Inheritance Tax in France

Naturally, when another generation occurs, it brings to mind inheritance planning (not to mention school fees planning, wedding planning, etc., etc.) especially when the generations are separated by country borders.

Many people believe that if their financial assets are in the UK and their beneficiaries are also in the UK, then there will be no French inheritance tax payable. This is a myth. If you are French resident, these assets would be subject to French inheritance rules and tax.

In France, there are strict rules on succession. Children are protected heirs and so are entitled to inherit a proportion of their parents’ estate. If there is one child, the proportion is 50%, two children, one-third each and three or more children, three-quarters of the estate must be split equally between them.

The inheritance tax rates and allowances are also dependent upon the relationship to beneficiaries. Whilst these are quite generous between parents and children, at the other end of the scale, for ‘non-related persons’ (which includes step-children), the tax rate is 60% on anything inherited above a very small allowance of just under €1,600. Even grandchildren are taxed at 55% on amounts exceeding €7,967! Fortunately, there is no inheritance tax between spouses and partners with a PACS (or a recognised civil partnership from another country).

Inheritance planning becomes more complicated if there are children from a former marriage. For example, how does one protect the survivor and mitigate the succession taxes for the children, especially if they are all to be treated equally?

Let’s take a case where a husband has three children and his wife has two. The husband’s children are entitled to inherit 75% of their father’s estate, in equal shares, while his wife’s two children are each entitled to receive one-third of her estate. By simply making French wills, they can provide for the survivor to have life use (usufruit) of their estates.

However, a downside of the survivor only having usufruit of any property, for example, is that if he/she were to subsequently sell the property, his/her step-children would be entitled to receive their share of their parent’s part of the property, at the time of the sale. Although it would be possible for the step-children to revoke their inheritance at that time, but the surviving step-parent would be depending upon their future goodwill to do this.

One option would be for each spouse to enter into a ‘family agreement’ with their own children. This is known as a ‘Pacte de Succession’ and basically, the children agree to give up their French inheritance rights, leaving each spouse free to leave their total estate to each other through their French wills. The survivor is then free to sell the property without having to distribute the step-children’s share of the proceeds at that time.

Having achieved the protection of each other, the issue then concerns how the five children can be treated equally without the step-children being liable to 60% succession tax. This is addressed in two steps.

First, by creating a ‘Legs Résiduel’. Subsequently, when the survivor dies, whatever is remaining of the estate of the first person to die, passes to that person’s natural children, as if inherited directly from that person, without the possibility of the 60% tax.

Second, by investing financial assets into an ‘Assurance Vie’. This type of investment is considered to be outside of the estate for inheritance purposes and there is freedom to nominate beneficiaries and in whatever proportion desired. Depending on the value of the financial assets, it could be possible to address the imbalance between children, which arises because of the division of property. Quite simply, the husband’s three children could receive a greater proportion of the financial assets, since the wife’s two children will each inherit a greater share of the property.

When this type of investment is set up before one’s 70th birthday, each beneficiary is entitled to a tax-free allowance of €152,500 in respect of monies invested before age 70, with succession taxes limited to 20% on amounts exceeding the allowance (although a higher tax rate of 25% applies for amounts exceeding €902,838 per beneficiary). Hence, there is no possibility of any step-children suffering the 60% succession tax.

The Assurance Vie is one of the best types of investments in France for regular savings and/or capital, because, not only does it provide a valuable source of inheritance protection, but it also provides a tax-efficient source of income for the investor.

Thanks to Brian Furzer & Daphne Foulkes of Spectrum IFA for writing this article

The Spectrum IFA Group specialise in assisting English speaking expatriates across France and Europe in maximising their wealth opportunities with regard to investment planning, retained UK pensions, mortgages and family protection and tax planning.and can be viewed on Brian Furzer can be contacted directly on and Daphne Foulkes on

The Spectrum IFA Group is registered as TSG Insurance Services S.A.R.L.Siège Social: 34 Bd des Italiens, 75009 Paris « Société de Courtage d'assurances » R.C.S. Paris B 447 609 108 (2003B04384) Numéro d'immatriculation 07 025 332 -

Hello I wonder if anyone could advise on our situation. We purchased a house in Normandy in 2005 (its more of a shack no electric, water, etc) our son was 7 months and we purchased it in my name (we weren't married at this time - we married in 2009) and we have since gone on to have 2 (5 & 18 months) more children. My husband has 3 children from his previous marriage (20,18, 14). We have submitted a planning application to make it a habitable home this month. This house will remain in my name and our UK house is also in my name. Should my husband die before me (likely he is 10 years older) - do all 6 children effectively own the house? If I wanted to move back after his death could I do this easily or do I have to get permission from all 6 children if they are adults. If we sell when we are both alive and move back do we have to give any equity to the children? Many thanks.

