Managing and Investing Your Inheritance

One pair of hands passing a miniature house to another pair of hands
Inheritance is a gift. Use it.

Inheritance is a major source of wealth. Almost 11% of the world’s highest-net-worth individuals received their money through inheritance, and Millennials will inherit more than $68 trillion from Baby Boomers by 2030. If you’re lucky enough to expect one, make sure you’re investing your inheritance wisely.

You’ll have inheritance taxes to contend with and poor investment strategies to avoid. In this article, we’ll discuss every step of inheritance management, from maximizing the amount you can receive tax-free to investing wisely.

For professional and legal advice on managing your inheritance, contact us or visit our office at 4801 E Independence Blvd, Charlotte, NC 28212.


  • Estate tax
  • The SECURE Law
  • Converting to a Roth IRA
  • Starting a franchise
  • How to invest

Estate tax

It might be more glamorous to think about starting a business and investing in company stocks than optimizing your accounts for taxes — but neglecting this step could see you lose out on vast quantities of money.

Instead of waiting until a family tragedy to sort things out, make sure you and your relatives are storing your money in the right places way ahead of time.

You must pay an estate tax on the inheritance you receive. Despite the slightly misleading name, this tax applies to cash and securities as well as property. The government has recently updated some federal rules regarding retirement accounts and estate taxes, so make sure your understanding is up-to-date.

Calculating numbers for income tax return with pen and calculator
Don’t forget about taxes


In December 2019, the government approved the SECURE (Setting Every Community Up for Retirement Enhancement) Law, which made significant changes to how retirement plans work.

One of the most relevant shifts is in how recipients can withdraw their inheritance money. Now, most heirs must make all withdrawals from their IRA within ten years of the benefactor dying. 

However, a select group of heirs can still spread out their withdrawals throughout their lives, including spouses, minor children, chronically ill, and anyone less than ten years younger than benefactors, like siblings.

This means that those who leave substantial sums in their IRAs to their adult children will also pass on a heavy tax burden. Before the SECURE law, benefactors could “stretch” out the tax contributions over their life, but this is no longer an option.

Let’s look at an example: an heir with a salary of $100,000 who also inherits $500,000 in assets from an IRA that they must withdraw within ten years. If the heir withdraws 10% of the IRA sum annually, the extra inheritance money will increase his gross income by 50% each year. 

This results in a much greater burden than before the SECURE law, when an heir could stretch out the withdrawals, taking out 2% a year, for example.

Smart wealth planning methods are more than ever.

Infographic about the SECURE Law
Take some time to understand the new laws

Converting to a Roth IRA

If the benefactor converts their regular IRA account into a Roth IRA before they die, it will reduce the tax burden of the heir.

Whilst you finance regular IRA accounts with pre-tax income, Roth IRA accounts use money after taxes. So, if the benefactor pays taxes upfront, they save their beneficiary from facing a tax burden later.

The SECURE Law requirement to withdraw the entire sum within ten years still applies, with the same groups being the exceptions (spouses, minor children, chronically ill, and the young).

Of course, converting to a Roth account is the choice of the benefactor — and it’s less favorable for them since they will have to pay the taxes upfront themselves. However, there are a few advantages. For instance, regular IRA holders must make annual minimum withdrawals from age 70, which isn’t a requirement for Roth IRA holders.

Although people who plan to use the money in their IRA to fund their retirement might not mind making these withdrawals, it’s not ideal for those who plan to continue working or who have particularly high retirement income. Here, it’s best to convert to a Roth IRA.

Infographic about Roth IRAs
Make sure you convert to an IRA before you reach retirement

Further considerations

The banking institution that owns the IRA account should convert an IRA account into a Roth IRA for you. Because the conversion constitutes as a withdrawal, the account owner will have a tax obligation the year they convert the assets.

A little-known fact is that you can stretch out the tax impact by moving assets from an IRA to a Roth IRA gradually, over several years. 

There are others ways to lighten the tax burden of the account conversion:

  • Switch your account during a year when you have low taxable income, because your effective tax rate will be lower than usual
  • Convert your account during a year when your deductible medical expenses are very high, as you can use the expenses to offset the tax burden
  • Donate to charity — you don’t need to make an immediate charitable contribution and you can offset your tax liability 
Professional man explaining documents to his customers
Be smart about your money

Starting a Business or Franchise in the USA

Investing in your own business is an excellent way to make your money go further, because it generates even more income. However, this comes with a lots of responsibility — not everyone has the discipline to put in the time, effort, and risks required for entrepreneurship.

