps-forward-one-back dance. Your calendar beats the noise. If something here feels too fussy, keep the skeleton: fund tax shelters, keep cash buckets, rebalance on schedule, and don’t let any one idea run your whole portfolio.

Your inheritance is a runway, not a lottery ticket

Your inheritance is a runway, not a lottery ticket. Treat it like fuel for the next decade, metered out, rules-based, boring in the best way. Start with safety. Ring-fence the first 12 months of planned spending in instruments that don’t wobble when markets sneeze: insured high‑yield savings, short Treasury bills, or a true money market fund. Keep it titled correctly and inside FDIC or NCUA limits, $250,000 per depositor, per bank. If it’s at a broker, remember SIPC protection is $500,000 total, including $250,000 for cash. That’s not an investment strategy, it’s guardrails.

Next, build the core for the next ten years. Focus on quality and diversification. I know, not exciting. But concentration risk is exciting in the wrong direction. You want global equities tilted to profitable, cash‑generative companies, investment‑grade bonds that actually hedge your lifestyle risk, and a sleeve that’s dry powder for rebalancing when markets throw a fit. Rates have been two‑steps‑forward‑one‑back all summer, and rate‑cut odds keep getting repriced, so duration exposure should be intentional, not accidental.

Quiet alpha lives in taxes and account location. Put the tax‑inefficient stuff (REITs, high‑turnover strategies, taxable bonds) in tax‑deferred accounts; stash tax‑efficient equity index funds in taxable; and reserve the Roth for the highest expected growth. Harvest losses when available, mind wash sale rules, and line up charitable gifts with appreciated positions. It’s not flashy, but shaving 1 percentage point of taxes annually can compound meaningfully over a decade. And yes, double‑check every inherited lot for the correct step‑up to date‑of‑death; getting that wrong turns April into an epilogue you didn’t ask for.

Then automate the behavior so nerves don’t run the show. Set calendar rebalancing (semiannual works), pre‑schedule dollar‑cost averaging for any uninvested cash, and cap any single position weight. If a sleeve runs outside bands, you rebalance. No debates, no late‑night “maybe this time is different” Googling. I’ve watched too many good plans drift because the market was loud and the rules were quiet.

Runway means you can afford a bad quarter without wrecking a good decade.

If you want to go deeper later this year, consider: (1) Roth conversions in down markets to fill your current tax bracket, RMDs start at age 73 under current law, so earlier moves can lower lifetime taxes; (2) annuity income floors for retirees who want to outsource sequence risk on essentials, just compare guaranteed payout rates to your bond yield; and (3) family estate planning so this money keeps working past you, beneficiary designations, per‑stirpes where it matters, and a simple letter of intent. Oh, and one small but defnitely practical note I keep repeating to clients: put the spending account at a different institution than the investment account. Friction ain’t a bug there, it helps you stick to the plan.

• Protect: 12 months expenses in insured cash/T‑bills/money market.
• Build: 10‑year core with quality, diversification, and intentional duration.
• improve: Taxes and account location for quiet, compounding alpha.
• Automate: Rebalancing, DCA, and position caps, so headlines don’t drive allocations.

Markets zig and zag. Your rules give you runway. That’s the whole point.

Frequently Asked Questions

Q: How do I actually set up that three‑bucket cash map with new inheritance money?

A: Keep it stupid simple. 0-12 months: park known bills, planned big spends, and a true emergency cushion in cash or T‑bills. I usually tell clients 6-12 months of core expenses plus any near‑term one‑offs (the roof, the transmission). 1-3 years: short‑duration bond funds, CDs (laddered), or a balanced fund if you can tolerate some wobble. 3+ years: diversified equities and high‑quality credit; consider illiquid stuff only after the first two buckets are real. That sequence, cash first, near‑term bonds second, growth third, keeps you from selling stocks at the worst moment when life throws a curveball.

Q: What’s the difference between holding my 0-12 month bucket in T‑bills versus a high‑yield savings account?

A: Both are fine for the first bucket the article talks about. T‑bills: backed by the U.S. Treasury, state‑income‑tax‑exempt, you can ladder 4-26 week bills and roll them; you’ll see price mark‑to‑market if you sell early, but maturity is short. High‑yield savings: FDIC/NCUA insured up to limits, daily liquidity, rate can reset any time. Practical tip: compare after‑tax yield (T‑bills dodge state tax), keep day‑to‑day cash in savings for instant access, and ladder T‑bills for the known dates (tuition in March, property taxes in April). Don’t overcomplicate it, liquidity beats a few extra basis points if timing is tight.

Q: Is it better to wait in cash because of recession headlines or invest the inheritance now?

A: Short answer: set the buckets, then invest on a schedule. The piece notes J.P. Morgan’s 2024 Guide to the Markets, average intra‑year S&amp;P 500 drawdown ~14% from 1980-2023, yet positive in ~32 of 44 years. Volatility is normal; forced selling is the real enemy. My go‑to: fully fund 0-12 months in cash/T‑bills, fill the 1-3 year bucket, then dollar‑cost average the long‑term sleeve over 6-12 months (faster if you already have ample cash flow). Pre‑commit your rebalancing rules. If you can’t sleep, reduce equity target a notch, not to zero, just to the level you won’t bail on at −14%.

Q: Should I worry about taxes on inherited accounts, like an IRA or a brokerage account?

A: Yes, but it’s manageable. Taxable brokerage assets typically get a step‑up in basis to the date‑of‑death value (federal; state rules vary), so selling soon after usually means little capital gain. Inherited IRAs: most non‑spouse beneficiaries fall under the SECURE Act’s 10‑year rule, account emptied by year 10. If the decedent died after their required beginning date, you may also owe annual RMDs years 1-9; Roth IRAs generally have no income tax on distributions but still follow the 10‑year clock. Spouses have options (treat as own or inherited). One more trick: Qualified Charitable Distributions can be made from inherited IRAs if you’re 70½+, which can satisfy RMDs tax‑efficiently. Bottom line, title accounts correctly, set a withdrawal timeline now, and coordinate with a CPA before selling or distributing.

@article{where-to-invest-inheritance-amid-recession-risk,
    title   = {Where to Invest Inheritance Amid Recession Risk},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/invest-inheritance-recession-risk/}
}