Inheritance law and inheritance tax in France
When do inheritance law and inheritance tax in France apply to your assets? This guide explains the French inheritance rates, as well as the specific rules for non-residents and foreigners.
Those who become official French residents, move to retire in France, or buy French property should consider whether French inheritance and inheritance laws apply to their assets. In some cases, foreigners and non-residents can choose which law of their country of nationality to apply, but there may be certain restrictions on the division of property based in France under French inheritance law.
This useful guide explains the essentials of inheritance law in France, and includes the following topics:
French inheritance law and inheritance rules
French inheritance law derives from the French civil code and applies a system based on residence in matters of inheritance law. This means that French inheritance law applies to all French residents, regardless of their nationality.
The rules of forced inheritance protect the direct line of descent, that is, children, grandchildren and parents. Traditionally, the aim has been to protect the family – for example, to prevent an unscrupulous stranger from forcing an elderly person to disinherit family members.
However, the rules of forced inheritance mean that regardless of any will, a certain proportion of the estate must go to the children or spouse of the deceased. After this period, the remainder can be distributed freely according to a French will.
Children can waive their right to a French inheritance, if this is done in the presence of two notaries. It cannot be revoked after the death of the parent.
Under inheritance law in France, the amount set aside as a reserve is as follows:
- If there is a child, they receive 50% of the estate.
- With two children, they both receive 66.6% of the estate.
- With three or more children, they both receive 75% of the estate.
- If there are no children, the spouse can claim 25% of the estate.
A couple must be married at the time of death for the spouse to legally inherit part of the estate.
Unfortunately, a surviving spouse will have no predetermined legal right to a share of the estate if he or she is in a common-law relationship, in a civil union or divorced in France. However, survivors of a civil partnership have the right to reside in the family home for up to one year after the death of their partner.
Inheritance law on pensions in France
Inheritance law is complex when it comes to pensions and depends on several factors. It becomes even more complicated if the deceased was receiving a pension from another EU (or non-EU) country.
If the deceased leaves a French pension, it will not be automatically inherited by a spouse or ex-spouse if they are not over 55 and have a certain level of income.
If you choose to transfer your UK pension to a recognized foreign pension scheme (QROPS) while living in France, it is possible to establish a QROPS trust with children as beneficiaries. But if the deceased has been resident for at least 10 years on the date of death, his pension will become eligible for French inheritance rights.
The tax stakes can be high, so be sure to seek expert advice so you don’t make costly mistakes.
French inheritance tax
If you are an expatriate living in France with EU nationality and you want the inheritance laws of your country of nationality to apply, you must express this in a will or separate declaration. Generally, these laws will then apply as long as they do not contravene local public order.
EU rules do not apply to the following matters relating to your estate:
- Inheritance tax
- Your civil status
- The property regime of your marriage / partnership (how your assets should be shared after the death of your spouse / partner)
- Business Concerning
Once you are an official French resident, all of your assets in the world may be subject to French inheritance law – with the exception of real estate held elsewhere. This is because foreign real estate is generally subject to the inheritance laws of that particular country.
The rates of inheritance tax in France depend on the family relationship with the deceased. In fact, inheritance tax is part of the reason the French worry about purchasing life insurance in France, or death insurance, especially if the inheritance will go to a non-blood or distant relative. You can purchase multiple policies for different members of your family, children, friend or lover.
Inheritance tax rates and reductions in France
The current inheritance tax rates and reductions in France are as follows:
Spouses: Married and PACS couples are now exempt from inheritance tax in France.
Parents, children and grandchildren
- Tax-free allowance: 100,000 €
- 5% tax up to € 8,072
- 10% on € 8,072 – € 12,109
- 15% on € 12,109 – € 15,932
- 20% on 15,932 to 552,324 €
- 30% on € 552,324 – € 902,838
- 40% on € 902,838 – € 1,805,677
- 45% above € 1,805,677
Brothers and sisters
- Tax-free allowance: € 15,932
- 35% tax up to € 24,430
- 45% over 24,430
Other relatives up to the fourth degree
- Tax-free allowance: € 7,967
- 55% flat-rate tax
Distant parents and other beneficiaries
- Tax-free allowance: € 1,594 (€ 159,325 if disabled)
- 60% flat-rate tax
If a person dies without leaving a will, the French rules of intestate succession apply. This means that the estate is divided between the surviving children and the spouse accordingly.
The spouse can choose either full ownership of his share (minimum 25%) or life interest (usufruct) in French property (the right to use it throughout their life). In these cases, ownership of the entire estate is shared between the children.
Property tax in France
French real estate law recognizes ownership according to the person named on the title deeds. This means that you need to register your property after purchasing a home in France for it to be included in your estate.
The rights of the spouse under French inheritance law depend on the matrimonial regime chosen by the couple during the marriage in France:
- If the matrimonial regime is in joint possession (property purchased during the marriage is co-owned), then a surviving spouse retains his 50% share and the remainder becomes part of the deceased’s estate and is subject to the rules of forced inheritance.
- If the couple opts for Universal community marriage, any property held in common is considered to be common property. This means that the surviving spouse is the sole surviving owner and that forced inheritance does not apply, unless the deceased has children from a previous marriage.
- Another option is to buy a property in France in tontine, which means that all property is transferred to the surviving partner.
Beyond the French inheritance restrictions above, a person can leave the rest of their estate to whomever they want by drafting a French will.
If a child under the age of 18 inherits real estate in France, inheritance law states that no debt should be outstanding on the real estate (including mortgage repayments).
Inheritance tax on real estate in France generally falls under the normal tax brackets listed above. The tax allowance will depend on the value of the property and the relationship between the beneficiary and the deceased.
Payment of inheritance tax in France
When the deceased dies, banks, insurance agencies, and government agencies may take time to calculate their assets.
You have six months to make a declaration to the tax authorities, but you can generally obtain an extension if the deceased lived outside France. The government can then challenge the numbers underlying the tax return and calculation.
If they don’t, you need to pay the tax as soon as possible. The tax authorities may allow deferred payments from five to 10 years, depending on your relationship with the deceased. If more than half of the estate is cash (cash), you have to pay tax within six months.
If French inheritance law applies to your estate and you are a French resident, then French inheritance tax will be levied on all assets in the world. It will only be levied on assets located in France if you are a non-resident.
In some cases, this can lead to double taxation (in French), where the assets are taxable in two different countries. Fortunately, France has tax treaties with many countries, including the United Kingdom and the United States, to avoid double taxation. It is also possible to contest double taxation in France.
Whatever your situation, it’s a good idea to employ a licensed real estate planner to walk you through the process.
Reduce your inheritance tax in France
Tax-free donations up to the designated tax deduction can be made once every 15 years. In fact, the 15-year period must have expired for the donation to be excluded from the donor’s estate.
In other words, if you give someone property under the tax deduction and die before the 15-year period, it will be added to the value of your estate for the calculation of French inheritance tax. Certain other tax costs may also be incurred.
Whether you can reduce the inheritance tax you owe depends on your situation and your relationship to the deceased. So, do yourself a favor and have a good real estate planner explain all of this to you and minimize the amount you pay in taxes.