Yet, if you’re so inclined, you might want to use a lump sum like inheritance toward an independent venture. That might mean starting a business or setting up as a sole contractor, or you might prefer to try a franchise instead.


Owning a franchise means acquiring a license to operate an established brand in a new premise. 

You normally nemustay an annual fee to obtain the license — this might seem like a high upfront cost, but it’s worth it as you’ll learn about the knowledge, processes, and management of an already-successful brand. 

You also won’t need to work as hard to raise the profile of your company as you would if you were starting a new business.

Concentrated professional administrative manager of coffee shop making revisions after working day
Starting a franchise can take some of the pressure of

Top franchises

In the US, there are many recognized brands that sell franchise licenses.

These were the 10 most popular business to franchise from 2014 to 2019:

  1. Club Pilates franchise

Franchise growth: 2,774%

Total global locations in 2019: 554

Estimated initial cost: $168,000 – $280,000

Product: Gym

  1. Orangetheory Fitness

Franchise growth: 952%

Total global locations in 2019: 1,225

Estimated initial cost: $575,000 – $1.5M

Product: Gym

  1. 9Ronde

Franchise growth: 240%

Total global locations: 797

Estimated initial cost: $100,000 – $143,000

Product: Gym

  1. Kona Ice

Franchise growth: 111%

Total global locations: 1,199

Estimated initial cost: $128,000 – $152,000

Product: Ice creams

  1. Tropical Smoothie Cafe

Franchise growth: 104%

Total global locations in 2019: 784

Estimated initial cost: $247,000 – $581,000

Product: Smoothies

  1. HomeVestors of America Inc.

Franchise growth: 103%

Total global locations in 2019: 1,102

Estimated initial cost: $56,000 – $426,000

Product: Real estate services

  1. Planet Fitness

Franchise growth: 102%

Total global locations in 2019: 1,859

Estimated initial cost: $1.1M – $4.2M

Product: Gym

  1. Pure Barre

Franchise growth: 102%

Total global locations in 2019: 524

Estimated initial cost: $199,000 – $446,000

Product: Gym

  1. Mathnasium Learning Centers

Franchise growth: 92%

Total global locations: 1,047

Estimated initial cost: $113,000 – $149,000

Product: Mathematical tutoring

  1. Supercuts

Franchise growth: 87%

Total global locations in 2019: 2,883

Estimated initial cost: $151,000 – $321,000

Product: Haircuts

You might have noticed that gyms do particularly well on this list. It’s expected that there will be a 13% growth of trainers and fitness instructors from 2018 to 2028 — more than double the 5% growth of other industries.

Of course, buying a license for a franchise isn’t the only smart way you can make money.

Infographic about franchises
A franchise isn’t right for everyone

Four pillars of investment

Starting a business or franchise isn’t for everyone. 

You might prefer to pursue an alternative investment strategy — in that case, here are four pieces of advice to keep in mind.

1. Stable stocks

If your savings are large enough, you could invest in company stocks. Consider companies with good management and a successful track record, like MasterCard, Starbucks, and Home Depot.

These three companies have business models designed to facilitate growth. Mastercard has franchises in 210 countries; the Starbucks brand is known worldwide thanks to their 31,795 stores, and Home Depot is the number one choice for builders, boasting 2,290 stores across Canada, the US, and Mexico.

Even better, Starbucks and Home Depot have generated dividends for the past decade, and Mastercard for nine years.

Although past performance doesn’t guarantee future performance, the statistics for these firms make a powerful case for why they’re a safe investment.

2. High-growth stocks

If these types of stocks seem too risky to you, you might be more interested in high-growth stocks. Here, it’s worth mentioning DocuSign as an example.

The electronic signature generator launched in 2003 to wave goodbye to pen and paper contracts. It has over 562,000 users (and counting!) and expects to make $962 million this fiscal year.

Even better, it returned 150% in the last two years and achieved 40% year-on-year growth in the third quarter of 2019. 

The e-signature market is already worth at least $25 billion annually, but DocuSign hopes to build on this through further technological updates and automation of processes.

Look out for promising stocks like this.

3. Rule breakers

Companies that break the rules are true innovators — this often translates into high profits.

A perfect example is Netflix, a company that you’re probably familiar with already, unless you’ve been living under a rock. By modernizing entertainment to let you enjoy series and films from the comfort of your living room, it’s generated substantial wealth for its shareholders.

