Succession law and tax in France – how is your family affected?

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10.08.22
Succession law in France

Succession law in France works very different to what you may be familiar with in the UK and imposes forced heirship. French inheritance tax follows completely different and complex rules. Here we look the key succession implications you should be aware of and plan for in advance.

France’s complex succession law and tax regimes create various complications for UK nationals setting up life there. Once you understand how these might affect your family, you can tailor your estate planning take steps to ensure your estate will pass according to your wishes and with as little tax as possible.

Succession law and forced heirship in France

In the UK, you are largely free to leave your estate to whomever you wish, in the amounts that you wish. In France, however, its Napoleonic code was designed to keep property within 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 or PACS (civil) partner.

EU succession law ‘Brussels IV’

While the ‘reserved heirs’ regime works well for many families, it may not suit your family situation or your wishes for your spouse/partner and heirs. You need to be particularly careful if and your partner are not married or registered as PACs, and/or there are children from previous relationships.

Since 2015, it’s possible to use the EU succession regulation “Brussels IV” to opt for the succession law of your country of nationality to apply on your death, instead of your country of residence. This applies to all foreign nationals living in the EU, so Brexit does not change this.

You need to make this election in your will, otherwise French succession law automatically applies. It is not something your family can opt for after your death, but first make sure you understand the pros and cons. For example, opting for UK succession law could have the unexpected consequence of making you liable for UK inheritance tax on your worldwide assets, as well as French succession tax (with any appropriate offset).

Note also that, with effect from November 2021, if French assets pass according to the provisions of a country which does not impose forced heirship rules – as is the case in England and Wales – the protected heirs (biological and adopted children) can make a claim for the share they would be entitled to under the French rules. This effectively allows the forced heirship rules to override Brussels IV. This only applies to assets within France; you can still use Brussels IV to freely distribute your foreign assets. Moving assets outside France could be beneficial here.

There may be other, more suitable ways to achieve your estate planning wishes. Do your research and get professional, personalised cross-border advice to establish what will work best for your family situation.

French succession tax

In the UK, inheritance tax is paid by your estate, with the single tax rate of 40% and just two allowances (the ‘nil rate band’ and newer main residence allowance).

In France, succession tax is charged on each beneficiary individually, with the rates and allowances varying considerably depending on their relationship to you.

If you are resident in France when you die, each heir pays succession tax on their inheritance. This applies to worldwide assets. Likewise, if you have been living in France for six out of the last ten years and receive an inheritance or gift from abroad, you could be liable for succession tax (this depends on the double tax treaty, and inheritances from the UK are only taxable there).

Succession tax rates and allowances

  • There is no tax on inheritances between spouses and PACS partners, but lifetime gifts are taxable at 5% – 45% with a €80,724 allowance.
  • Children (natural and adopted) each benefit from a €100,000 allowance and pay tax at progressive rates from 5% to 45%.
  • Grandchildren pay tax at the same rates, but do not benefit from a specific allowance for assets received as an inheritance, so only receive the standard €1,594 allowance for inheritances.
  • You can, however, give grandchildren lifetime and cash gifts up to €31,865 tax free.
  • Brothers and sisters generally receive a €15,932 allowance and pay tax at 35% or 45%.
  • The allowance for nephews and nieces is €7,967 with a 55% tax rate.
  • Anyone else pays tax at 60%, and their allowance is just €1,594.

Download our free Guide to Taxes in France

Stepchildren and unmarried partners

Stepchildren and unmarried partners are unfortunately treated as ‘non-relatives’ for the purposes of succession law and taxation. This is a problem for today’s families where many couples are not officially married and/or have children from previous relationships.

Stepchildren do not have the same right to automatically inherit as natural or legally adopted children. They are also liable for a much higher 60% succession tax rate, as are couples who are not in a recognised civil partnership (PACS).

If you remarry and have adult children from a previous relationship, you may not think of them as your spouse’s stepchildren. But if you leave assets to your partner (tax-free), who then passes them to your children when they die, they would be taxed at the highest possible rate as non-relatives. A €400,000 inheritance, for example, would present a tax bill of €58,195 for a biological child, but a staggering €239,044 for a stepchild!

It may be possible to overcome or mitigate these punitive taxes and the restrictions of succession law, through strategic advance planning, so take time to explore your options. If you have not bought your French property yet, research the various methods of ownership to establish what will work best for your family.

Other estate planning considerations for France

It’s not just inheritance tax you need to think about. If you’re leaving investments, once your heirs receive the funds, they will start to pay tax on the income and gains. Explore arrangements you can use to hold investment capital so it is tax-efficient for them. Also consider how these investments will pass to your chosen heirs. Will it be a drawn out and costly process, or can ownership easily change hands?

And, while you may want the best for your heirs, don’t forget your own needs. Look for arrangements that allow you to benefit from what you have, providing tax advantages during your lifetime as well as for your heirs in the future.

Succession law in France – personalised advance planning

Estate planning is a complex area, especially when you have to consider the rules of two countries and how they interact. Every family is different, so your approach should be tailored to meet your personal objectives and unique situation.

Take specialist advice for peace of mind that you have got the right plans in place, for yourself and your heirs. At Blevins Franks, we take the time to get to know our clients, their family situation, and how they wish their wealth to be passed on. , This allows us to tailor our recommendations for each client’s unique circumstances. We have 45 years of experience providing cross-border tax and estate planning to UK nationals living in France.

Contact us today to find out how we can help you achieve your estate planning wishes and protect your heirs. 

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.