Estate planning in France and how to benefit your family – .

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Estate planning in France and how to benefit your family – .


As regular readers know, this column was written by Bill Blevins for many years until his passing this summer.
Bill has spent over 40 years advising British expats and was passionate about estate planning, inheritance tax and inheritance law due to the issues his clients face. He felt it was an important topic for readers and returned to it regularly.

With that in mind, we thought it was a good time to remind you of the estate planning challenges that UK expats face here and the steps you can take to improve your position. And what could be better than answering the questions we are most frequently asked?

As a British national living in France, do I have to have a British or French will?

It is often advantageous to have two wills – one for your assets in France and one in the UK for assets based in the UK. These must line up and overlap to avoid conflicts.

A UK will may be effective in France, but after going through the UK probate process, it must be translated and notarized before obtaining probate here, so separate wills can avoid delays and expense for your heirs.

Your will must follow French inheritance law or formally opt for UK inheritance law to apply to your estate, otherwise it will be invalid.

How much French inheritance tax will my children pay?

Each child benefits from a tax-free allowance of € 100,000. Tax rates start at 5% (for inheritances up to € 8,072) but gradually increase to 45% (for deductibles above € 1,805,677).

This does not apply to stepchildren, who typically pay 60% tax, with virtually no allowance.

However, this could also apply to your own children. If, for example, you bequeath property to your spouse who is not their birth mother, who then leaves the property to your children upon her death, it is treated as her stepchildren and taxed accordingly.

I have no children and I intend to divide my estate between my sister, my nephew and my godson. What tax will they pay?

The tax rates can be quite impressive: as a general rule, it is 35% or 45% for your sister (with a deduction of € 15,932), 55% for your nephew (€ 7,969 reduction) and 60% for your godchild (€ 1,594 reduction).

Can I bypass inheritance tax by transferring property while I am alive?

You can donate fixed amounts tax-free, but beyond that, donations are taxable and exemptions only renew every 15 years.

Be careful when donating assets. Some people do not allow themselves the resources to live comfortably for the long term. Giving your house to children or making it co-owners can also cause problems later if there is a quarrel, a divorce, or if you have to sell it.

Our house is in my name. I want to give half to my wife but will she pay tax on the transfer?

While inheritances between spouses are tax exempt, gifts are not. Any amount greater than € 80,724 is taxable. You must also follow French inheritance law, as children are “heirs with reserve”.

Why can’t I bequeath my assets to my spouse?

Under French inheritance law (the default position, unless you make other arrangements), inheritances must be passed down through lineage.

Children are protected heirs and must inherit between 50% and 75% of your estate (depending on the number of children). You can only leave the ‘freely available’ part to your spouse / PACS partner (civil). If you haven’t made a will, it’s even more complicated.

My partner and I have been together for 10 years but have no desire to get married. What happens when one of us dies?

I fear you will feel the strength of the French succession regime. If you are not in PACS either, you will pay the highest inheritance tax rate – 60%.

Remember that if you have children, they have inheritance rights over your partner. If you manage to get around this rule and bequeath assets to your partner, who then passes them on to your children from a previous relationship, your children will also pay 60% tax.

More complex families face more complicated rules, so planning ahead is essential.

Can I bypass French inheritance law?

You can use the EU Brussels IV inheritance regulations to opt for the inheritance law of your country of nationality to apply in the event of death instead of French law. You must opt ​​for this in your will.

Be careful, however, and work out how this affects your family. For example, you risk making your worldwide estate subject to UK inheritance tax.

Keep in mind that if you bequeath property to people other than a spouse or descendants, they will face huge tax bills – we have seen cases where the family home has to be sold for it to happen. they can pay.

There may be other ways to leave assets to your chosen beneficiaries. For example, inserting a and tontine clause in the transfer when buying a property ensures that it will pass to the survivor tontine incumbent.

The different types of marriage contracts available in France can also affect how property is held and is worth exploring, but they can have tax consequences, so take advice.

Do the same inheritance rules apply to my capital investments?

Yes, generally, estate tax and law apply. However, it is easier to avoid them than with real estate.

One widely used solution is to hold the investment assets within an insurance life. These policies can significantly reduce inheritance tax and are exempt from inheritance tax, automatically passing to named beneficiaries upon the death of the insured. Normally a savings vehicle, they’re a great source of tax-taxed income – but they’re also great succession planning structures. Arguably, the estate planning benefit of a life insurance outweighs all other advantages.

The French inheritance system is complex, so I can only address a few questions here in very general terms.

Do enough research, but also take professional and expert advice to make sure you get it right and that your wishes for your heirs are fulfilled.

Author: Rob Kay, Blevins Franks. Blevins Franks advises on tax and wealth management

Tax rates, scope and reliefs may change. All statements regarding taxation are based on our understanding, Blevins Franks, of current tax laws and practices which are subject to change. Tax information has been summarized; it is advisable for an individual to seek personalized advice.

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