Inheritance tax in France regarding properties and other succession issues
French inheritance law is unlike anything ever seen by overseas buyers of properties. France has a completely unique system of succession. Although recently overhauled, this still complicates the issue of your spouse inheriting your home in France.
The decision on how properties are bought is a huge one and can have a massive impact on the amount of inheritance tax in France your beneficiaries pay.
Laws of succession and inheritance tax in France
France’s historic inheritance law, dating from 1804, was overhauled in 2005 to bring it more into line with modern requirements. The new law has modified the rules which previously required unanimous agreement between heirs to split any inheritance. It also allowed inheritors to forfeit in favour of other relatives.
Allowances free of tax in France
The new law provided a tax-free allowance for the first time. Estates up to €100,000 are now free from inheritance tax in France. Inheritance tax in France is paid on any properties in France owned by non-residents and is applied on any transfers between spouses during your lifetime.
The tax-free allowances are:
Inter-spouse transfer - €76,000
To children (each child) - €50,000
To parents (each parent) - €50,000
Plus a global allowance of €40,000 for inheritance to a spouse of children.
The rates on transfer to children, parents or spouses, when applicable, are:
Less than €7,600 - 5%
Between €7,600 and €15,000 - 10%
Between €15,000 and €30,000 - 15%
Between €30,000 and €520,000 - 20%
Between €520,000 and €850,000 - 30%
Between €850,000 and €1,700,000 - 35%
Above €1,700,000 - 40%
Rates for so called “strangers”, including unmarried partners, is 60% with no allowance. This obviously leaves you with a problem if you are unmarried and want to leave your home in France to your partner but professional tax advisers proficient in French inheritance law will be able to advise.
Wills and your home. France’s legislation
Leaving a French will means an owner can stipulate that their spouse receives the entire home or other properties in France. This can also be done by inserting a clause tontine in the purchase contract which effectively freezes ownership of the home in France until one or the other dies.
However, opting for this method in France means properties will still be liable to taxation.
If you want to leave your home in France to the person of your choice you can buy properties jointly in a manner that the survivor owns it upon the death of the other.
Another method is by purchasing properties in the name of a Societe Civile Immobliere (SCI), which will cost upwards of €2500 to set up. If the property is bought by the SCI, the members own shares rather than property. As shares are considered to be personal property they can be left in accordance with the wishes of the deceased.
Minimising the amount liable to inheritance tax in France
It can be beneficial to use a loan to purchase the property as this will have a depressing effect on the value of the SCI for inheritance purposes.
There are several ways to avoid liability to inheritance tax in France. Assets can be sheltered offshore or held within an assurance vie (life assurance) arrangement. This offers substantial investment and tax benefits in France.
Inheritance law in France is something you must look into before buying any properties. France has a unique set of succession arrangements which could stop your desired heir taking ownership of your home. France’s laws on inheritance tax means it is vital to think about how properties are bought.
