How to Deposit a Large Cash Inheritance

Receiving a substantial cash inheritance requires careful handling. Understanding the necessary steps for depositing these funds correctly ensures a smooth process and compliance with financial regulations. Preparation and awareness of relevant guidelines are important for managing inherited assets effectively.

Preparing for Your Deposit

Before depositing a large cash inheritance, gather specific documentation. Financial institutions require personal identification, such as a driver’s license or passport, to verify your identity. Documents proving the inheritance’s legitimacy, like the deceased’s death certificate, a will copy, or relevant trust documents, are often necessary. If processed through a legal proceeding, probate court letters may also be required to confirm your legal right to the funds.

Financial institutions operate under strict Know Your Customer (KYC) and Anti-Money Laundering (AML) laws, mandating verification of large cash deposit sources. These regulations prevent illicit financial activities. Presenting inheritance documents establishes the legitimate origin of your funds, fulfilling the bank’s due diligence.

Select a suitable financial institution for your deposit. Both banks and credit unions offer deposit services; choose one that is federally insured. Deposits in banks are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per insured bank, for each account ownership category. Credit union deposits are similarly insured by the National Credit Union Administration (NCUA) with the same coverage limits.

Deposit the full cash inheritance in a single transaction. Breaking up a large cash deposit into multiple smaller amounts to avoid reporting requirements, known as “structuring,” is illegal and can lead to severe penalties, including fines and imprisonment. Financial institutions identify and report such activities.

Before depositing, consider where the funds will reside within the financial institution. While the immediate goal is to deposit the cash, deciding if it will go into a checking account for liquidity, a savings account for short-term preservation, or be earmarked for investment accounts can streamline future financial planning. This initial decision is about placement, not investment advice, and helps communicate your intentions to the bank.

Making the Deposit

Once documents are prepared and a financial institution chosen, the next step is the deposit process. This requires an in-person visit to a bank or credit union branch. Present the cash, identification, and supporting inheritance documentation to a teller or banking officer.

During the transaction, the financial institution will inquire about the source and purpose of the funds. They will ask for specific details to confirm the cash’s legitimate origin. Providing clear, consistent answers and presenting required documents, such as the death certificate or probate letters, will facilitate a smooth process.

For cash transactions exceeding $10,000, financial institutions must file a Currency Transaction Report (CTR) with the Financial Crimes Enforcement Network (FinCEN). This federal requirement is routine and not an indication of depositor wrongdoing. The CTR records large cash transactions to help prevent money laundering and other illicit financial activities.

After the cash is counted and processed, obtain a receipt or confirmation of the deposit. This document serves as proof of the transaction and should be retained for your records. The receipt shows the amount deposited, the date, and the account into which the funds were placed.

Even after the initial deposit, the financial institution may follow up with additional questions or documentation requests. This post-deposit verification is part of their ongoing due diligence, especially for large or unusual transactions. Cooperating promptly helps finalize their internal compliance procedures.

Understanding Reporting and Tax Implications

Beyond the deposit process, understand the tax and reporting implications of a large cash inheritance. It is a common misconception that all inheritances are subject to immediate income tax. Generally, the principal amount of a cash inheritance is not considered taxable income at the federal level, nor in most states.

Some states may levy an inheritance tax, typically paid by the beneficiary. However, only a few states currently impose an inheritance tax, and most individuals will not face this state-level tax. This is distinct from an estate tax, levied on the deceased person’s estate before assets are distributed.

Federal estate tax applies to the value of the deceased person’s estate and is generally paid by the estate itself, not the beneficiary. This tax only affects estates exceeding a high exemption threshold, adjusted annually for inflation. For example, in 2025, the federal estate tax exemption is $13.61 million per individual. Most inherited sums fall below this threshold, meaning most beneficiaries will not be impacted by federal estate tax.

While the inherited principal is generally tax-free, any income generated from the deposited cash after receipt is taxable. This includes interest earned on savings accounts, dividends from investments, or capital gains from selling assets acquired with the inheritance. These earnings must be reported as income on your annual tax return and are subject to applicable federal and state income tax rates.

If you plan to gift a portion of your inheritance, be aware of federal gift tax rules. Each year, an annual gift tax exclusion allows you to give a certain sum to any number of individuals without incurring gift tax or reporting requirements. For 2025, this annual exclusion is $19,000 per recipient. Gifts exceeding this amount to any single individual within a calendar year generally require the donor to file IRS Form 709, the United States Gift (and Generation-Skipping Transfer) Tax Return.

Distinguish bank-filed Currency Transaction Reports (CTRs) from FinCEN Form 8300. While banks file CTRs for large cash deposits, FinCEN Form 8300 is used by businesses that receive more than $10,000 in cash in a single or related transaction. This form is not applicable to individuals receiving a personal inheritance, clarifying different reporting obligations for various cash transactions.