In this article we aim to tackle several frequently asked questions related to estate planning in France, where tax and succession regimes are very different from the UK’s and often misunderstood.
Legislation surrounding tax is ever-changing in both France and the UK, and the complexities of the subject can cause a great deal of confusion. Then there is the issue of Napoleonic Law which many UK nationals find restrictive.
The questions of how you can leave your main home to a spouse/partner, whether you can bypass succession law, and how investment wrappers such as an assurance-vie can help to protect your assets are touched upon here. We also answer a few of the most common questions surrounding how your beneficiaries and estate will be taxed.
As UK national living in France, should I have a UK Will or a French one?
It’s often beneficial to have two wills – one for your assets in France and a UK one for British-based assets. These should align and cross-reference each other to avoid conflict.
A UK will can be effective in France, but after going through the UK probate process it needs to be translated and notarised before obtaining probate here, so separate wills can prevent delays and expense for your heirs.
Your will should follow French succession law, or officially opt for UK succession law to apply to your estate, otherwise it will be invalid. Unfortunately, we come across this frequently with British expatriates.
How much French inheritance tax will my children pay?
Each child benefits from a €100,000 tax free allowance. The tax rates start at 5% (for inheritances up to €8,072) but rise progressively to 45% (for the excess above €1,805,677).
Step-children, however, generally pay tax at 60% with virtually no allowance. This could potentially apply to your own children – if you leave assets to a spouse who is not their natural parent, who then leaves the assets to your children, they are treated as her step-children and taxed accordingly.
Download our free ‘Guide to taxes in France’ for a full list of succession tax rates and allowances
I don’t have children and plan to divide my estate between by sister, nephew and godchild. What tax will they pay?
The tax rates can be eyewatering: generally speaking, it’s 35% or 45% for your sister (with a €15,932 allowance); 55% for your nephew (€7,969 allowance) and 60% for your godchild (€1,594 allowance).
Can I bypass succession tax by giving assets away while I’m still alive?
You can give away set amounts tax free, but above this gifts are taxable and the exemptions only renew every 15 years.
Be careful when giving assets away. Some people don’t leave themselves with sufficient resources to live comfortably long term. Gifting your home to children or making them part-owners can cause problems if there’s a falling out, someone gets divorced or you need to sell it.
I own our house entirely in my name. I want to gift half to my wife, but will she pay tax on the transfer?
While inheritances between spouses are tax free, gifts are not. Anything above €80,724 is taxable. You also need to follow French succession law, since children are ‘reserved heirs’.
Why can’t I leave all my assets to my spouse?
Under French succession law (the default position unless you make other arrangements), inheritances must pass down the bloodline.
Children are protected heirs and must inherit between 50% and 75% of your estate (depending on the number of children). You can only leave the ‘freely disposable’ part to your spouse/PACS (civil) partner. If you haven’t made a will, it’s more complicated.
My partner and I have no wish to get married. What happens when one of us dies?
I’m afraid you may feel the force of the French succession regime. If you are not in a PACs (civil partnership) either, you’ll pay the highest rate of inheritance tax – 60%.
Remember, children have inheritance rights over your partner. If you successfully bypass this rule, leave assets to your partner, who then passes them back to your children from a previous relationship, your children will pay 60% tax.
More complicated families face more complicated rules, so advance planning is key.
Can I bypass French succession law?
You can use the EU succession regulation ‘Brussels IV’ to opt for the succession law of your country of nationality to apply on your death instead French law. You must opt for this in your will.
Be careful though and establish how it affects your family. For example, you could risk unknowingly making your worldwide estate liable to UK inheritance tax.
And in August 2021 the French Constitutional Court approved new legislation where children, who were not left the share they are entitled to under French law, can challenge the will and seek compensation. This would apply if you or your children are EU residents and the succession law you opted for does not apply forced heirship – as is the case in England and Wales. However, they can only claim on French assets.
Read more about this change to French succession law
Remember that if you leave assets to people besides a spouse or descendants, they’ll face huge tax bills – we’ve seen cases where the family home has to be sold so they can pay the bill.
There may be other ways to leave assets to your chosen beneficiaries. For example, inserting an ‘en tontine’ clause into the conveyance when a the time of buying a property ensures it will pass to the surviving tontine holder.
France’s different types of marriage contracts can also affect how assets are owned. But they may have tax consequences, especially for more complex families, so take advice.
Do the same succession rules apply to capital investments?
Yes, generally speaking both succession tax and law apply. However, it is easier to avoid these than with real estate.
A widely used solution is to hold investment assets within an assurance-vie. These policies can considerably mitigate succession tax and are exempt from succession law, passing automatically to the nominated beneficiaries. Normally a savings vehicle, they are a great source of beneficially taxed income – but also fantastic succession planning structures.
The French succession regime is very detailed and complex, so we can only touch on some issues here in very general terms. You must do sufficient research but also take professional, specialist estate planning advice to ensure you get it right and your wishes for your heirs are fulfilled.
Contact us for personalised advice