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By reading and absorbing the answers to the Frequently asked questions (FAQ’s) below, you will be better informed and more confident about the major issues. Please feel free to raise any interesting points you may have. Please however note that any reliance on the information provided below is solely at your own risk. Neither Stephen Smith nor Stephen Smith (France) Ltd can accept any responsibility for any loss occasioned to any individual or legal person no matter howsoever caused or arising as a result of or in consequence of action taken or refrained from in reliance of the contents of the information provided below.


Do I need advice about French inheritance law and tax?
How does French succession law affect me?
What about inheritance tax?
Can you give me simple examples of how French succession law and tax could cause me problems?
Can’t my will avoid all problems?
What other solutions are there?
What about French wealth tax?



Do I need advice about French inheritance law and tax?

Most definitely. Please think very carefully about your French inheritance position and get clear written advice on this important topic before committing yourself to buy French realty. Afterwards it may be too late. At the same time, legal advice should also be taken as regards your UK or other estate, which can be affected by owning French realty.


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How does French succession law affect me?

French succession law always applies to French realty and your English will or trust is of no effect. This rule applies even if your permanent home is in England and you spend only a few weeks in France every year. French succession law is very different to English succession law. The two main problems are that, without careful estate planning, (a) you cannot leave all your French estate to your surviving spouse, unmarried partner (same sex or heterosexual) if you leave surviving children, grandchildren or parents who have ‘entrenched rights’ in your French estate; and (b) you cannot usually exclude those individuals with entrenched rights unless they and their issue formally renounce their rights to your French estate when you die. Furthermore, unlike English law, French law allows minors to own French realty. Trusts do not exist in France, and English executors have very limited powers to administer a French estate.


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What about inheritance tax?

In France transfers between husband and wife are not exempt from French inheritance tax (French IHT) or droits de succession. French IHT is not paid out of your French estate but by each of your entrenched and other heirs in proportion to the net value of their inheritance. The remoter the heir is from the deceased, the higher the rate of tax. For example, a rate of 60% applies between unmarried (same sex or heterosexual) couples. Surviving spouses have a tax-free allowance of (currently) FrF 500,000. The amount of French IHT that one actually pays can be influenced by wise decisions now.


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Can you give me simple examples of how French succession law and tax could cause me problems?

Yes. Assume that you are married with a wife and a child. Under French succession law you would have to leave one-half of your French estate to that child. If you had two children, the proportion would be two-thirds and if you had three or more children, it rises to three-quarters. You would be free to deal with the remaining balance as you wished and may or not as you wish leave it to your widow. However, there are ways of “cutting in” a spouse to childrens’s shares.

As another example, take the case of a deceased with two properties, one in the UK and one in France. Concerned to leave the same assets equally to each of his two children, he decides to bequeath his French realty to one child, and the other property in the UK to the second child. Under UK law the UK property will pass under the deceased’s will to the first child. However, under French succession law the French realty cannot pass to the second child entirely, as French succession law also protects the other child (who already has the UK property) who will also get one third of the French realty.


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Can’t my will avoid all problems?

It depends. With careful lifetime planning there are ways of ‘cutting-in’ a spouse to children’s shares and you can usually sell your French estate or leave it to your family in a trouble-free and tax-efficient way when you die. In many cases a simple and cheap solution is to make a French will. Your English or other will should also be reviewed at the same time. If you do not have a will, French law makes almost no provision for a widow(er) or surviving partner. Depending on your will, the property will usually go to your children (but not your spouse) or if you don’t have any, to your siblings and parents.

Some cases require additional or more complex solutions but, whatever your needs, prevention is always better and cheaper than cure. For example, it is also possible to get round French succession rules if you are buying property jointly. When you bought your house in England, you probably bought it jointly with your husband or wife. Your solicitor will have explained to you that there are two ways of owning property jointly. One is that on your death the property passes automatically to then survivor (in English “joint tenancy”, in French en tontine) and the other is that each of you own a part of the property which you can deal with separately (in English “tenancy in common”, in France en indivision). You probably chose the former method and your solicitor would probably have been very surprised if you had chosen the other method. In France, the same two ways of jointly owning property exist, though for quite different reasons. The French almost always use the en indivision method for the very reason which makes it usually disastrous for the English to do so: it does not avoid the normal French succession rules. The English should (subject to advice) always buy en tontine which is how they would buy in the UK and the property will pass automatically to the survivor. A carefully worded tontine clause must appear in the deed of conveyance and cannot be inserted after completion of your purchase.

