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French Succession Law & Tax Planning

Precis of French Succession Law

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Succession Law Questionnaire


French Succession Law and Tax Planning

A brief precis of French Succession Law

Few countries in the world can be geographically so close as the United Kingdom and France, and yet remain so different. For example, French property and succession law is based on a ‘civil law’ system, which is quite unlike the ‘common law’ systems which operate in the United Kingdom and in many other English-speaking countries throughout the world.

You should consider yourself and your French property matters to be unique. Please therefore listen to, but never rely on the anecdotal or other general advice – however well intentioned it may be – given by friends or others who already own or are in the process of buying property in France, either as a holiday home or as a main residence. By oversimplifying matters, the solutions implemented by other people do not always dovetail with your requirements. It is also dangerous to believe what you read in books etc. which can be a useful source of general information, but can also be misleading.

At the risk perhaps of sounding self-serving, it is our experience that no-one should seek advice about French legal and/or tax matters purely on the advice of a notaire or an estate agent, without having the documentation looked at by bilingual specialists like ourselves who have knowledge and experience not only of the French and United Kingdom legal systems but, more importantly, how they interact and sometimes conflict with each other.

Practice shows that most notaries do not advise on any of the legal/tax consequences of cross-border issues. If they do advise at all it is not unusual to see a notaire suggesting a French solution which may impact badly on the clients’ position in his home country. In the same way, for example, an English solution proposed by an inexperienced English lawyer to a French legal problem is not usually appropriate, and can instead be damaging to the client.

Whatever your personal circumstances, it is usually vital that you get proper independent legal advice (click here) before you enter into a legally binding commitment to buy property in France. Afterwards it may be too late.

1. French succession law and French inheritance tax

‘Property’ in France can either mean ‘immeubles (realty) or meubles (personalty). Immeubles mainly consist of land and buildings located in France. Meubles include household furniture, bank accounts, shares in a company or other movable assets.

Immeubles are always governed by French succession law and are also subject to French inheritance tax (‘French IHT’), regardless of your nationality, residence or place of domicile (French meaning) when you die. French or other meubles held by a person who is domiciled outside of France are not subject to French succession law. For example, if you die domiciled in England, these assets are governed by English succession law. But if you die domiciled in France, French succession law and French IHT do not only apply to your French immeubles. They also apply to all your meubles in France and to any other personalty you may own in any other country throughout the world. Any realty you may own outside of France will not usually be governed by French succession law and French IHT.

Unless you plan your affairs carefully now, French succession law and/or French IHT can cause the following (and possibly other) problems.

  • You cannot always leave your French estate to your surviving spouse, unmarried partner or other chosen beneficiary. If you leave children they have absolute protected rights over all or part of your French estate. ‘Children’ means any child (regardless of their age) by an existing or previous marriage or relationship. If a child predeceases you, his or her issue (your grandchildren), will instead inherit, regardless of their age. It does not matter what your English or other Will says. These and other provisions of French succession law override any contrary provisions you may have made.

  • It is not always possible to disinherit one or more of your children.

  • If any of your children or other descendants are minors (below 18 years of age) when you die, the sale or other disposal of your French immeubles must usually be postponed until the youngest of any minor children reaches the age of 18.

  • In some cases full ownership of your French estate can be taken (in descending order) by your surviving parents, brothers and sisters, nephews and nieces, grandparents, uncles and aunts, and cousins. If you leave no relatives the French State takes all of your French estate.

  • Executors have very limited powers to administer a French estate, even for the benefit of minors.

  • French IHT is payable between spouses.

  • Most unmarried couples are exposed to French IHT at the highest rate of 60% of the net value of their inheritance.

  • French IHT allowances are not generous.

  • If you are a resident of a country which (unlike the United Kingdom) does not have a suitable double tax treaty with France, you may have to pay one or more special taxes in addition to French IHT.

Some cases require complex and expensive solutions. However, in many cases complexity can be avoided, and a much simpler and cheaper alternative solution can be found that dovetails neatly with your personal requirements.

2. Ways in which French immeubles can be owned

The second aspect to understand from the outset is the way in which French immeubles can be owned. There are basically three different options:

  • Direct ownership in the name of one individual

    It may sometimes make sense to place your French immeubles in the sole ownership of one single person.

