EU Eases Cross-Border Successions (Guest Blog)

New rules will make cross-border successions easier, but they will not alter your liability to French inheritance tax.

News that the EU Council of Ministers last month finally agreed to relax inheritance rules has been greeted with unbounded joy in many quarters.

This eagerly awaited measure will mean that EU citizens living in a different country than their own will be able to choose which legislation applies when their heirs settle legal inheritance matters.

So expatriates living in France will not be bound by the country's enforced inheritance rules, as they will be able to choose the country in which they want settlement of their estate to take place.

The UK has chosen to opt-out of this measure, so those from the UK with second homes in France will not be able to benefit from the new rule. In such cases, real estate in France will continue to be governed by French inheritance laws.

The same applies to Irish and Danish nationals with a holiday home in France, as they too have decided to opt out.

Nevertheless, holding the property through a French property company, called a Société Civile Immobilière does enable non-residents to escape enforced inheritance laws.

Tax Remains Unchanged

Despite the relaxation of the rules for expats in France, Mervyn Simms of French financial advisors Siddalls points out that, ''the proposals do not affect the operation and application of French inheritance tax rules. So avoiding French succession law could actually create a larger French inheritance tax bill for selected beneficiaries''.

Under French rules if you leave assets to those outside of your immediate family (including step-children) they could face an inheritance tax bill of up to 60%.

Within the immediate family French inheritance taxes are actually very generous and there are options that can be adopted to reduce liability.

‘’The key as always’’, says Mervyn Simms ''is to take advice about your individual circumstances and the choices that are available to you’’.

As Member States have three years to align their national laws for the new rules to become effective, it may be some time before the detail of the necessary legal changes is published, when it will then be possible to see the exact mechanics of how they will be operated.

In France the enabling legislation may not be a straightforward process, for the rights of children are enshrined in the French Constitution, which it may be necessary to amend.

Strictly speaking, the new regulation provides a single criterion for determining both the jurisdiction and the law applicable to a cross-border estate: the deceased's habitual place of residence.

So adopting your own country rules is not automatic or mandatory. If you do not draw up a will or a succession certificate, your succession will be dealt with under the law of the country in which you were resident.

However, provided appropriate inheritance planning is undertaken, it will also be possible for those individuals living in France to have the law of their country of nationality apply to the entirety of their estate.

The decision will substantially ease the legal burden for beneficiaries where a person dies with property in more than one Member State as it will permit expatriates in France to plan their succession in advance in full legal certainty.

Figures compiled by the European Commission show that there are about 450,000 cross-border succession cases every year involving deceased owned property or bank accounts in different Member States, or cases in which beneficiaries are confronted with differing national rules on what courts and authorities have jurisdiction to deal with the case.

The approval also paves the way for the introduction of the European Certificate of Succession, which will allow people to prove that they are heirs or administrators of a succession without further formalities.

This will represent a considerable improvement from the current situation in which inheritors sometimes have great difficulty exercising their rights.

David Yeates


French News

Jean, it's a question of residency. The implications of the UK's (and some other countries') opt-out are that the change in French law applies only to those foreign nationals resident in France (regardless of nationality), hence it doesn't apply to UK nationals with second homes in France, who are resident in the UK.

I am a bit puzzled.

Now, I understand that the EU has put forward legislation which will allow someone to opt for the inheritance rules (not taxation) of the country of their nationality. So, someone residing in France but who is Italian can opt for Italian inheritance laws on the whole of their estate rather than the mishmash it is just now.

But, the UK has not signed up for this agreement ,so surely these new rules will not apply to UK citizens wanting to opt for English/Scottish inheritance law rather than French inheritance law.

Very well set out, easy to read information, Guillaume.

As for my own situation, I will not be classed as being domiciled in the UK. I left over 8 years ago to move to Malta. I did still have a small flat in London but sold that to buy our house in France, so I have no assets remaining there either. My concern at the moment is the Maltese government and our 'personal links' to Malta which could make my son liable to pay additional taxes after my death if I still have assets in both countries. I kept our small house in reserve in case Shaun was unable to settle here. If in a year or two, after he's had a chance to become fluent and better equipped for school, I feel confident that he's not suddenly going to say 'I want to go back' then I think it might be best to sell up in Malta to avoid future problems.

A quick reaction to this post:

  1. The EU rules on cross-border succession are a long way away from being enforceable and many elements can be modified until then. It is naturally always preferable to anticipate such change but it is also prudent to take such information with in mind the fact that it will be some time before it is effective. The procedure reference of the EU Regulation is 2009/0157 (COD) (careful, it is extremely long!).
  2. The government is planning to lower the inheritance tax threshold like it was planning to add social charges to non-residents. The discussion of the Bill (projet de loi) by the Assemblée Nationale has only started yesterday and will carry on all week before being sent to the Sénat, etc. The measure relating to the inheritance tax threshold may be less likely to be scrapped than the one regarding social charges but there is no reason to create any confusion about what is the Law and what may be the Law.
  3. UK inheritance tax is payable if the deceased person is domiciled or deemed domiciled in the UK. French inheritance tax is payable if the deceased person is domiciled in France (the French concept of domicile being different from the UK definition), if the asset is situated in France (from a legal perspective which can be different than from a geographical perspective) or if the beneficiary of the estate is domiciled in France. There is a double tax agreement as regards to inheritance tax between France and the UK and domestic guidance exist from the tax authorities in both countries.
  4. Valerie: before carrying out estate planning measures (i.e. wills and/or other measures to transfer your estate), it is paramount to determine where you would be domiciled from a French and a UK perspective. This is based on numerous elements so one could not determine your domicile and how your estate would be taxed before checking these facts. Both French and UK rules could result in considering you domiciled respectively in France and the UK. Only once you have clarified this point can you know if you need estate planning measures or if the current ones are sufficient.

