Estate planning becomes increasingly important as the years go by, and we think more about how our legacy will be passed to the next generation. Succession planning is a complex and emotional subject, and in France it is further complicated by French succession law, forced heirship, and succession tax up to 60%.
Unsurprisingly, we receive many questions on this subject. Here we answer some of the most common queries we are receiving about succession and inheritance in France.
Should I have a UK Will or a French one?
It’s often beneficial to have two wills, one for your French assets and a UK one for British-based assets. A UK will can be effective in France, but besides UK probate, it will need to be translated and notarised before obtaining local probate. Separate wills can prevent delays and expense for your heirs, but they should align and cross-reference each other to avoid conflict.
Your will must either follow French succession law or make an election for UK succession law to apply to your estate; otherwise, it may be invalid.
Is my estate subject to UK or French inheritance tax?
Under the terms of the France/UK double tax treaty on inheritances, if you live in France your worldwide estate is subject to French succession tax only. That is except for UK assets, which are assessed for both French succession tax and UK inheritance tax. France will give a credit for any UK tax paid, but your heirs will pay the higher amount.
Contrary to popular belief, moving to France does not necessarily mean that their heirs will pay more tax. French tax rates and allowances depend on the relationship between the deceased and beneficiary. Spouses are exempt on inheritances (but not gifts), and for children rates start at just 5%.
Will my UK pension be subject to inheritance tax?
UK pension funds are due to become subject to UK inheritance tax from April 2027, losing the estate planning advantages they have offered to date. This change could substantially increase inheritance tax liabilities for some families. Bear in mind that any UK-resident pension beneficiaries also face income tax up to 45%.
The position can be more complex for British expatriates, as UK pension assets may also have implications under French succession tax rules. Reviewing your pension arrangements is highly advisable right now.
How much French inheritance tax will my children pay?
Each child received €100,000 tax-free from each parent. Scale tax rates range from 5% to 45%, the latter applying to amounts above €1,805,677.
Be careful if you have children from a previous relationship. For example, if you leave assets to your current wife to then pass to your children on her death, they are treated as her stepchildren and face 60% tax.
I don’t have children and plan to divide my estate between my sister, nephew and godchild. What tax will they pay?
In these cases, the tax liabilities are considerably higher. Generally speaking, it’s 35% or 45% for your sister after 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 now?
You can gift set amounts tax free during your lifetime but, above these limits, gifts are taxable and the exemptions only renew every 15 years.
Be careful when giving assets away and ensure you leave yourself with sufficient resources to live comfortably long term. Gifting your home to children or making them part owners can cause problems later if there’s a falling out, divorce, or you need to sell it.
Why can’t I leave all my assets to my spouse?
Under French succession law (the default position without other arrangements), inheritances must pass down the bloodline. Children are protected heirs and must inherit between 50% and 75% of your estate; only the ‘freely disposable’ part can go to your spouse/PACS (civil) partner. It’s even more complicated without a valid will.
My partner and I are not 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, the survivor will pay the highest rate of inheritance tax – 60%.
The other important issue is that French law favours the bloodline. Your children have inheritance rights over your partner. If you don’t have children, your will must name your partner as your beneficiary; otherwise your estate could pass to surviving parents, siblings or other relatives, potentially leaving your partner with nothing.
Expert, advance succession planning is essential here. Marriage is not necessarily the only solution, but you need professional advice to determine your best course of action.
Can I bypass French forced heirship rules?
French succession law applies by default. However, under the EU ‘Brussels IV’ succession regulation, you can opt for the succession law of your country of nationality to apply to your estate instead. This election must be stated in your will.
France has now clarified that its 2021 domestic legislation, giving children the right to make a claim on certain inheritances, does not apply to British expatriates who have elected for their UK law to govern their estate.
Always remember that if you leave assets to distant or non-relatives, they could lose up to 60% of their inheritance to tax.
Should I use Brussels IV?
Brussels IV can be very helpful if you want greater freedom, particularly if you wish to leave more assets to a spouse than French succession law allows. However, while it is the answer for many families, it is not a universal solution. Suitability depends on your circumstances, objectives and wider estate planning arrangements.
In some situations, electing for UK succession law could have unintended consequences and may undermine planning already put in place. For example, there is a risk of opening your global estate up to UK inheritance tax.
The French regime does offer other estate planning solutions. For example, different marriage contracts impact ownership of assets, or you can insert an ‘en tontine’ clause when buying a property. But always understand and weigh all the succession and tax implications.
Before reaching a decision, take specialist advice to ensure the outcome matches your wishes and does not create unforeseen consequences.
Do the same succession rules apply to capital investments?
Yes, French succession law and tax generally apply to bank accounts, shares, bonds, investment funds etc. However, capital investments can offer greater estate planning flexibility than real estate, making it easier to reduce inheritance tax liabilities and overcome certain succession constraints.
A highly effective planning tool is to hold investment assets within an assurance-vie. These policies can mitigate succession tax and can often pass automatically to the nominated beneficiaries. Normally a savings vehicle, they are a great source of beneficially taxed income – but they are also fantastic succession planning structures.
The most common succession mistake? Failing to plan
The biggest mistake is not planning at all. Nobody enjoys thinking about their own mortality, but postponing indefinitely can have serious consequences. French residents have opportunities to improve tax efficiency and succession outcomes, and ignoring them often results in unnecessary tax and/or your wishes not being followed.
Finally, effective succession planning will make life much easier for your heirs. Instead of leaving them with complex administration and unfamiliar French bureaucracy, you can set up your affairs to make the process much simpler for them.
Good financial planning is proactive rather than reactive. Waiting until it’s too late often limits the options available to family members left behind. And with succession law and taxation evolving constantly, regular reviews and professional advice are essential to ensure your plans remain appropriate.
Get in touch if you have more questions, need more information, or would like Blevins Franks to review your estate planning.
