French Wills

Why a French Will Is Essential

It is vitally important to write a French will if you live in France and abide by French law. 

French inheritance rules are relatively complex. Understanding how they work and how to mitigate tax requires input from various professionals. 

When someone dies without a will, the deceased's estate (french assets) is distributed according to the rules of intestacy. 

In France, this means that the proceeds of the estate would be distributed in compliance with French succession law, irrespective of any personal wishes.

The French Will and Forced Heirship

The separation of assets is linked to the relationship between the deceased and his/her heirs. France practices a system of forced heirship, wherein there can be no deviation from the rules in terms of how much can be passed on and to whom.

The reserved shares are calculated as follows:

‍

These proportions come from Articles 912-917 of the French Civil Code and apply to the deceased person’s worldwide estate if they were habitually resident in France.

While the surviving spouse is not a "forced heir" when there are children from the marriage, they do have entrenched rights which can be significant.

These include:

• the option of either taking a full usufruct (life interest) in the estate or a portion of the property with the children
• the right to continue residing in the family home for at least one year after the death of the deceased
• protections specific to the situation where the couple had children as a result of their marriage

A Simple Example

Let's take a simple example of a married couple with two children. Assuming all assets were jointly owned by the couple, only the half owned by the deceased would be subject to inheritance tax. 

The other half would remain the property of the surviving spouse. The estate of the deceased would thereafter be split along the following lines:

• ¼ to the surviving spouse
• 2/3rds to the children
• the remaining 1/12th would be distributed in accordance with the wishes of the deceased.

If there is no expression of wishes, the court and family would have to decide what to do with the extra 1/12th.

Types of French Will

Holographic Will

This type of will is handwritten by the testator. In fact, it is still the most common form of will and is subject to certain conditions.

The will must be written entirely by the testator, and no other text can be added by anyone else. It must be dated and signed, and can be written in any language.

Authentic Will

This is a will which more closely resembles an English will. The document must be read out to the testator in the presence of the Notaire and two witnesses who can’t be beneficiaries. 

The witnesses also have to sign. This is a more formal will whereby the testator gives precise instructions to the Notaire.

Sealed Will

This type of will is less common and is only used when the testator requires secrecy regarding its contents. 

The will can be handwritten or typed, then sealed and stamped before being presented to the testator in the presence of two witnesses. The will can only be opened on the death of the testator.

Marriage Contracts

Marriage contracts affect how assets are owned in France and by whom.

Inheritance and Succession tax is partly determined by the type of contract chosen and the personal circumstances of each partner. 

Factors such as the type of marriage contract, the country where the assets are located, and cross-border legislation must be considered before deciding on the best strategy.

Séparation de biens (Separation of assets)

Most British married couples fall into this category. Each partner owns the assets they acquired, and any jointly held assets are considered 50/50.

Communauté réduite aux acquêts (community property ownership)

Under this regime, property owned before marriage remains owned by each partner personally. Any assets acquired after marriage are considered jointly owned.

Donation entre époux

This is a mechanism that protects the surviving spouse when there are children from a previous marriage. Restrictions do still apply in certain circumstances. It is possible to change your marriage regime; however, it’s important to check all implications and avoid the ‘law of unintended consequences’.

Unmarried Couples

Unmarried individuals have no rights to their partner's possessions.

It’s possible to enter into a PACS agreement where transfers of assets are free of succession tax as if they are spouses; the usual laws of succession will apply according to forced heirship legislation.

Brussels IV

Under EU law (Regulation 650/2012), it’s possible to elect to be taxed for succession and inheritance tax purposes in the individual’s home country.

Clearly, it’s important to establish which regime works best for each individual when establishing a tax-efficient strategy.

UK individuals can also elect to be taxed at home. Much will depend on being able to claim full tax-free allowances, including joint basic and possibly, property exemptions.

Once it is confirmed that the country of taxation is optional, calculations need to be made to compare the two regimes.

It has to be noted that the French government passed a law in 2021, overriding the EU regulations. This is currently under investigation by the European Commission.

Intestacy

Another important issue covered by the Brussels IV legislation is what happens when someone dies intestate, i.e., with no will in place anywhere.

Essentially, any tax payable depends on the deceased's habitual residence and the type and location of their assets. If all assets are located in France and the whole family are residents, the usual rules of ‘forced heirship’ would apply.