  • Direct ownership in the name of two or more individuals (‘joint ownership’)

    In England, immoveable property can either be jointly owned ‘legally’ (e.g. via a ‘joint tenancy’ or a ‘tenancy in common’) or as an ‘equitable interest’ (e.g. via a trust).

    In France, by contrast, trusts are not recognized. Therefore, of the two remaining principal methods of joint ownership available, ownership ‘en indivision’ produces approximately the same results as an English tenancy in common. For a variety of reasons, indivision ownership should usually be avoided by all buyers of French immeubles as their chosen method of joint ownership.

    The other method of joint ownership (known as ‘tontine’) is similar to English property held under a joint tenancy in that – unlike indivision – on the death of one tontinier, ownership immediately passes to the surviving tontinier (s).

    As with indivision ownership, tontine ownership comes with potential legal and/or French IHT problems of its own, particularly if the owners are not married to each other.

  • Indirect ownership in the name of a company

    Purchasing French immeubles through a company means that you own the shares (which are defined as meubles) in the company rather than owning the French immeubles itself. This can sometimes be beneficial for non- French residents since, as explained above, meubles held by a non-French resident are not subject to French succession law.

    This advantage is lost, however, if you die domiciled in France. However, there may be other reasons why it is still advantageous for those who are domiciled in France as well as those whose domicile is non-French to make use of a company to own French immeubles.

Each of the above and other methods of ownership has different legal and tax implications for the owner(s) and next of kin.

To illustrate some of the points made above, consider Jack and Jill who are domiciled in England. Their English wills cover all their assets worldwide, including a house (built on top of a hill) in France, which they own en indivision 50% each. Their English wills require the deceased spouses’ French immeubles to pass in full to the surviving spouse. They have two minor children (A aged 1 and B aged 12) by their marriage, and each has two children by previous relationships (C and D are Jack’s, E and F are Jill’s). One morning Jack went down the hill, tripped over a pail of water, and was killed. Jill may well have assumed that, because Jack’s English will left everything to her, she now owns all of the French immeubles. She is mistaken, however, because French law overrides Jack’s English will. Jill is instead left with one half of the French immeubles she already owned, but must share the other half with four children, two of whom are minors, C and D are not hers (she has never yet met them nor their mother Mrs. Goose) whose involvement is required to deal with the administration of Jack’s French estate within the next 12 months. Jill is understandably not pleased to discover this at a time when the last thing she needs is this kind of unexpected shock. Moreover, as explained below, if the parties argue about the French immeubles (e.g. Jill wants to sell but Mrs. Goose or one or more of the others do not) the dispute must be resolved by the French courts with sometimes unexpected results. To make matters worse, the French immeubles cannot in any event be sold for 17 years (until A reaches the age of majority).

3. Free initial advice

If you would like us to help with your French succession law and/or French IHT matters, please complete the French Wills and Succession Law Questionnaire (click here) and return it to stephen@stephensmithfranceltd.com. Once we have your completed Questionnaire, we will e-mail you a free assessment with brief recommendations of what (if anything) you need to do in order to avoid or mitigate problems of French succession law and/or French IHT in the future. Please note that we are unable to discuss your case by telephone or other correspondence unless we have been formally instructed by you (see Paragraph 5. below).

4. French Wills

In many cases, all that you need to do is to instruct us to make a French Will for you. You should not usually let your English Will govern your French estate. An alarming number of people do not make a French (or English) Will at all. Thinking about one’s own death is not the most positive of pastimes but, for many people, a reluctance to contemplate mortality is not the problem. To these people, making a French or any other Will seems as though it should be just simply an inexpensive consumer service offered by a supermarket for £9.99.

With few exceptions, anyone owning property that is governed by French succession law should make a French Will. The consequence of dying intestate in France (without a Will that respects the rules of French succession law) can otherwise severely prejudice your next of kin and provide plenty of work to keep French probate lawyers in business.