Stitch Fix is ​​another example. The founder Katerine Lake began the firm with a simple idea: to help people find an outfit they like with the click of a button. Users can register in the app and computer algorithms will suggest five pieces of clothing for them based on 90 aspects of your profile. Customers can even try on and return items easily, straight from the app.

Since then, Stitch Fix has gained 3.4 million users. They also earn a net revenue of $498 per customer — an increase of 6% year-on-year — and expect to grow 20-25% over the next year. The growth of e-Commerce makes them more likely than ever to achieve this goal.

4. Don’t expect instant returns

Recessions are inevitable. To receive guaranteed profits from your shares, you must hold them for the long term and not panic if you see short-term losses.

In the words of the world’s most successful investor, Warren Buffett: “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.”

Building a company involves developing a customer base, recruiting staff, growing the business, and pursuing long-term strategies — this involves some serious time investment. There’s no need to panic that you’ll lose all your money because a firm is going through a temporary blip.

Infographic about investment strategies
Investing doesn’t have to be complex

Investment strategies for 2020

So far, 2020 has proven to be a turbulent year. After the longest bull market in history from 2009 to 2020, the global coronavirus pandemic led to uncertainty and a halt in production. 

As a result, in late February and March, the stock markets of most major economies saw severe crashes.

There has been some recovery since then, but many are expecting a prolonged recession later this year.

That might put you off from investing — but often the best opportunities appear during times of uncertainty and recessions. By following proven economic strategies and adopting a long-term focus, you can minimize the effect of a recession — or even avoid any negative consequences. 

A tablet with a graph
Take a look at the data before you spend your money

General strategies

Here are some strategies carried out by Mapfre, Iberdrola, Santander, Repsol, and other major businesses.

  1. Be cautious. Focus on how your investments will perform years from now. Just because a stock has dipped over the last few months, it doesn’t mean it won’t recover — in fact, the dip could be an opportunity in disguise.
  1. Assess the risks. Although some dips represent great buying opportunities, never buy shares of a company without doing your research first. Plus, remember that your money isn’t guaranteed — don’t invest what you can’t afford to lose. If you have limited economic resources, consider buying low-priced yet quality companies and try not to worry about short-term volatility.
  1. Diversify. The best way to increase your chances of success is to diversify your portfolio as much as possible. Invest in different sectors and different countries. Great industries include defense, energy, telecommunications, automobile, and consumer goods.

Recommendations for 2020

Stéphane Monier, Chief Investment Officer of Lombard Odier, suggested the following eight investment strategies:

1. Aim for diversification and agility. Managing a diversified portfolio is essential for investors. Make sure you know what you’re investing in and that you have enough cash to remain flexible.

2. Account for currencies. If you’re investing in multiple countries, you need to think about their local currencies. Set spreads on equity indices to protect your portfolio from large drops in the market. A prominent example is gold.

3. Identify profitable opportunities. The only way you can earn a fixed profit is by limiting yourself to low profit. To earn more, you need a dynamic approach. Try high-yield strategies for greater profitability and only moderate volatility.

4. Equity quality. This year, equities may yield better results in the US. Equities are still a risky area to explore, but don’t write them off completely.

5. Look out for equity sectors. Since the manufacturing industry is declining, investors must pay attention to big industry names and balance the defensive and cyclical sector. 

6. Look to emerging markets. Developing countries can be a promising investment opportunity since they have the most potential for growth. In Latin America, Brazil is a strong choice because of its changes in macroeconomic policies.

7. Invest in assets. Real estate asset valuations — be it real estate, private equity, private debt or infrastructure — seem appealing right now. However, they face a low interest rate environment, so other assets might be a better option.

8. Consider emerging market currencies. Although there’s a lot of variation, overall, emerging market currencies appear undervalued. This means that, as the market economies of emerging countries recover and experience growth, their economies are likely to appreciate.

businessman with financial symbols coming from hand
Sometimes recessions bring the greatest opportunities

Bottom Line

Business and investment are complicated. Don’t use this as an excuse to avoid learning about them — it can be a very costly mistake. Being hit by an exorbitant tax bill from an inherited IRA that was never converted into a Roth IRA is the perfect example.

If you need to learn more about some of the concepts discussed, check out our articles about starting a business or paying taxes. Alternatively, you might prefer to contact us directly and ensure you make your business ideas, investment strategies, or inheritance plans in accordance with the law.

Contact us or visit us directly at our office at 4801 E Independence Blvd, Charlotte, NC 28212 for professional and legal advice.

Leave a comment