If, however, the estate consists of a French property and the owner’s habitual residence is the UK, only the property would be subject to French succession rules. In this case, UK inheritance tax would apply to non-property assets, even if they were based in France.

Probate in France

In most cases, a Notaire will be appointed to administer the deceased’s estate, although this is only mandatory if French immovable property is included.

The Notaire will search the French Central Wills Register to establish that a will actually exists and where the original is kept.

Following that, the Notaire will proceed to confirm the identities of the beneficiaries and what proportion of the estate each will inherit. This is known as an ‘acte de noteriete’.

The Notaire will also help the beneficiaries with their inheritance tax declarations. Any tax due must be paid within 6 months in the case of the deceased being French resident and 12 months if death occurs outside France.

French inheritance tax

No inheritance tax would be payable by the surviving spouse; the children would pay tax on amounts inherited above €100,000. A sliding scale in French inheritance law determines exactly how much is payable. 

The tax on high-value estates, to be worked out by a French ‘notaire’, can be considerable. It is important to prepare in advance and take advantage of allowances for both spouses.

Tax liability rules:

• France has unlimited taxing rights on worldwide estate if the deceased was French resident when he/she died.
• France has limited taxing rights on French situated assets (including real estate, bank accounts and other investments) if the deceased was non-UK resident when he/she died.
• In some cases, the beneficiary's residence may also affect the amount of liability payable.
  
  

French succession tax, unlike UK inheritance tax is taxed on each beneficiary separately and therefore each beneficiary will receive their individual tax-free allowance and pay tax on the amount received from the deceased based upon their relationship with him/her.

‍2024 rates and allowances:

‍

Transfers between spouses and PACS partners have been exempt since 22 August 2007, but PACS partners are still not automatic heirs under French succession law without a Will.

Gifting and Tax Rates

Direct descendants can receive gifts up to €100,000 free of tax every 15 years. Excess amounts are taxed at rates between 5% and a top rate of 45% on amounts above €1,805,677. 

Any gifts are included in the value of an estate if death occurs within the 15-year period. A further €15,000 can be gifted after that point.

Gifts to non-blood relatives are taxed at 60%, and allowances are much lower, as only €1,594 is free of gift tax.

Property-Related Issues

The situation regarding property can be complex. This is particularly the case when it involves overseas property ownership.

However, there are ways in which the surviving spouse can be protected from either inter-family disputes or being forced to sell. This is where it is important to engage a ‘Notaire’ who understands international tax planning issues. 

The job of the Notaire is to ensure that the family is protected against any unwelcome surprises by writing an effective French will that specifies all french assets.

Use of Assurance Vie contracts

‍

Parents can help mitigate future inheritance tax by making gifts. Those who don't wish to give away funds to their offspring, or who need money as a source of income or capital in their lifetime, should consider using Assurance Vie contracts in their tax planning.

‍

Each child can inherit up to €152,500 from Assurance Vie contracts free of French inheritance tax. This figure is in addition to the € 100,000 allowance per child. 

This means that €252,500 can be inherited effectively free of tax on the death of the first parent. It is important to note that each parent is taxed independently. 

The situation could be repeated on the death of the second parent. The key factor in this instance is to establish the Assurance Vie contract correctly. This can be achieved by setting it up as individual policies or on a joint life second death basis.

This is where your financial adviser can help. The adviser will liaise with the family and their legal representatives to ensure that the Assurance Vie is constructed in the most tax-effective way possible. 

The advice needs to be personalised, as each individual's situation is different.

The example above takes a relatively commonplace situation into account. Things may not always be as straightforward. 

Many people are in their second marriage and have stepchildren to consider. The process is the same, although the allowances and fractional splits are different.

Checklist

Here is a checklist to consider:

• Have you made a will in each country where you own assets?
• Does your ‘French will’ note your wishes on how assets are to be distributed?
• Are you taking advantage of gifting rules?
• Are you taking advantage of Assurance Vie rules?
• Do you know what will happen to your house(s) in the event of your death?
• Have you considered which jurisdiction you prefer succession rules to apply to?
• Have you included your valuable possessions in your will?

As ever, any individual element of a financial plan needs to be considered in the context of your entire personal and financial situation.

Further Information

For additional information on preparing a French will, please get in touch with us below:https://axis-finance.com/contact

‍