Important Changes to Inheritance Laws


(Nick Ord) #1

This is related to the post on Inheritance Laws posted by Laurence Clary, but warrants a new topic of it's own.


I have been reliably informed that from the 17th August this year, European inheritance laws are changing. Apparently British people living in France with French property will be allowed to decide whether the succession is passed as per the British system or as per the French system. From what I gather you need to be British without any French naturalisation. More details here.


As I say, the source is reliable, but as always, the best advice is to check with your notaire.


(David Rosemont) #2

Firstly Wealth Tax is Wealth Tax (or ISF) in France and Income Tax is Income Tax (Impots sur Revenus). Lest you know it already the French also have additional Income Taxes but they call them Charges Sociaux. They are levied on top of the Income Tax and can be quite punitive (after all France is a socialist country and lots of better off French leave to go and live in Belgium, Switzerland, Portugal or even the UK (over 300k French in London alone)). Wealth Tax (ISF) is a bit of a political football but currently is levied when your worldly wealth exceeds 1.3 million euros as valued at 31 December of the year in question. Tax is however then paid as a variable % over 800k euros. There are certain allowable deductions. At lower levels they let you assess it yourself and then as the wealth increases you have to have a full assessment. It's your duty to make the return and pay the tax. The value of trust assets overseas has to be included if you are a beneficiary. As the euro has been falling and asset values in other places have been increasing this becoming a greater problem for some expats domiciled in France. The tax can also be payable even if you are non dom if your assets in France exceed the thresholds. The Connexion newspaper has a guide as does Anglo Info France. I don't know if there is a double taxation treaty with the States but if there is one it may and probably will only affect income tax. Rolling on wealth tax exposure in France could become a serious liability on death. It's not affected by Wealth Tax considerations as far as I know but there is a limit on total tax take of your income in France but it's as high as 75%. Considering you are also paying Taxe d'Habitation, Taxe Fonciere and VAT (TVA) you could possible paying about 80% of your income to the French State who employ about 50% of all workers. All this won't make you eligible for a French state pension or, necessarily, for healthcare. Have I ruined your weekend?!


(misha hollingsworth) #3

This is not about inheritance laws but about the French Wealth Tax law. Does anyone have any information about it and how does one go about making the decision to make a declaration, or not. It seems unjust to me as an American since I already pay American income tax on all my income. It seems like double taxation.


(David Rosemont) #4

Not the case if you die and you were the beneficiary of a will trust in the UK; there may also be the need to pay IHT at every tenth anniversary of the trust.


(Susan Edwards) #5

Lynne, my understanding, (as just an ordinary person, not an expert), is that if you are mot resident in the UK, there's no UK IHT to pay as the dead person#s estate pays IHT in the UK .... not the beneficiaries. But it depends on how long ago you left the UK for France. See the rules here. UK IHT rules for ppl who have died while living abroad


(David Rosemont) #6

I bought our house before I met or married so the notaire says it is mine but as we are married my wife is entitled to live in it rent free for her lifetime. However if she leaves the house the proceeds will be divided according to French law as far as I have thus far been informed. I think the new law will be subject to many test cases as the law has moved slower than the increasing lifetime mobility of people, number of divorces/marriages/Pacs etc all good stuff for "m' learned friends"!


(David Rosemont) #7

40% over 325K but there are calculations which apply re things like taper relief I believe- specialist area!


(Harriet Wallace) #8

We have been told that while UK inheritance laws will apply from August 17th, it will not avoid French succession laws on real estate owned in France as British law provides for real estate to follow the law of the land in which it is situated. Our property is in tontine so we are OK and we change make a will to leave car, bank account, etc. to our surviving spouse but if the property had not been in tontine when we bought it, we would still have a problem with the new regulation.


(Lynne Hilton 2) #9

Thanks David really helpful, so my understanding is sole parent, sole child if under 325 no IHT to pay in the UK, if over will be do we know what rate and from what figure, is from the 325K


(Peter Scawen) #10

Having read the post by Sylvia and from discussions with my notaire, it seems to me to be perfectly clear that as from August 15th, the UK inheritance laws apply, providing you have made the necessary changes to your French will.

Taxation is an interesting question. I ma meeting a "financial adviser" on Tuesday and will seek his opinion.


(David Rosemont) #11

Seems to be different advice to that I received yesterday but I suspect that a French country notaire may not be au fait with the new legislation so I shall be very careful before committing myself to any action


(David Rosemont) #12

I have been informed that it is illegal to prefer one child against another in France's inheritance laws; a succeeding child may renounce an inheritance but only after your death. Properties I have bought in France were always sold by hordes of related people most of whom couldn't agree with each other. That's one reason why farms were so small and why most have been transferred into SARLs or EARLs. An alternative is to put a property into an SCI.


(Sylvia Davis) #13

Here's some more information in English. It's an article and video by Dan Harris. I found his explanation easy to follow, particularly as the subject is quite complex.

http://www.frenchentree.com/french-property/law/warning-for-propert...


(David Rosemont) #14

If the total of your estate would be less than I think £325,000 (might be altered by an incoming government in the UK) there should be no IHT payable in the UK by my reckoning (might be more if you are married but it seems you may not currently be)


(Lynne Hilton 2) #15

I went to a Notaire too re I have one child and he will inherit my house, fine. He lives in London, and, if he then sells the house here what I want to know is, anything over the 100K he pays tax on here in France, if he then wanted to take that money back to the UK would he then have to pay inheritance tax on what was left as well, or is paying the French tax the finale and he can keep what ever is left, does anyone know the answer to this?


(Celia Ford) #16

The last line of the summary , [1] Or, comme le Royaume-Uni n’a pas ratifié le règlement, il pourra revendiquer l’application de son droit. , not sure if I understood this correctly? The UK hasn't ratified it but it still stands?

I'm wondering if it's necessary to make a will here, or if a will made in UK in English (before we moved here) would still be legal?


(David Rosemont) #17

Another issue I have is that I get some income from a UK trust but that income ceases at my death and the trust assets (which are all in the UK) pass to my sons. There will be UK IHT tax payable on that if the assets are over a certain value, being an IHT threshold. Some people have told me (but I'm not convinced) that the French could also claim Inheritance Tax over any paid in the UK on those assets although the assets have never been mine in UK law, plus any inheritance tax due on any French estate. All this complication puts you right off dying!


(David Rosemont) #18

Interestingly I had a meeting with a local notaire yesterday and I got the impression he wasn't up to speed and he's going to have to consult with a specialist. It gets more complicated if like me you have children from two marriages. I have two properties in France and I wan't to leave one to my two sons from my first UK marriage and the other house to my wife and daughter. He said that his understanding is that the new changes don't affect the French laws which divide the properties up into 1/4 each, but my wife retains her right to live in our house for her lifetime. I'm looking into giving my sons the cottage now but the notaire says I can't legally prevent them from being entitled to their full shares, although they could agree to renounce after my death. He said my case was very complicated which in turn made me realise that a large bill is probably coming out, maybe without any real possibility of achieving what I want. I am 70 this year and my friends are dropping around me, so I need to get on!


(Dave Ratcliffe) #19

A quick look at that Irene and the 2nd set of bullet points has me confused again. Are we to be governed by the FRENCH national rules alors?