It is common knowledge that France is the most popular tourist destination in Europe and also attracts more than its fair share of expats from countries such as the UK. However, while many people do their homework on the property market, taxes and life in general in France it seems that inheritance tax laws in the country are very different to those in the UK and very complex to say the least!
French inheritance laws
This is an issue which is arising more and more as married couples look to protect their assets and pass them down to their children on their death. However, there is also a need to protect the surviving spouse to ensure that their lives are not hindered in any way upon the death of their partner. This is a very difficult subject to bring up and a very complex situation to understand and accommodate in France.
French inheritance laws
In simple terms, even if you have no contact with your children and do not wish to leave them anything in your will, French inheritance laws state that your assets must upon your death be passed over to your children. Only in very few circumstances (i.e. murder, etc) would you be able to circumvent the basic French inheritance laws and declare whom you wish your property and your assets to be passed on to.
The background to the thread
There is a thread on the expat forum posted by a couple who have remarried and each have children from their former partnerships. They have moved to France, acquired property and have been looking at ways of ensuring that the surviving spouse is catered for on the death of the other – although this particular situation is complicated by the involvement of an estranged son.
In summary, the husband’s son has been estranged for 30 years and he no longer wishes to include him in his will, preferring that he does not receive any assets on his death. There are many suggestions and comments on the thread which are very helpful but in summary they highlight the complicated nature of French inheritance laws.
Bloodlines
There is much mention of bloodlines, i.e. in this particular situation the husband’s share of the property and assets would be passed to his estranged son, and the wife’s share would pass to her children. Without instigating potentially complex legal arrangements, transfer of ownership and other legal matters, it appears that a husband and wife have very little choice in choosing where their assets go on their death.
Life interest
This is a very interesting aspect of the argument which states that a property could well be acquired in the name of one party of husband and wife rather than both, with the other party retaining a life interest in the property which will allow them to live there upon the death of their partner. If the partner, who is unnamed on the property documentation, were to die then the assets would still remain in the name of the wife and pass to her children on her death. There is however some debate as to whether this particular action would circumnavigate the French inheritance laws with many posters suggesting that legal advice should be taken at the earliest opportunity.
Life insurance policies
While it seems clear that the potential to redirect assets and property to specific individuals is very limited under French inheritance laws, the situation is very different for life insurance policies. Assuming that both parties have life insurance, upon the death of one party the funds paid out would go directly to the surviving spouse (unless another person was named) BUT would not be part of the children’s inherited estate.
In many ways this offers an interesting opportunity to rebalance any potential inheritance issues by using funds from a life insurance payout to favour one or more of the parties who would inherit equal shares under French laws.
Other assets
It would appear from the general opinion expressed on the thread that all but life insurance policies will be part of an estate on the death of a husband or wife. Even if you are estranged from your children and no longer wish them to inherit any of your assets it seems that your hands are literally tied behind your back and you have very little option and room for manoeuvre.
Inheritance tax
While inheritance tax is mentioned in passing on the thread there is no specific reference to the level of inheritance tax a benefactor would expect to pay. However interestingly there is a suggestion that depending upon how strong the bloodline from a benefactor may be they could pay different rates. This is something which has not been addressed or discussed by many on the thread and like everything else in relation to taxation in foreign lands, local legal advice should be taken.
Assumptions
Those who assume that even though they are living overseas they are still ruled by their former homeland taxation regime could be in for a very big shock. Assumptions in any area of life are dangerous but assumptions when moving overseas, in relation to taxation and property, can not only be very dangerous but very very expensive. It is essential that you take local legal advice prior moving and buying a property, and also at regular intervals to ensure your affairs are up-to-date with current laws in your new homeland.
Conclusion
In general it seems that the natural progression from father or mother to children is something central to French inheritance tax laws. Even where families are estranged and may not be on speaking terms it appears as though assets will still be handed down by the bloodline on both sides of the marriage. The issue is of course complicated where people remarry, have children from other partnerships and then attempt to leave assets for specific individuals.
There is a suggestion that some legal options can be investigated although some people believe these work and others believe that French inheritance tax laws supersede everything. It would appear that the need to take local legal advice at the earliest opportunity is paramount as your assets could be left to estranged children and relatives and the surviving spouse potentially dragged into a battle to stay in the marital home.
Those who assume anything with regards to taxation could pay a very high price!
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Oh yes… and if anyone wants a lesson in what NOT to do, just get in touch!
- rule number one… do not put off dealing with this because you are ‘young’. Especially if you are neither married, or ‘pacsed’. Should a partner die unexpectedly, and you be in the aforementioned situation, then you are subject to 60% tax on any share you might be entitled to under French inheritance laws. You are a nobody in French law, even if you have been living together for 15 years. The same as if you were a complete stranger that had been named in your partner’s will. The 60% is payable in full within six months of the death, with very few exceptions. Even if the assets concerned are not liquid, say tied up in property.
- Bear in mind that unlike in the UK for example, should your underage children be beneficiaries of a will, then the surviving spouse is responsible for coughing up the tax. No delaying until 18, as in the UK. You’ve got six months.
Fortunately Sarko raised the tax threshold when he came into power, so if you’ve lots of kids and your estate isn’t worth a fortune, then they might have nothing to pay. But don’t assume that your assets overseas are beyond the reach of the French taxman. My partner and I jointly owned assets in the UK. However after consulting a UK lawyer, it soon became evident that her share of these were part of the total estate to be considered in the French inheritance procedures.
There’s more… plenty more… but food for thought for the time being!!
A very comprehensive warning to French expats. Surely will encourage further inquiries.
But could you point towards a source of similar info for an Australian expat in Thailand? Much obliged.