Plan Ahead for French Inheritance

When you’re purchasing property in France, you will want to set up the structure of the purchase the best way possible in consideration of the French inheritance tax laws that can be very, very expensive for your heirs. France has forced heirship laws that protect certain relations from being disinherited, but the good news is that if you are a native of another country, you can select the inheritance laws of that country.

That doesn’t change the taxation, however!

The French have no choice, but to bequeath their assets to their children and spouses. They will inherit the largest part of the estate, and in the absence of children and spouses, then your parents will win the prize…all this unless there’s a valid reason they shouldn’t, like if they are in prison for murder!

Civil partners (in a “Pacs”) only get a fair shake if they have been named in the will, otherwise, they have no legal claim on the estate. And the surviving partner can only stay in their main residence for one year free of charge. Common law partners (“concubin/concubine” in French) can benefit from certain advantages by living together, but not the inheritance laws. They are considered strangers with no legal inheritance rights and will be subject to one of the highest tax brackets.

Fortunately for you as non-French nationals, in 2015, France signed the EU law known as Brussels IV enabling the non-French to elect the laws of their country of nationality. All it requires is a will that is legally valid in that country. However, reforms have been put in place since that time which halts those people from countries where there is no forced heirship from disinheriting their children. While the laws were aimed at protecting brothers and sisters to ensure they inherit equally, it also affects North American nationals where there is no forced heirship. This applies to your French property, so you want to get it right the first time around.

And the tax rates are nothing to sneeze at. Meanwhile, there are no clean lines to be drawn and challenges to the laws are sure to erupt, and already have. Just consider the cases where there are biological children and/or non-biological children! And what about people who are multi-national? Just imagine how convoluted all this can be! And on top of it all, the European Commission is examining the legality of the French laws and may have even more to say about them.

Expect years to pass before anything concrete happens, as there is too much to consider. Meanwhile, there are ways around the laws you can employ:

Form an SCI: a “Société Civile Immobilière” is a company specifically created for buying and managing property that controls who owns the shares.

“Usufruit”: (Usurfruct in English) allows someone the use of the property, but leaves the ownership with someone else.

“En Tontine”: Buying 50-50, when one of the two owners dies, the ownership passes to the other in full, as if the other owner had never existed.

No matter what, it is always wisest to consult one of our specialists to set up the structure in advance of signing the final deed. See our Planning for Expats page for more information. Our expert associates Brian, Matthieu, Benjamin and Jonathan can all be of tremendous assistance! When you contact them, be sure to tell them Adrian sent you!

A bientôt,