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French Property
News, May 2007
France appears to be a nice place to retire even
for those who do not intend to use it as a holiday home for
themselves and their children. This will have serious
implications both in terms of tax and estate planning. It is
unfortunate that we find that most people who move to France tend
to postpone these issues until after the time they have already
made their investment. This will make it more difficult and
eventually costly and potentially impossible to achieve what they
might ideally wish for.
Despite the two recent
Inheritance Acts the children's statutory inheritance rights are
still a major feature within inheritance tax planning or estate
planning. The recent vote by the French Parliament for
Fiducie which is comparable to a trust to some extent, has
shown that even with recent legislations the statutory rights will
not disappear in France for the time being. This new
institution should allow people to gain more flexibility in
managing their assets in a way which would be comparable to a UK
trust. Nevertheless the underlying position remains regarding
children's statutory inheritance rights and such institution will
not enable parents to deal with their assets the way they
want. Provisions have been made to prevent children from
being disinherited in the Fiducie Act.
Since 1 January 2007,
parents have lost their statutory inheritance rights, which could
not in the past be overridden even by a Will. The only way
was to sign one of the nuptial agreements ie communauté universelle
in order to supersede parents' rights. From now on, for
couples without children, the surviving spouse will not face equal
rights in the presence of parents and the deceased can bequeath the
whole of his estate to his spouse. For this a Will
should be drafted which can either be a French or UK as France and
the United Kingdom ratified the Hague Convention 1961 which
recognises Wills in both countries.
Without a Will the surviving
spouse will receive only 50% of the estate and each of the parents
25%. If one of the parents pre-deceases, the surviving
spouse's share will increase to 75% of the estate. Clearly
there is a strong incentive to have a Will in place although the
spouses may consider entering into a communauté universelle which
will bring the spouses tax exemption in France. It is worth
indicating that the communauté universelle can be set up even after
the couple has moved to France or after they have bought the
house.
The Inheritance Act 2006
introduced, from 1 January 2007, a new right with the goal to
compensate the parents for the loss of statutory inheritance
rights. This right amounts to 25% of the assets which were
gifted by the parents to their child(ren). In other words
even if the predeceased spouse's parents are not entitled in
principle to statutory inheritance rights they still have a claim
on 25% of the assets gifted.
If the predeceased spouses
parents have also deceased the surviving spouse will receive the
whole of the estate in absolute property. There are, however,
two limits to this. The assets received by the deceased which
come from succession or by gifts from his predeceased parents and
which are still available in his estate will be divided 50% between
his siblings (or their children) and his spouse. The second
limit is the right by the deceased grand parents who are in need to
claim against the surviving spouse who has received a minimum of
50% of the estate to live. For those who will be dealing with
the settlement of an estate subject to French inheritance law such
as executors or solicitors it will be necessary to take this into
account and probably look at this from an estate planning point of
view. By not taking this into account a surviving spouse
might loose (even with the presence of a Will) part of the family
assets which were received from the spouse's estate.
Again, careful estate
planning will prevent unforeseen circumstances.
For more information,
please contact Christophe Dutertre in
Blake Lapthorn's French Private Assets and Tax team
on 023 9253 0379; email christophe.dutertre@bllaw.co.uk.
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