Good estate planning is about achieving the peace of mind that our affairs are in order and that, as far as possible, what we want to happen in the future will happen in the way we wish.

Estate planning in France is made far more challenging by ‘forced heirship’ succession law and inheritance tax rates of up to 60%. The regime is particularly daunting for complex family situations. Arrangements set up in the UK are unlikely to be effective in France and may have unexpected consequences.

Succession law

Under France’s Napoleonic code, children are protected heirs and may inherit up to 75% of your estate – spouses are not protected in the presence of children. You cannot override this by simply stating in your will whom you want your assets to go to. Again, this can make life much more complicated where children of previous relationships are involved.

Since 2015, you can use the EU Certificate of Succession regulation, ‘Brussels IV’, to elect for the succession law of your country of nationality to apply instead of that of your country of residence. You need to state in this your will, or French law will automatically apply.

While this is a welcome development, it is all very new and untested and choosing UK law may have unexpected consequences. It is obligatory for a French notaire to handle your estate, and they would have to administer it under a law they are not experienced with. The UK opted out of Brussels IV and there is uncertainty over how the rules will be interpreted. Adopting UK law could negatively affect your existing succession planning arrangements, and may mean your estate becomes liable to UK inheritance tax as well as French succession tax.

You need specialist, personalised advice and to consider your options carefully. There may be options available under French law that achieve your aims.

Succession tax

Tax rates and allowances vary depending on who the beneficiary is, and you need to plan accordingly.

There is no tax between spouses/PACS (civil) partners on inheritances (there is on gifts). Your children each receive a tax-free allowance of €100,000 and pay tax at progressive rates of 5% to 45%. Stepchildren, however, are treated as non-relatives. Their allowance is a mere €1,594 and their tax rate 60%.

If you have children from a previous relationship and leave everything to your spouse, when your children inherit from him or her on the second death they are treated as stepchildren. The difference in how much tax they pay compared to natural or adopted children is staggering. Taking a €400,000 inheritance as an example, a natural child would have a tax bill of €58,195, while a stepchild would pay €239,044.

These tax liabilities are without tax planning in place, which can make a considerable difference.

The tax rates for siblings, nephews, nieces etc are between 35% and 55%, with allowances of less than €16,000.

Note that Brussels IV does not allow you to choose UK inheritance tax instead of French succession tax. So be aware that if you use UK succession law to leave assets to distant or non-relatives, they face tax of up to 60%.
At Blevins Franks we focus on helping our clients create the optimum 'estate plan' to meet their wishes for their family and heirs and to minimise the impact of inheritance taxes. Contact us to review your estate planning for France.

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; an individual is advised to seek personalised advice.