It is quite impossible to say how many English husbands and wives who have not been properly advised on this point are horrified to learn that they have made the wrong choice. In fact, usually they have not made a choice at all but have signed papers prepared by a French notary who assumes that English law is the same as French law and that all English couples buy jointly in the same way as French couples. Usually, it is far too late to do anything about it except at great cost. If you are buying jointly, get advice from a lawyer who knows English and French law and who, if the circumstances require, will ensure that the notary does the right thing.

It is worthwhile giving an example so that you may see how important this is. Remember that if you are not prepared for it, the problem will arise just at the moment when one is least able to cope with it i.e. on the death of a husband or wife. Take the following situation, which is not unusual.

Mr and Mrs A are married and are UK domiciled. They have one child by their marriage. Each has been previously married. Mr A has two children by her previous marriage and they now live with their mother who has remarried. Mrs A had one child by her previous marriage who lives with Mr and Mrs A. Some of the children are under 18 and some are older. Mr and Mrs A have bought a holiday home in France for FrF 750,000. They have bought it by the standard French method of joint ownership (en indivision). Mr A dies. Mrs A owns one-half of the house as her own property. Three-quarters of Mr A’s half share is divided among his three children (by his existing and previous marriage) and one-quarter goes, if his will says so, to Mrs A. At best, therefore, Mrs A has five eighths of the house and her joint owners now include children whom she may never have known and with those of whom are under 18 she can come to no legal arrangement.

It is true that arrangements can be made so that Mrs A can be given a life interest in her husband’s share so that she would own one-half outright and one-half she can use for as long as she lives. This is, however, hardly a situation which Mrs A wants to learn of for the first time on the death of her husband, She may well have assumed that because her husband’s will in England leaves everything he has to her, she now owns the whole of the house. She is mistaken, however, because French law overrides that will.

If Mr and Mrs A had bought en tontine none of this would have happened. On the death of one of them, the French realty would automatically have passed to the survivor.

It is true that the tontine method of joint ownership may involve the payment of French inheritance tax, whereas the indivision method might avoid it. However, the amounts involved are usually only a small price to pay to avoid the confusion caused by the imposition of the French law of succession.

There are French notaries and others who say that there are dangers in using the tontine method because children who have been ‘cut out’ can claim to be ‘cut in’. Take courage from some recent cases on this point which say that it is almost impossible for children to succeed if care is taken and the documentation is correctly prepared. This applies to any Power of Attorney given by the buyer and to the deed of conveyance itself. It is worth taking the right advice to ensure that this happens.

Please remember that the above examples may not give you a complete overview of your own personal circumstances and you may therefore miss out on putting the appropriate structure in place thereby jeapordising your heirs and relatives’ wealth and rights.


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What other solutions are there?

There are several other methods of circumventing French succession rules. For example, you can buy French realty via a French company known as an SCI, or via a UK limited company. Alternatively, you could set up a trust or have a nuptial agreement Only the most competent advice can establish if either of these solutions may be suitable for you. As a general rule, unless your family circumstances warrant it or you are trying to get out of a very difficult succession situation into which you have been put through lack of advice on a purchase, none of these methods should be indulged in for properties worth less than £100,000.

Do not use an offshore company to buy French property or, worse still, buy the shares in a company which already owns French property. The French notary may not understand the implications but an English lawyer and the French tax authorities will. For instance, the company will be liable to a series of heavy taxes which it may never have paid and thus you may be buying a past and future tax liability.


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What about French wealth tax?

French wealth tax (impôt sur la fortune) is payable in respect of your assets in France. If you are not French domiciled, the rates of tax are on a slice basis, the lowest rate currently being 0.5% in respect of assets valued in excess of FrF 4.7m. Simple tax planning methods can produce substantial savings.


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