Inheritance Law in France
Understand the system of heirship for residents and those with fixed assets in France: the rules of reserved and unreserved allocations and how to make it work for you...
Under French law, if an individual has children, they do not, unlike in for example the UK, have testamentary freedom to leave assets to who they wish in whatever proportions they desire. Strict inheritance rules mean that children have certain rights to their deceased parent’s estate.
In France, a person's estate is divided between the réserve légale and the quotité disponible. The former must be inherited by your children and the latter is freely disposable by will.
The value of the former is determined by how many “reserved heirs” (héritiers réservataires) the deceased has. This basically means children, although in the absence of children, the surviving spouse is a reserved heir for 25 percent of the estate.
For someone with one child the reserved portion is 50 percent, 67 percent for two children and 75 percent for three or more children, split equally between them. The remaining percentage is considered the unreserved portion and may be left to whomsoever the owner pleases.
A French will
A will cannot override the law of reserved heirs. On this basis the surviving spouse could end up "sharing" ownership of their home with the children of the deceased. However, it is possible to leave the surviving spouse the “usufruit”, or life interest of the estate, by including that in a will. This gives the surviving spouse considerable extra protection, but difficulties may remain if the surviving spouse wishes to sell the property.
Whilst significant changes were made to French inheritance law in 2007, the basic principle remains that you cannot disinherit your children.
However, a child can agree to forego their inheritance by formally renouncing (in the presence of two notaires) their right to inherit. Their decision cannot be revoked after the death of a parent.
Also as long as children agree, a parent may leave assets directly to grandchildren.
A family agreement (Pacte de Famille) allows a person to get family members to agree to the organisation of their inheritance during their lifetime. All interested parties sign a Pacte de Famille with a notaire which binds them to agreements made during the life of the deceased.
Marriage Regimes (Régimes Matrimoniaux)
There are various ways of being married in France and these are called marriage regimes.
These control how assets are dealt with between spouses and can be an effective tool in financial planning to deal with succession rules. You can change your marriage regime every two years, by signing a new “marriage contract” with your Notaire. However, whilst this can provide extra flexibility, this rarely provides an adequate solution for those with children from a former marriage.
French inheritance rules are likely to mean that, without action, your inheritance wishes will not be met. It is relatively easy to avoid these rules in the case of a simple family situation and various solutions exist.
There are also ways of investing capital which can help to reduce the effect of the French inheritance rules even in the most complicated of situations.
Recently adopted EU legislation should make it easier to bypass the rules outlined above.
The basic principle is that an EU national living in another member state will be able to choose which of the two countries’ legislation determines the distribution of their estate, by stating this clearly in a will. For example, for British nationals resident in France they will be able to stipulate that they wish to use English or Scottish Law rather than French Law, thereby circumventing France’s strict rules regarding “reserved heirship”.
However, it is our understanding that, in order for the French Government to ratify this new regulation, the constitution would have to be changed, since the automatic right of children to inherit is an element of “public order”. Also, it is expected that France will seek to apply the regulation as restrictively as possible.
In any case, the regulation will not come into force until August 2015.
The regulation applies only to rules on who can inherit, but does not cover taxation. This means that should you decide to leave assets to, for example, step-children, French inheritance tax would still be levied at 60 percent. Therefore, whilst this is good news on the face of it, it is not necessarily a panacea and appropriate advice and planning will still be vital.
Also, the regulations will not be directly applicable in the UK, as a result of its right to opt out.
Blevins Franks, the leading international tax and wealth management advisers to UK nationals living in Europe, with decades of experience advising British expatriates moving to and living in 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.