I’m 72 years old and my sister just passed away and left me $40,000. At my age, what’s the best place to put this mini windfall?

Fortunately, she has multiple options. Here’s what experts recommend Leah do with the cash.

Leah’s current finances are the starting point, but she can’t forget about the IRS

The best use of an inheritance isn’t the same for everyone, so Leah needs to consider the state of her finances.

“At age 72, a $40,000 inheritance may not change your retirement, but the best use of it depends on your personal circumstances and greatest financial need,” Tom Buckingham, an actuary and chief growth officer at Nassau Financial Group, told Moneywise.

Cody Schuiteboer, president and CEO of Best Interest Financial, agrees. “Make sure you consider this within the larger context of your situation,” he advised. However, Schuiteboer and other experts also warned that Leah’s first focus must be understanding the tax implications and technical requirements of the inheritance.

For example, there are special rules for when you must make withdrawals from inherited IRAs or 401(k)s, and, as Chris Dixon, registered financial consultant and co-founder of Oxford Advisory Group, warned, “receiving your inheritance can trigger estate, capital gains or income taxes depending on your state and situation.”

Fortunately, Leah can minimize the amount lost to the IRS because, as David Talley, founder of Talley Wealth, explained, the value of an inherited asset normally resets to the value at the time of death for capital gains tax purposes. This provides a lot of flexibility.

“The biggest error I see is that someone receives an inheritance and assumes it should stay invested the way it was before,” Talley told Moneywise. “It’s legally yours now, and the law is largely set up to support you acting on that. With most assets you can sell, reinvest around your own plan, and incur basically no tax penalty because of that step-up.”

Schuiteboer suggested talking to a fiduciary financial advisor and a tax professional about these issues.

Pay off debt or beef up an emergency fund

As Leah considers her finances, most financial professionals shared the same advice for her if she has debt. Deal with that first.

“Paying off debt, especially if that debt carries a high interest rate, is a return on investment that is virtually guaranteed and hard to beat,” said Schuiteboer. “A $40,000 inheritance won’t transform the financial reality of retirement, but if used correctly, could pay down a large enough liability to have a big impact on the monthly average cost of living.”

Save up an emergency fund

If Leah has her debt situation under control, the next best option may be to shore up her savings.

“Before making a large purchase, consider whether the money could help build a cash reserve for unexpected expenses,” Buckingham advised. He mentioned the rising costs of health care with age, something Leah should definitely consider. The average 65-year-old in 2025 will likely end up needing $172,500 in savings to cover health care expenses in retirement.

Schuiteboer recommends “a year’s worth of living expenses set aside in a safe and accessible location.” He stressed the importance of an emergency fund, telling Moneywise, “Living on a fixed income in retirement, real cash on hand prevents you from having to sell an asset at a bad time. Reserve cash is one of the most important assets a retiree can own.”