Author: Matthew Cameron

Date: 1st June 2010

Published: Living France

I had expected to use this article to explain how a group of English solicitors are working with notaires to promote an ever-improved understanding of cross-border legal implications between the UK and France, and that as part of this ongoing work we had scheduled a conference in France.  The conference we had organised was affected by the Icelandic volcano problems but did go ahead anyway, albeit with only a few of the English lawyers in attendance.  It is suitable to underline that solicitors specialising in French law and notaires do regularly work together for the benefit of British clients with French property interests – our respective roles do complement more than conflict or overlap.

The conference took place notwithstanding the number of delegates who could not attend, and a number of issues of international private law were discussed.  In this article I shall concentrate on one of these.  Many French property owners will be aware of the concept of a change of matrimonial regime and how this may be used to address property ownership in France taking into account the implications of French property law.  One topic was how this concept may be extended beyond the limits that were previously understood to apply. To consider how such changes are understood, we should first review what exactly a change of matrimonial regime means, and why it may be an attractive option for the purposes of French inheritance law and estate planning.

A couple married under English law (which generally means that they have initially lived in the UK following their marriage) will not have had the chance to select a specific matrimonial regime to be applied to their joint estate; in France a couple is able to decide how their assets will be held, and eventually devolved on death.  UK couples will be treated as owning their estates in equal, but separate, undivided shares.  Under French law this regime can be chosen, and is known as a separation of assets (séparation de biens).  The effect of a separation of assets matrimonial regime on one person’s death is that his share in the French house would pass in accordance with French law, and subject to the terms of a Will, provided the Will is not inconsistent with French law.  That of course means that the deceased’s children will take an interest in the French property on his death, even if the deceased’s Will was worded to leave everything to the surviving spouse.  Leaving an interest to the children at the time of the first death may though not be what the married couple would have wanted.

It is possible for a couple marrying in accordance with French law to adopt different forms of matrimonial regimes apart from the separation of assets regime, including various forms of community regime under which the couple’s assets – or certain of them – are treated as not being owned by one or other of them, or even in joint undivided shares, rather it is the matrimony as one entity that owns everything.  Such community regimes can extend to all of a couple’s property, under what is known as a universal community regime.  Furthermore such a regime can be backed up by an attribution clause, which will mean that not only is a couple’s estate during their marriage treated as one entity, but that at the time of the death of the first of the couple then the whole of the estate would pass absolutely to the surviving spouse.

Much of this is not news to readers who are well aware of the workings of French inheritance law.  For a good while, British people buying properties in France have been aware that it is possible for a married couple to ensure that the surviving spouse would inherit the entire house in France.  There was – and still is – the proviso that the couple do not have children from other relationships apart from their own, as otherwise they would not have any security in their objective: article 1527 of the code civil holds that where there are such children who would otherwise be disinherited, they have a right to set that regime aside.

Thus for a couple with no children or who only have children from their own marriage, adopting a community regime can be an ideal way of ensuring survivorship between the two of them.  It has long been accepted that it is possible for a British married couple to complete this change of regime, by virtue of certain international regulations that entitle them to apply French matrimonial law to a house they may own, or come to own, in France.  A problem, though, is that this change of regime has always only ever applied to the house, and nothing else.  The reason for this is that British couples buying properties in France have always been able to rely in the past on certain international regulations (part of the Hague Convention regulations) to apply this change of regime, which has allowed them to avoid substantial duties that would otherwise apply; these regulations, though, only allowed the couple to apply local (French) matrimonial law to the house that they had bought in another country, while the rest of their assets had to remain subject to English law.

But what was to happen if the couple were to live permanently in France, such that all of their estate were to be subjected to French law?  Would they not be able to complete a change of regime to adopt a universal community for the rest of their estate?  In the past, the answer to such a situation has been that they would be able to do this, but that this change would be subject to certain fiscal obligations in France, which would inevitably become quite costly, based on the value of the estate being brought into the regime.  That in itself has generally been enough to deter people from completing the second change of regime. On top of this, the second change of regime has always required judicial approval – which, compared to the first one that only required completion of a deed before a notaire, is legally burdensome.

This is where we return to the conference.  One of the issues discussed was how this original concern about being able to extend a matrimonial regime without suffering substantial costs and legal procedures.
The current view is that, since the original regime change applied only to the French house, then a subsequent change of regime applying to your personal property is not affecting the same assets and is therefore not a further amendment to ones regime.  This is important since while the Hague Convention permits a change of regime for a house to apply the matrimonial law of that country, it is only possible to do this for the house while you re not resident in France.  And such a change of regime is only possible once if there are to be no tax disadvantages.

Thus the view that it should now be possible to complete a subsequent change of regime for the remaining assets without incurring such tax problems would be extremely attractive for people who have already bought a house in France and are then going to move to France permanently: they would not have been able to apply the regime to the whole of their estate when they first bought. So the ability to do following a move is therefore attractive.

These views are being expounded and proposed by various legal specialists, including lawyers at the CRIDON, the advisory body for French notaires.  It follows from this that such propositions should be capable of being put into practice.  In a subsequent article, we will review the benefits of different forms of matrimonial regime, to understand how they can help in relation to your French estate planning.  It is important, though, to seek independent legal advice from specialist solicitors for such matters.