The change of marriage regime sounds like the 'en tontine' clause which needs to be applied at the time of purchasing the house as I understand it i.e. it cannot be applied once the purchase has been completed.

Our assurance vie is administered from Luxumbourg and you do receive extra benefits if you set it up in UK before you become tax resident in France. However, in these tough times anything which benefits individuals seems fair game.

Thank you for the article. It's the first time anyone has given us hope on the inheritance. We realise we will have to go home before either of us dies as we have children by our first marriages, but don't want my husband's to get their hands on any of our estate, but at least this will address the inbalance between the five should the unthinkable happen.

When we bought our house in France we changed our marriage regime at the same time. This enables us the surviving spouse to inherit directly without the children receiving anything until the death of the surviving spouse. the surviving spouse is free to sell the house or deal with their finances in any way they deem necessary.

We also took out an assurance vie before we moved to France and became tax resident here.

Our family affairs are simple as we have been married for 36 years and have only our to daughters and I think anyone with children from previous marriages need to take appropriate advice.

I have the sole income on an interest in posession UK trust. (I am a trustee but there are two UK trustees and all the assets are in the UK). I am British, tax registered and domiciled in France, with no substantial directly owned UK assets. Mu understanding is that the UK trust will have to pay IHT in the UK on my demise but am I right in thinking that the French will have no IHT claim on the trust or on my French estate in connection with the trust? Also will the UK IHT threshold apply? I am married, my wife is not British or European, but works and is taxed in France under a Carte Sejour. My french properties are in my sole name. Ihave two adult sons in the UK from marriage No 1 and a British daughter here in France from marriage No 3.

Where does the 'en tontine' clause fit into this jigsaw puzzle. I was told, when we purchased, that by taking the 'en tontine' clause that on the death of the first spouse the property passes to the survivor, but you would be liable to inheritance tax on the value of that half. Then, as far as I am aware, a subsequent change in tax laws stated that this was no longer taxable on the value of the deceased's half until the subsequent death of the surviving spouse. Be nice to know if all that is correct or not?

@ Maureen - this is actually a guest blog!

Sounds as though you have set up a "Donation entre epoux" which is fine in your case as the house becomes a non taxable gift on the death of your husband. You can then do what you want with it, although if you stay in the house upon your death it passes to your children. Fine as long as your husband does not have any close family whoo might take issue with this. Registering wills in France does not remove the absolute right of the children to inherit though, and they will still get their legal percentages equally.

You have got the percentages wrong, James, I am at the moment in the throes of the legalities due to my husbands demise. My husband had four children, I have two. The law as it stands is 50% of the property will go to his four children after my death, or when we all decide to sell, and 50% will go to my children after my demise. I am blessed with six lovely kids who are vwry happy for me to stay here as long as I wish, even though I am "usofruit". This also means while I am alive, I have one fifth of their 50%. At the moment we are having to transfer the deeds into their four names in place of my husband. I am not pushing things until after Christmas!

As we have both been married twice and only I have children we took advice and bought the house in France which is our only residence in my husband's name only. On good authority from the notaire we were told the house, if mny husband predeceases me, comes to me directly as a gift, I can sell and only if I buy another house in France, does it then become an inheritance issue. We also registered wills, should we both die at the same time, stating how the estate is to be divided up between the two families. Obviously we were informed about the differing taxes between my children and my husband's family. I do hope we were well advised.

A few inaccuracies here. If a surviving spouse has usufruit of all of the deceased spouse's assets, for example half of the house, then if the house is sold the children do NOT have half of the proceeds. A stipulated formula is used (based on the age of the surviving spouse) by the notaire to apply the value of usufruit and that is deducted from the half of the proceeds that the children would get.

Another fact that has been omitted is that you CAN get your UK assets treated seperately, given that you make application before you have been resident in France for a certain period (10 years I believe). Consult your notaire about a treaty that covers this point, as it may be important and time is not on your side as it cannot be applied for once the residential period has passed