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Inheritance: what to do with the money?

Written by Birdee | Feb 1, 2024 6:00:00 AM

Inheritance: how to invest your money?

When you receive an inheritance, choosing the right way to honor the memory of the deceased by investing your money is not the easiest thing to do. Should the inheritance be declared to the tax authorities? SCPI, life insurance, savings or real estate: what type of investment should you choose for your inheritance? Before jumping into an investment a little too quickly, take the time to take stock of your situation. Birdee will explain your rights and help you choose the right investment for your inheritance.

INHERITANCE TAX AND TAX RETURNS: THE RULES YOU NEED TO KNOW 

The complex rules of inheritance deserve to be studied in detail. Birdee explains it all!

Do I have to declare inheritance tax?

In the event of the death of a close relative, if you are the heir, legatee or responsible donee of the deceased, you should be aware that you are obliged to declare the money in your estate to the tax authorities. You must first send a declaration to the tax authorities, who will then calculate whether you are liable to pay tax on your estate. This declaration must be made :  

- Within 6 months of the date of the deceased's death, if in France, 
- Within 12 months of the date of death if the deceased died outside France (except in the case of Mayotte and Reunion Island).  

In certain cases, you may be exempted from making a declaration. Deductions are applied according to the relationship between the deceased and the heir (for example, if there is a specific amount for the children, another for the spouse, etc.). Certain assets, such as the principal residence of spouses or PACS partners, may benefit from partial or total exemptions.

💡 If a will has been drawn up, the declaration can be made by a notary. In the case of a deceased relative, you are entitled to draw up a single declaration for the entire estate, signed by all the heirs concerned.

What conditions apply to inheritance tax?

The amount of inheritance tax payable is calculated according to a tax scale. 

Your inheritance tax rate depends on your relationship to the deceased. The more distant your relationship to the deceased, the higher the rate. Inheritance tax is paid upon death and receipt of the tax notice, generally within 6 months of the declaration.

The tax rate may change in certain circumstances: 

- In the case of a gift made by the deceased during his lifetime, injected less than 15 years before death, the tax rate may increase. 
- If the deceased was in debt or had outstanding loans, the debts may be deducted from the estate assets, which may reduce the taxable inheritance base.
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POSSIBLE INVESTMENTS FOR YOUR INHERITANCE

Have you inherited a substantial sum of money following the death of a close relative, but you're not sure how to invest it? Depending on the amount received, the terms of your inheritance and the risks you're prepared to take, there are a number of possible ways of making your assets grow.

  1. Investing your inheritance in one or more bank savings accounts: a precautionary solution

While investing your money in a bank passbook does not generate a direct return on investment, it does provide you with a degree of economic security. 

It's possible to spread your inheritance over a number of savings books, with varying interest rates: the LEP, which currently offers the most attractive yield on the market (6%). You can also opt for a Livret A or LDDS (Livret de Développement Durable et Solidaire), each paying 3% annual interest.

🤝 Make your savings profitable and responsible! With Birdee, bank savings are solidarity-based. 

 

  1. Choosing LMNP to invest a large inheritance

If you have received an inheritance of over 100,000 euros and would like to delegate the management of your assets, investing in a non-professional furnished rental property (LMNP) can be advantageous over the long term. LMNP lets you invest in serviced residences while entrusting the management of the property to a company. 

How does it work? You invest in a property, sign an agreement with a management company, and earn a return of 6-10%. If you opt for this type of real estate investment, remember to ensure that your company's manager is financially stable.

  1. Take out a life insurance policy

A favorite investment of the French, life insurance is an effective way of increasing your savings over the long term, thanks to tax advantages. A flexible savings tool, life insurance provides financial security for your descendants or those to whom you leave your estate. 

As a parent, you can take out a life insurance policy to leave capital to your heir children. The life insurance account remains your responsibility until your children reach the age of majority. At any time, you can adjust your investment and withdraw money from your life insurance account to supplement your income or boost your retirement.

💡 Up to an amount of 152,500 euros, your life insurance is not subject to inheritance tax.

  1. Invest in an SCPI to ensure regular returns

Acquiring SCPI units (Sociétés Civiles de Placement Immobilier) means placing your investment in collective real estate, such as offices or shops. 

These funds are managed by a private professional, whose mission is to maximize profits and pay you quarterly or annual income. SCPIs offer attractive yields of between 4% and 6%. As with the purchase of a house, rents received by an SCPI are taxed as income from property. Beware: the manager of an SCPI can go bankrupt: it's a risk worth taking.
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