Inheritance planning in France is essential for UK nationals navigating complex cross-border tax rules. Without the right strategy, your heirs could face high inheritance taxes, forced heirship restrictions and administrative hurdles. Discover how expert planning can protect your legacy wealth.
You may have put a lot of thought into creating your wealth for your retirement years, but have you done the same for your succession planning? Does it take both UK and French systems into account and meet your wishes? Are you clear on how your assets will be transferred to your heirs, at what cost, and how long it will take? Have you explored ways to mitigate inheritance taxes and, importantly, is your planning up to date?
Strategic estate planning is essential for UK nationals residing in France. French succession laws, combined with cross-border taxation, create complex challenges that affect how your wealth is passed on. Without appropriate planning in place, your heirs could face forced heirship restrictions, unexpected tax liabilities and administrative complications.
The good news is that, with specialist advice and expert planning, you can keep control of your estate, protect your family’s financial future, and ensure more of your wealth goes to the people you care about, rather than the taxman. Acting now ensures everything runs smoothly later, when it matters most.
Why French succession tax remains a key concern
If you die as a French resident, each of your beneficiaries is assessed for French succession tax. This applies whether the assets are located in France, the UK or elsewhere, and regardless of where the recipient lives. UK assets are subject to both UK inheritance tax and French succession tax; your heirs don’t pay tax twice, but do pay the higher amount.
Inheritance tax allowances in France and UK have been frozen for years. France’s tax-free allowance for children has been €100,000 since 2012 (when it was cut by almost €60,000), and the UK’s nil-rate band has been stuck at £325,000 since 2009. The result? Your family will pay much more tax than if allowances had tracked inflation.
Both France and the UK exempt spouses and civil partners from inheritance tax on death, but French tax applies on gifts surpassing €80,724. While the allowance for children is €100,000, they are much lower or negligible for other heirs. Succession tax is applied at progressive rates from 5% to 45% for children, but other heirs pay between 35% and 60%.
Fortunately, a lot of planning that can be done with liquid assets, cash and investments to reduce or potentially eliminate the succession tax liability on them. Savings and investment structures available in France can provide significant succession tax planning benefits, while accomplishing tax advantages for yourself.
Inheritance considerations for blended families
The UK levies its 40% inheritance tax (IHT) on the whole estate. France assesses each beneficiary individually for tax and the level of kinship makes a massive difference.
A married or PACs (civil) couple leaving everything to their joint children can structure their assets to fully utilise the allowance each child can receive from each parent. Tax rates then start at just 5%.
It’s a completely different story for couples not in a legal relationship and/or who have children from previous marriages. The succession tax rate for remote and non-relatives is a flat 60% on everything above €1,594. If you leave assets to a long-term partner but haven’t entered into a PACs, 60% will be lost to tax. Stepchildren also fall into this category – a trap that catches many modern families out.
For example, you have three children from a previous marriage. When you die, you leave assets worth €600,000 to your current wife, tax-free. On her death, she divides this equally between your children. Since there is no blood relationship, each child will pay €119,045 tax on their €200,000 inheritance. If you had left this money directly to them, their tax bill would have been €18,195. That’s over €300,000 lost to tax, perhaps unnecessarily.
Aside from tax, blended families must be extra careful in following French succession law. Civil/PACs partners do not have the same rights as spouses here, and have no rights over each other’s property. While you can opt for your relevant UK succession law to apply, your children still have the right to make a claim for your French assets.
Preparing for inheritance tax on UK pensions
In little over a year’s time, the UK introduces a major change that impacts anyone with UK pension funds, wherever they live. From 6 April 2027, most UK pensions become subject to UK inheritance tax. Your family could pay significantly more tax as a result.
If your UK private pension is passed to UK resident beneficiaries, they could potentially pay not only the 40% inheritance tax, but also, if you die after age 75, income tax of up to 45% on the residual funds. This won’t leave much left for your heirs.
If you currently manage to keep UK assets below the nil-rate band, this may prove impossible once pensions are included. There are a couple of options to extract your pension from the UK system, though they are subject to terms and conditions, and your circumstances, objectives and risk tolerance. Be careful to only employ regulated advice and solutions. If leaving your pension in the UK is best for you, consider moving other assets, such as property and investments, out of the UK, to re-invest the capital more tax efficiently for a French resident.
Inheritance tax – France vs UK
Since the UK and French regimes are so different, it’s impossible to give a general assessment of whether your heirs are better off if you die as a French or UK resident. It depends on who the beneficiaries are, residence, how much they receive, what the assets are etc.
When passing assets onto children, the French system often proves more favourable, since each child receives the first €100,000 tax free (potentially double that between two spouses) and tax rates start at 5%. If you don’t keep UK-based assets, you don’t need to worry about UK inheritance tax at all.
On the other hand, if you are not married or in a PACs, the survivor would suffer very high taxes in France.
Inheritance tax planning
Wherever you live, taking professional advice on strategic estate planning and structuring your assets correctly can make a significant difference to your inheritance tax liability. It’s certainly always worth exploring the options available to British expatriates in France to establish how much tax you can save.
And as a bonus, you may well find that restructuring your assets to mitigate inheritance tax also improves your own annual tax position.
Blevins Franks has 50 years of experience supporting UK nationals moving to and living in France with specialist management services that encompass tax planning, succession, pensions, and investments.
Get in touch today for peace of mind that your assets will pass to your chosen heirs, at the right time, with as little tax as possible.
