How to Invest an Inheritance: A Practical Guide

Receiving an Inheritance: Do Not Rush

Receiving an inheritance is an emotionally charged moment. Whether it is 50,000, 100,000, or 500,000 euros, the temptation to make quick decisions is strong. Some heirs want to invest the money immediately to "make it work," others are tempted by an impulsive purchase, and many simply leave the sum sitting in a current account out of inability to decide.

The first rule, and perhaps the most important, is not to act in haste. Wait at least three months before making any major investment decision. During this time, place the sum in a regulated savings account (Livret A, LDDS) or a term deposit so it is safe and earns a minimum return while you define your strategy.

Understanding Inheritance Taxation

Before thinking about how to invest your inheritance, it is essential to understand the applicable taxation. Inheritance taxes (droits de succession) can significantly reduce the amount actually received.

Allowances in Direct Line

For inheritances between parents and children, each child benefits from an allowance of 100,000 euros per parent. This means a sole child can inherit 200,000 euros (100,000 euros from each parent) without paying any inheritance tax. Beyond this allowance, taxes apply according to a progressive scale:

• From 0 to 8,072 euros above the allowance: 5%
• From 8,072 to 12,109 euros: 10%
• From 12,109 to 15,932 euros: 15%
• From 15,932 to 552,324 euros: 20%
• From 552,324 to 902,838 euros: 30%
• From 902,838 to 1,805,677 euros: 40%
• Above 1,805,677 euros: 45%

Life Insurance from the Deceased: A Special Case

If part of the inheritance comes from a life insurance contract, the taxation is different and generally more favorable. Capital paid before the deceased's 70th birthday benefits from an allowance of 152,500 euros per beneficiary, entirely separate from the 100,000 euro inheritance allowance. Beyond this, a flat-rate levy of 20% applies up to 700,000 euros, then 31.25% above.

Setting Aside Funds for Inheritance Tax

If your inheritance is subject to inheritance tax, set aside this amount before making any investment. Taxes are due within six months of the death (one year for deaths outside metropolitan France). Failing to anticipate this tax liability would be a serious mistake that could force you to sell investments in a rush.

Strategy by Amount: How to Invest Your Inheritance

The investment strategy varies considerably depending on the inherited amount. Here are our detailed recommendations for each bracket.

Inheritance of 50,000 Euros: Laying the Foundations

With 50,000 euros, the objective is to build a solid wealth base without taking excessive risks. This sum, well invested, can become the cornerstone of your financial wealth.

Recommended allocation:

• Emergency fund (10,000 euros): If you do not yet have three to six months of expenses in your regulated savings accounts, this is the absolute priority. Place this sum in the Livret A and LDDS.
• Multi-fund life insurance (20,000 euros): Open a high-performing online contract if you do not already have one. Split between 40% fonds en euros and 60% unit-linked funds (diversified ETFs). You lock in the tax clock and will benefit from reduced taxation after 8 years.
• PEA (15,000 euros): Invest progressively over 6 to 12 months in MSCI World or S&P 500 ETFs. Do not invest the full amount at once to smooth out market risk.
• PER (5,000 euros): If your TMI is 30% or above, a 5,000 euro contribution to the PER will save you 1,500 euros in income tax.

Inheritance of 100,000 Euros: Diversify Intelligently

With 100,000 euros, diversification becomes more relevant and you can access additional asset classes such as real estate investment trusts (SCPI).

Recommended allocation:

• Emergency fund (10,000 euros): Top up if needed, otherwise this share can be reduced.
• Multi-fund life insurance (35,000 euros): Split 30% fonds en euros, 50% equity ETFs via unit-linked funds, 20% SCPI in unit-linked funds. You may consider two different contracts to diversify across insurers.
• PEA (30,000 euros): Progressive investment over 12 months in diversified ETFs. With this amount, you can combine a World ETF and an Emerging Markets ETF for global exposure.
• SCPI held directly (15,000 euros): SCPI offer an average return of 4 to 5% distributed quarterly. They provide real estate exposure without the constraints of property management.
• PER (10,000 euros): If the tax deduction is relevant for your situation.

Inheritance of 200,000 Euros and Above: A Comprehensive Wealth Approach

From 200,000 euros, you enter a wealth management logic that potentially justifies the support of an independent wealth management advisor.

Recommended allocation for 200,000 euros:

• Emergency fund (10,000 euros): Unchanged -- security first.
• Life insurance (60,000 euros): Two contracts with different insurers. Diversified allocation across fonds en euros, ETFs, SCPI in unit-linked funds, bonds.
• PEA (50,000 euros): Diversified ETF portfolio (World, Europe, Emerging Markets, Small Caps).
• SCPI held directly (40,000 euros): Two to three different SCPI to diversify across sectors (offices, healthcare, logistics).
• PER (20,000 euros): Maximize the tax advantage according to your bracket.
• Standard brokerage account (20,000 euros): To access vehicles not available in PEA or life insurance (specific ETFs, international bonds).