Totally agree with you Finn. I'm hoping long term, if Shaun is happy, he will simply inherit and live in this house. He can of course do with it as he wishes if he doesn't want to stay, but I'm hoping that will be very much in the future when things may have become much more stable. I do have an old property in Malta (very old and only 3 rooms) which is the part that is concerning me. Hopefully the market will remain buoyant enough out there (with the island being so small there is limited space apart from upwards, hence the highrise apartments) that I can sell it. Even though the amount will be minimal , especially if I drop below market value to get rid, the government out there are eager beavers when it comes to getting their cut, especially from foreigners, which is what they will automatically class Shaun as in order to do that. Yes, I think that will be the plan.

Thank you again, Finn. Extremely helpful. Malta does not have inheritance tax but I can see from the chart others that they would easily apply (and believe me, they would) under the 'personal links' clause. I think the solution within the next 2 or 3 years, if Shaun seems completely settled and happy here, is just to dispose of anything I still own there. That will simplify matters enormously in relation to future events. Thanks Finn.

Thank you Finn. Shaun is my sole beneficiary (unless something happens which i don't want to think about) so everything would pass to him anyway. If not, then my mum and sister in the UK. I'll check the wording on my Maltese will and see if there's anything '...governed by the laws of' but realistically I don't think the Maltese government would pursue Shaun for a percentage of anything the 'Inglizza' leaves him. He, the house and I are all now based in France so I think I will let things take their natural course.

Eeekk! Just when I get one bit something else jumps up and bites me!!! I can feel one of my headaches coming on.

I hope you don't mind me jumping in here but I'm wondering whether I now need to have my will redrawn. In summary, I'm a UK citizen. My son is Anglo-Maltese and has a UK passport (because of me). I had my will drawn up in Malta and he will be my sole beneficiary. I own our property in France. It's not worth much but if the market etc picks up it may eventually be worth 100k, plus whatever I can put in the bank. I'd prefer him not to be thumped with 60% tax on anything over 100k as in real terms that's not much of an inheritance anyway. I'd need to dig out my will to check the wording, but do you think Maltese law would apply, French by default, or should I perhaps get it redrawn in the UK to safeguard him? Sorry if this sounds confusing, but, hey, that's my life in a nutshell.

Finn, inheritance tax is paid in the country in which you reside and die. As a French resident, inheritance tax on my estate will have to be paid by my successors according to French law.

As a UK citizen living in France, under the new rules I will be able to specify in my will that the inheritance rules of England and Wales will apply to my estate - I will be able to leave it to whom I wish. If I dont so specify in my will, uUnder French law I must leave it to certain heritors - my children/wife.relatives according to a set pattern and percentage (enforced inheritance rules).

The UK has opted out inasmuch as they will not allow anyone to specify the inheritance rules of another EU state - the English law will always apply.

Sorry, I dont have the number

Thank you Dick. Got it (at last!!).

Don't forget that the government is lowering the threshold for tax free inheritance by children from 159,000 Euros per parent per child to 100,000 Euros per parent per child. Above these limits, it will be taxed at 60%. Ouch, not quite so generous now, thanks Mr Hollande

Norah. it means you can leave it to whom you like, so long as it is legal under UK law - but they will have to pay French Inheritance Tax. Your will must state that you wish your estate to be dealt with according to the law of England and Wales - or Scotland, 'cos that's different.

Call me stupid (alright, alright, not all at once!) but I was clear, now I am muddled again. And this does not even affect me really!!! But.............does this mean you can leave your French house and contents to your best friend and not to your children (if you don't like them a lot) or not?????

As I understand it this comes into effect in 2015 which is after all three years away. What interim measures apply?

Hi there! my father passed away recently. He was from the UK but lived in France with his second wife for a very long time. I have not seen his will but she says that he left everything to her and her family. I find this difficult to believe and would like to see a copy of his will. I have tried the adsn but the report came back blank and I have emailed his noraty many times (the town hall mairie gave me the name of the notary who is on his death certificate) but they are not replying. Is there anything else I can do? I would like to see his will for two reasons- one to check that what she is saying is accurate and two to see whether it is governed by english or french law, as I believe that if it is governed by french law then their inheritance succession law automatically passes a portion of the estate to his children. Does anyone have experience in this area? Lastly, I have just found out that she is selling the property they lived in, which was in his name. Does this suggest that his estate has been settled since she is free to sell the home? Any help or advice would be very much appreciated! Thank you!