so, our house is worth a sizeable sum; we are second marriage and i have 2 children and my wife has 1. currently i own 66% and my wife 34% - to help with passing on our shares of the property fairly after our deaths. we have a ‘usufruct’ agreement; so the surviving spouse can stay in the house without triggering the succession of the others shares. then on both of our deaths the property is shared in 3rds as above. we think we have covered everything.
we are just looking at a way where our children wont have to pay the tax on any amounts over 100k each. does anyone have any ideas on this please ? what we can do now to prepare for the future.
im not looking for anything illegal obviously ! just a way to prepare for succession where our children can inherit the property without having to find the tax money ! we are not sure that they will be in a position to do that; and fear that they will have to sell the property at that stage.
Go see a Notaire, they will be dealing with sucession when the first spouse passes away. Also remember that if there are large debts at time of second death, the inheritors are liable to pay those if they accept the inheritance. Perhaps creating something like an SCI might be possible, go and have a chat now.
Interestingly, just been having a similar conversation.
We have no children. We have made wills and we have specified the house passes onto the remaining spouse and we have nominated inheritors for when both of us have gone.
When one of us dies, who then, at that point owns the house? The remaining spouse? Or the eventual inheritors? If the remaining spouse does not wish to live out their remaining days in the house but sell and downsize, what happens to the released capital? Does it go to the eventual inheritors?
From you description the surviving spouse will own the house and would have access to all the funds were it sold. IANAL, of course so take legal advice if not sure.
As your inheritors are not your blood kin as in children, the survivor is the sole inheritor of the property and all the other sucession items, cars, jewellery, furniture etc. The named inheritors will only kick in when the second spouse passes and there are no other inheritors from the marriage, only those nominated due to this situation.
We’re in the same position. No kids.
We were married outside France so deemed to be married under the “séparation des biens” régime, meaning that if one of us died, the surviving spouse would get only part of the estate and the remainder would go to the dead person’s other relatives.
We therefore saw a notary (25 years ago) and he changed our marriage contract so that we are now married under the “communauté universelle des biens” régime, meaning the surviving spouse gets everything.
Then a few years ago we made wills to cover the situation where we’re both dead. Although I now think I’ve probably created a huge headache for my niece and nephew because they’ll be liable to 50% inheritance tax (60% if I die first and they inherit from my husband because there’s no blood relationship with him). To be paid within 6 months of the death.
In France the banks are well used to such situations and people get bridging loans to cover the inheritance tax until they can sell the property if necessary (a French colleague just had to do this). But I can’t see a UK bank doing that (my niece and nephew are in the UK).
Also, because the UK is outside the EU, they will also have to appoint a représentant fiscal in order to settle the estate.
If we decide to stay in France I might actually change the will and leave everything to a French charity. To save the niece and nephew a lot of hassle.
Thanks for this @Helenochka. This is exactly our scenario - 4 nephews/nieces of OH plus a cousin of his. My beneficiary is my god daughter (no relation).
I will need to speak to our notaire.
I believe people under 70 often take out life insurance policies for their beneficiaries to help them pay the inheritance tax. But I’d rather not tie up our funds.
The fact niece & nephew don’t speak French also makes me think it would be better not to involve them.
That’s exactly what we’ve done. We have no children, (just dogs!), we were married in the UK, and I understand that separation des biens applies. Everything is left to the surviving spouse under our French wills. We have chosen 3 French charities to benefit from our entire estate, once we’ve both gone.
Good idea. French charities will be well used to dealing with legacies and will have the funds to pay the inheritance tax within 6 months of the last surviving spouse’s death.
No way my niece & nephew could come up with that kind of cash.
Perhaps we could leave them our UK assets if we’re still resident in France when we snuff it. Certainly the UK assets can be disposed of under UK law. And hopefully they would be liable to UK inheritance tax only. Although I need to check that.
Hopefully there should be no French inheritance tax if you leave your entire estate to an approved French charity. We checked that the charity is on the list of those where there is a total tax exemption for a legacy. That’s one of the reasons we are doing this, so that the charity gets to benefit even more…
That also kicks in as a back up but if not, its S de Biens automatically. I know this from personal experience and we also had Donation Entre Epoux as well but because we put off accepting the inheritance (this is me and my two children from the marriage) for ten years, that was automatically cancelled and on all paperwork S de Biens was used instead.
It seems strange that this would be a common ploy. Firstly, you would gift your house rather than give it, ie gift tax law would apply. Secondly, tax would potentially be due on the rent, which if the objective is to avoid tax, seems a self defeating strategy.
In certain circumstance is would be effective but in many circumstance it would not.
Have you checked this with a notaire?
Registered charities do not pay inheritance tax, that is the point.
I hope people are going to get advice from notaires rather than rely on what other people think they have read or been told.