Investing Gradually: The Smoothing Method

Whether your inheritance is 50,000 or 500,000 euros, never invest the full amount at once in financial markets. The smoothing method involves spreading your investments over a period of 6 to 18 months, depending on the amount.

Why Smooth Your Investments

Financial markets are unpredictable in the short term. If you invest 100,000 euros in the stock market the day you receive your inheritance and markets drop 20% the following month, you immediately lose 20,000 euros in value. Psychologically, this is devastating, especially since this money carries a particular emotional charge.

By investing 8,000 euros per month over 12 months, you smooth your entry price. Some months you buy high, others lower, and on average you get a reasonable purchase price. This method does not necessarily maximize returns (statistically, investing everything at once is slightly superior over the long term), but it protects your capital and your peace of mind.

An Investment Calendar

Here is an example calendar for a 100,000 euro inheritance:

• Month 1: 10,000 euros into Livret A for the emergency fund, open PEA and life insurance if needed
• Months 2 to 4: 8,000 euros per month into PEA in diversified ETFs
• Months 3 to 8: 5,000 euros per month into life insurance (fonds en euros and unit-linked funds)
• Month 4: 15,000 euros into SCPI (real estate investment can be done in one go since liquidity is already limited)
• Month 6: 10,000 euros into PER before the end of the tax year if relevant
• Months 9 to 12: Adjustments and rebalancing based on market developments

Common Mistakes to Absolutely Avoid

An inheritance is a moment when investment mistakes are particularly common. Here are the traps that heirs most frequently fall into.

Putting Everything into Real Estate

This is the most widespread mistake in France. Many heirs rush to buy a rental apartment with their entire inheritance. Buy-to-let can be a good investment, but it concentrates all your wealth in a single asset, in a single city, with rental risks (vacancy, unpaid rents, damage) and significant costs (notary fees, renovation, property management).

With an inheritance of 100,000 euros, buying a studio flat with a mortgage to rent out may seem attractive. But notary fees (8%), potential renovation costs, property tax, and co-ownership charges considerably reduce the net profitability. And if the tenant does not pay, your rental income drops to zero while the mortgage continues to run.

Leaving the Money in a Current Account

At the other extreme, some heirs leave tens of thousands of euros in their current account for years. With inflation of 2 to 3% per year, 100,000 euros in a current account loses 2,000 to 3,000 euros in purchasing power each year. Over 10 years, that is 20,000 to 30,000 euros of real value evaporated.

Investing in What You Do Not Understand

An inheritance attracts "advisors" of all kinds. Be wary of investment proposals in cryptocurrencies, forests, wine, overseas parking spaces, or any other exotic investment. The golden rule is simple: if you do not fully understand the mechanics of an investment, do not put your money into it.

Being Influenced by Those Around You

Everyone has an opinion on what you should do with your inheritance. Your brother-in-law will recommend real estate, your colleague cryptocurrencies, your banker their in-house products. Take the time to educate yourself, read, consult an independent professional, and make your decisions with full knowledge of the facts.

Optimizing the Taxation of Your Invested Inheritance

Beyond inheritance tax, the taxation of income generated by your investments deserves particular attention.

Prioritize Tax Wrappers

The order of priority for placing your inheritance in tax-advantaged wrappers is:

1. PEA: Reduced taxation after 5 years (only 17.2% on gains)
2. Life insurance: Tax allowances after 8 years and estate planning benefits
3. PER: Tax deduction at entry, ideal if TMI is high
4. Regulated savings accounts: Full exemption but limited return
5. Standard brokerage account: As a last resort, 30% PFU on gains

Defer Taxation Over Time

By placing your inheritance in capitalizing wrappers (life insurance, PEA), you only pay taxes upon withdrawal. In the meantime, your gains are fully reinvested and themselves generate gains. This compounding effect is all the more powerful the larger the invested sum.

When to Seek Professional Help

The Independent Wealth Management Advisor

For an inheritance exceeding 100,000 euros, engaging an independent wealth management advisor (CGP) is strongly recommended. Choose a professional compensated solely through fees (not commissions on products sold) to ensure their independence. They prepare a comprehensive wealth assessment, propose an allocation suited to your situation, and support you through implementation.

The Notaire for Legal Aspects

The notaire handling the estate can also advise you on legal and tax matters, particularly regarding usufruct arrangements (demembrement de propriete), donations to children, or setting up a societe civile immobiliere. These legal tools can considerably optimize the transmission of your wealth.

Conclusion: A Methodical and Patient Approach

Investing an inheritance requires method, patience, and a basic level of financial literacy. Do not rush, educate yourself, diversify your investments, and invest progressively. This money, often carrying a strong emotional dimension, deserves to be managed with care -- to honor the person who passed it on to you and to build lasting wealth that you can in turn pass on.