In one case (not unlike Jack and Jill’s) a client died without making a valid French Will, leaving a former wife and a second wife with minor children from each marriage. It took more than seven years, four firms of lawyers acting for the various parties and combined legal fees of something like £300,000 to resolve matters to nobody’s particular satisfaction. Not to mention a French inheritance tax bill several hundred thousand pounds higher than it might have been had the deceased made a carefully crafted French Will. At least the client is not around to see the chaos he has created. I have seen several such tales, distant or disliked relatives inheriting French property instead of long-term partners, massively higher French IHT bills, long and expensive French court cases. These and other scenarios have graced the filing cabinets of French lawyers because of the simple failure to make a French Will.

You only need to own a small apartment in France these days and the French and/or English taxman is rubbing his hands behind his back, just waiting for the tax to roll in when you die. Two or three thousand pounds on a family holiday - fine, but the prospect of spending considerably less on a French lawyer so as to save French IHT and deal with family succession planning – no way.

French lawyers have gone some way to creating this state of affairs by offering the writing of Wills and succession planning as an afterthought service. But hopefully, with more and more people being caught by French IHT and second and third families becoming more commonplace, things will change. And if they don’t, it won’t be the lawyers who will suffer. All those problems over intestacies or disputes over poorly drafted Wills will keep them in business long after the person is dead and buried.

5. How to instruct us

If you would like to formally engage our services in order to implement some or all of our recommendations, please read “How we charge for our services” (click here). Every client has different tax and succession planning requirements, and in some cases making a French Will is not enough. Sometimes an alternative or additional solution may be required. For example, it may be appropriate to form a company to own your French immeubles. The greater the complexity of your needs, the greater the costs and the chance that something will go wrong. Other less sophisticated but effective methods may be appropriate, even if they achieve more limited objectives at less overall cost and maintenance.

6. About us

6.1 About Stephen Smith

Stephen Smith is a bilingual French national who read French law and English law at Cambridge University. He is a French lawyer (juriste) holding substantial UK professional indemnity insurance, and lives and works as a French lawyer in England and in France. He is one of the leading French property law specialists in the UK, and has over 25 years experience covering all aspects of buying and selling residential and commercial property in France. Stephen is a published author on French law and tax. He appears on television and radio as an expert in French property matters, and also writes for or is quoted regularly in a broad range of specialist publications and in the UK or French press.

On a personal note, Stephen is passionate about France and French rugby. Unlike many lawyers he has a good sense of humour. He has an unfulfilled ambition to create the Society for the Preservation of Authentic Bistros in France.

6.2 About Stephen Smith (France) Ltd

We are a well-respected bilingual company. We provide strong cross-cultural expertise in all aspects of residential and commercial real property across France. We are experienced in handling higher value or complex French property and commercial transactions, often working closely with clients’ professional advisers in the UK, France or elsewhere.

Service from Stephen Smith (France) Ltd means a comprehensive range of skills to include:

  • strength in depth and breadth (we know our subject)

  • personal service (we care about our clients)

  • active communication (we chase unanswered communications)

  • informal and approachable staff (we enjoy doing what we do)

  • extremely good value (for work requiring specialist skills)

As well as mainstream French real property work, we and our network of qualified independent lawyers and other professionals across France can advise on French succession law, French inheritance tax, French estate (inheritance) planning, cross-border wills and probate, French wealth tax, French capital gains tax, other French taxes and opportunities for tax efficiency.

A number of the French lawyers with whom we work closely are the authors or co-authors of some of the leading French legal textbooks covering areas which complement our own areas of expertise.

7. Exclusion of liability and disclaimer

This document provides a general overview only of various aspects of French succession law and French IHT.

The information and opinions contained in this document are not intended to be a comprehensive study, nor to provide legal or tax or any other advice, and should not therefore be relied on or treated as a substitute for specific advice concerning individual situations.

Stephen Smith and Stephen Smith (France) Ltd make no representations, express or implied, with regard to the accuracy of the information contained in this document, and cannot accept any responsibility or liability for any errors or omissions that it may contain.

Stephen Smith and Stephen Smith (France) Ltd will not be held liable or responsible to any person or entity with respect to loss or damage as a result of the information supplied in this document, whether caused or said to be caused by a direct or indirect result of its contents.

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