by Schuyler Hoffman
When you buy property in France your ability to give it away or bequeath it is governed by French inheritance law. You are not free to do with it as you please. Your legal heirs have mandated rights to a certain proportion of your French property, known as the "Reserve Legale." You can only freely give away or bequeath the remainder ("Quotit disponible").
For example: If you are survived by one child you can give away no more than half your French property. If you are survived by two children this limit drops to one third; to one quarter if you are survived by three or more children.
If you have no children, other members of your family may qualify as legal heirs and so enjoy mandated rights to a proportion of the property. A husband or wife is not considered a legal heir and has no right to the legal reserves. French law, however, allows you to make certain disposals to your spouse which go beyond what she or he would be entitled to if they were a mere stranger.
France's forced heirship system of inheritance is based on the French family tradition that properties must remain within the family. A bit unrealistic today, but it is still the law. Consequently, means to work around the system have been developed.
French inheritance law has very clear rules about what happens to your French real estate after you die, regardless of what you might want. Children and blood relatives have certain mandated rights to your property over spouses or partners.
The good news, however, is that there are ways--perfectly legal--for you to leave that Paris apartment to anyone you want. I'll get to that in a moment. First, I want to go over the basics, just so we're all on the same page. French Inheritance Law 101, if you will.
There are two types of joint ownership in France: "en indivision" (tenancy in common); and "en tontine" (similar to joint tenancy). There are important differences between the two concerning how the property will be treated upon the death of one of the owners.
"En indivision" is the default type of ownership in France, where each person owns 50% of the property. When one person dies, the property is divided according to French
succession law. Children or parents will have rights over and above those of the surviving spouse to that 50%.
Joint Tenancy, "en tontine", does not establish ownership until the death of one of the owners. At that time the survivor is deemed to have owned the entire property from
the beginning and can dispose of the property as he or she wishes. "En tontine" must be established at the time of purchase; ownership cannot be converted to this after purchase.
Although foreigners generally use "en tontine" when they buy property in France, it is rarely used by the French. In fact, you may need to insist that the notaire insert a clause establishing this type of ownership in the title when you buy. Though perfectly legal, it may be seen as a bit of a fraud against your children.
The "en tontine" type of ownership, while solving some problems, may create others. Should you want to sell the property while both parties are still alive, for example, this will require the agreement of both parties. One party cannot force the sale if the other does not want to sell. Likewise, in a divorce or other dispute, since there is no clear owner, a court will have difficulty dividing the property. Again, a sale could only be ordered if both parties agree.
There is a third option, though, that allows you to dispose of your French property as you wish--buying through a "société civile immobilière" or SCI. This is a French company (that you set up) that buys and owns the property. You own shares in the SCI. You can then dispose of your interests in the SCI in accordance with the law where you are domiciled. In the case of a couple--married or not--you would set the company up so that on the death of one owner (share holder) the survivor receives full ownership of the company, and therefore, the property.
It is also possible to set up a U.S. based company to do the same thing. This is what International Living did when it purchased the rue Mazarine apartment here in Paris. The apartment is owned by Left Bank Properties, LLC. Though this was not done to address inheritance issues, it accomplishes the same result as an SCI. It is the company and not the property per se that changes hands through sale or death, thus circumventing the inheritance laws.
Each option discussed above comes with advantages and disadvantages. While they address ways you can work with French law to achieve what you want, the advantages and disadvantages may depend on your particular situation. Only a professional can advise you on the best way to take ownership of your property in France.
When considering estate issues and taxes, you should always consult with a legal professional who can advise you on the particulars of your situation. We encourage you to seek the necessary counsel to enable you to deal effectively with these two important aspects of buying property in France.