Why not pay off the debt and then go back into debt if you absolutely have to, but try not to? Holding cash loses 10% a year to inflation (the govt's 2.5% number is bogus...if you don't believe it, go buy a single apple for $1.50). Meanwhile that $25,000 debt is being charged what interest? 15% ? 25%? In year 1 you'll lose more than 10% of the inheritance to interest on the $25,000.