Published: French Entrée
Author: Matthew Cameron
Date: 25 April 2011

It is almost inevitable that complications will arise when dealing with a deceased person’s succession if an estate is spread over different jurisdictions. This is increasingly so with an estate split between the UK and France, as the rules of inheritance law and tax are vastly different. The rules of succession – the general requirement to leave at least part of your estate to your children – are commonly appreciated in France. This, though, is only part of the issue. Questions of how inheritance tax is applied – both in France and the UK – can cause a number of concerns and complications. In a law firm with a specialist French Legal Services department, we encounter such issues on a regular basis. We will look here at some cases we have encountered, highlighting some of the potential pitfalls that can be avoided with suitable prior planning. As we cannot identify any of the parties involved, we have referred to them by a letter only.

The issue of domicile is not normally a major problem, as in most instances, it is clear where a person was domiciled prior to their death. It is therefore simple to establish which law will apply to which part of the deceased’s estate. One area where French and English law agree is in the way that different parts of an estate are administered: land and buildings – real property – pass in accordance with the rules of the country where it is situated. Personal property (i.e. everything else), passes in accordance with the laws of the country where the deceased was living prior to their death. Since the rules of ‘domicile’ are different in the UK and France, it is not always clear which set of laws govern the personal estate of a deceased person.

To give an example of this, we have been advising the sister of C, who lived in France, where she died. C had written an ‘off the shelf’ Will while in England, which unfortunately wasn’t very clear and was not fit for use in relation to her French estate. In this scenario, there would have been a good case for having contacted specialist solicitors to advise on the preparation of separate Wills for her French and English estates. Certain international regulations mean that provided the Will was valid for use in England, it would have to be taken into account in France. This caused a number of complications. While having solicitors prepare separate Wills professionally would obviously have cost more than an ‘off-the-shelf’ package, C would certainly have benefited from the extra advice, as would her beneficiaries.

However, this was not the only problem. C was not married: she lived with her partner. Her partner had tried his best, along with a firm of English solicitors, to persuade the notaire in charge of the succession to accept that C had been domiciled in the UK. He had an interest in this being agreed – as an unmarried partner, French inheritance tax would be applied to anything he inherited at a rate of 60%, with only a very small tax-free allowance. If English inheritance law applied, the maximum rate of tax would be 40%.

The first part of the case, then, was taken up in protracted negotiations with the other firm of solicitors and the notaire. C’s partner had to accept that C was domiciled in France, and that French law therefore applied to her estate. While this may have been to the detriment of C’s partner, it was clearly the correct result.

Another example where domicile has been an issue is in relation to a single man whose estate we have been administering. W worked in a school in the UK, where he also lived. The only house he owned was in France. He had very little by way of a UK estate, and as such it wouldn’t normally have been necessary to obtain a Grant of Probate for the administration of his UK based assets. However, because there was no dispute that he was domiciled in the UK and because his French house was worth more than a specific value, a Grant of Probate was obtained in the UK, to confirm that the overall value of his estate was below the threshold for inheritance tax purposes in the UK. Had the family merely contacted a local notaire, on the basis that W had no estate in the UK to speak of, there may have been no application for a UK Grant, which could have led to substantial penalties.

Another major complication that occasionally arises in estates split over the UK and France is when a person domiciled in the UK dies leaving children who are under 18 years old. The problem is that minors cannot own real estate in the UK, while in France they can. Children cannot, though, sign any of the succession documentation that beneficiaries would normally have to sign in France. This may not be a major problem on completion of the succession itself – it is normally possible to organise for someone else, such as a grandparent, to sign for them. The problem arises if there is a subsequent sale. While minors can inherit property in France, they can’t sell it. A Court order is therefore necessary for this to be authorised.

Our client, A, whose wife died recently, has had to seek such a court order –from the English court – to enable his children to sell the small part of the house they have inherited. This demonstrates the complications that can arise when an English court has to produce an order to allow for the sale of a house in France. Clearly such matters would be almost impossible for a notaire to deal with on his own.

A notaire is the only person who is entitled to complete a succession in France. However, whenever there is a cross-border element in a deceased person’s estate, the notaire will commonly need to work with a firm of solicitors in England. Indeed the notaire’s governing body, the Conseil Supérieur du Notariat advocates the involvement of solicitors in England and Wales in such circumstances.

For further information, please contact Matthew Cameron