Published: Faces and Places

Date: January 2011

Author: Matthew Cameron

To many an English mind, French inheritance law can appear incredibly unfair, particularly due to its apparent disregard to the wishes of the deceased. It is important to understand the rules that apply and to what effect they may be overcome if necessary, when buying a house in France.

Subject to limited restrictions, English law allows you to leave your estate to anyone of your choice. This could vary from your children to a cat home, and gives you what is normally referred to as freedom of testamentary disposition.

However, French inheritance law bases itself much more on passing estates along the bloodline. Thus, the children and the spouse of the deceased are protected through the rights of ‘protected heirs’. Only biological descendants or ascendants count as protected heirs, with certain rights granted to a surviving spouse in some instances as well. In principle protected heirs are entitled to at least a minimum interest, regardless of the wishes of the deceased. By living in France, your worldwide assets become subject to these laws, and even your estranged children are guaranteed a minimum interest in your estate.

Whatever your nationality, at the date of your death, any real property you own in France is subject to French law. If you are resident in France when you die, all assets are subject to French inheritance law, save generally for any real property you own outside of France (although this may itself be subject to French inheritance tax in any event.

A protected heir is entitled to inherit a legal reserve–(reserve), the minimum amounts being:
- One child: half of the estate;
- Two children: two-thirds of the estate divided equally;
- Three or more: three-quarters of the estate divided equally between them.

The disposable portion (quotité disponible) is what remains after the legal reserve.

If a child predeceases, their portion would be shared out amongst their own children. However, if the predeceased child had no children, his part is distributed between the surviving children. If you die leaving a spouse but no children, the surviving spouse is entitled to the entire estate in preference to the deceased’s parents.

French Inheritance Tax
After deduction of all liabilities, French inheritance Tax is paid by each and every beneficiary, rather than by the estate of the deceased. This can vary depending on the relationship between the beneficiary and the deceased. This means that where a deceased’s estate is split then the amount each party would inherit may vary substantially, due to the differences in inheritance tax. As mentioned before, French inheritance tax is only applicable if domiciled in France at time of death, or on French assets, subject to the exemptions.

French inheritance tax is due on the registration of the ‘déclaration de succession’. But delays or payment by installments can be agreed with the French Revenue, if necessary. Interest will be charged and French inheritance tax varies from 5% to 60%.

If there is an inheritance tax liability, a ‘déclaration de succession’ must be filed within 6 months of the death (12 months if the deceased died outside France) to avoid possible tax penalties.

Surviving Children and Parents
After an initial tax-free allowance, inheritance tax of between 5% and 40% is payable by each child, dependant on the scale of the child’s inheritance. However, stepchildren, unless officially adopted, can be liable to pay full 60% tax due to lack of blood-connection.

Brothers and sisters are taxed at a rate of 35% within the first band of inheritance, and 45% after that. Further relatives are charged at a full 55%, with a lower tax-free allowance than is offered to siblings. All other relatives pay 60% maximum tax with a minimum tax-free allowance. Again, it is clear that the French inheritance tax favours the family. It must be noted that, these tax bands are subject to regular change.

Lifetime Gifts
A solution to the problem could be a lifetime gift, a tax-efficient way of disposing of your assets. Rates of tax and allowances are generally the same as with inheritance except for certain allowances. These depend upon the relationship between donor and donee. Although you can be heavily taxed, the gift does not have to go in any direction, and thus gives you the freedom before death that you may feel you will lose within it.

Conclusion
Although in principle the vast majority of people leave their estates to their children, our English predisposition of the rights of the individual screams out at this privation of liberties. However, in making ones Will, it is advisable to consult a solicitor who understands both French and English law, and thus who can work out the best solution for you. Unfortunately, we cannot change the law, but a French Legal Services solicitor can try to use the law to get where you want to be.

This article is intended as general information and proper legal advice should be sought before taking any further action.

Contact Matthew Cameron
Head of French Property at Ashton KCJ