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Imagine getting a note like this:
“My dad died last month. While we were cleaning out his house, my brother found $40,000 in cash in a shoebox in his closet. My sister wants to split it three ways and not tell anyone. Do we have to report it?”
We’ll call the writer Lisa. Her question deserves a straight answer, because a family that guesses wrong here can turn a lucky find into a real mess.
I’ve been a CPA since 1981, and I served as executor of my parents’ estate. Here’s my short answer for Lisa: Don’t split it yet, and don’t hide it.
That cash almost certainly belongs to Dad’s estate. “When someone dies, their debts are generally paid out of the money or property left in the estate,” the Consumer Financial Protection Bureau explains (1).
How you deposit it matters, too. “Federal law requires financial institutions to report currency (cash or coin) transactions over $10,000,” according to the Financial Crimes Enforcement Network, or FinCEN (2).
The good news? Federal estate tax almost certainly isn’t the issue. For deaths in 2026, the IRS filing threshold is $15,000,000 (3). But five states levy an inheritance tax, according to the Tax Foundation (4).
Here are 6 rules for Lisa’s family, and yours.
1. Treat it as Dad’s money until the estate is settled
Until the estate is settled, that $40,000 is an asset of the estate, just like his bank account or his car.
Generally, Dad’s debts get paid out of what he left behind (1). Someone also has to file his last tax return. “When someone dies, their surviving spouse or representative files the deceased person’s final tax return,” the IRS says (5).
If the estate has real money in it, it’s worth getting professional help to sort out the taxes and the order of payments.
One place to find it is SmartAsset. They offer a free matching service that pairs you with up to three fiduciary financial advisors, all legally required to put your interests first.
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To use the SmartAsset service, expect a questionnaire of about 10 minutes. You’ll be asked for a phone number near the end, but you control whether and when you respond.
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2. Never deposit it in $9,000 chunks
Some people think the smart move is to keep each deposit under $10,000 so the bank doesn’t file a report. That’s the dumbest move of all.
“Federal law makes it a crime to break up transactions into smaller amounts” to evade the reporting requirement, FinCEN says (2). That’s called structuring, and it “can result in imprisonment for not more than five years and/or a fine of up to $250,000” (2).
So deposit the money openly, into an account in the estate’s name if one has been opened. “There is no general prohibition against handling large amounts of currency,” FinCEN notes (2).
3. Don’t panic about federal estate tax
“The Estate Tax is a tax on your right to transfer property at your death,” the IRS explains (3).
For 2026 deaths, if Dad’s estate, plus certain large gifts he made while alive, doesn’t top $15 million, it won’t even need to file a federal estate tax return (3).
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4. Check your state’s rules
State taxes are a different story. “All five states with an inheritance tax—Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania” tax at least some heirs, according to the Tax Foundation (4).
Those states give “preferential treatment, including lower rates and higher exemption thresholds, to close relatives” (4). So a child may owe less than a more distant heir. Also, 12 states and D.C. impose their own estate taxes (4).
If Dad lived in one of those places, find out what applies before anyone spends a dime.
5. Don’t leave your own kids a treasure hunt
Here’s the lesson for the rest of us. If you keep cash, valuables or accounts your family doesn’t know about, write it down and tell the person who’ll handle your estate.
Even better, put a plan in writing. An online service like Trust & Will can walk you through creating a will, a trust or both, fast and at a low cost.
6. Find out whether Medicaid paid for Dad’s care
If Dad was 55 or older and Medicaid paid for his long-term care, the state may have a claim on his estate. Federal law requires states to try to recover those costs from the estates of enrollees 55 and older, according to KFF (6).
There are protections. States can’t recover from the estate of an enrollee who’s survived by a spouse, a child under 21, or a child who is blind or has a disability, according to Medicaid.gov (7). And states must waive recovery when it would cause an undue hardship (6).
But a claim like that is one more reason not to divvy up the cash on day one.
My honest take
Lisa’s sister means well. Most families do. But quietly splitting found cash is how siblings end up not speaking, and how an estate ends up short when the bills come due.
Do it by the book. Count it with a witness, deposit it openly, and let the estate pay what it owes first.
Then whatever’s left is truly yours, with nothing to look over your shoulder about.
Sources: 1. Consumer Financial Protection Bureau; 2. Financial Crimes Enforcement Network; 3. IRS; 4. Tax Foundation; 5. IRS; 6. KFF; 7. Medicaid.gov
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