Inheritance and expats living in France
By Spectrum IFA - Topics: Assurance Vie, France, Inheritance Tax, Uncategorised
This article is published on: 4th August 2014
Quite a few of my meetings with clients new and old recently have focussed on the thorny issue of inheritance. I think most of us are aware that this can cause problems for expatriates living in France. More recently some of us seem to think that the problem is about to go away. It isn’t.
What is true is that we will be able to adopt the laws of succession of the country of birth over the country of residence from August next year. What we have to realise though is that although this is indeed a relaxation of the strict Napoleonic succession code, there are no plans to change the taxation structure that goes with it. Whilst we will then be free to write estranged children (a sad but relatively common problem) out of our Wills, leaving substantial amounts of money or property to non-blood relatives will arouse glee in the ‘fisc’ as they will pick up 60% tax on the vast majority of it.
At this point many of you will be expecting me to veer off on my favourite tangent and harp on about how assurance vie can be the answer to all these ills, but I’m not going to. If that disappoints you, please feel free to drop me a line and I’ll rectify that situation.
Instead I’m going to stay on inheritance, because there are a few other aspects to this inevitable situation that some of you aren’t sure about. At present, children are ‘reserved heirs’. They enjoy special rights, and they have relatively generous tax free allowances that they can use from both parents. Rather unfairly though, step-children do not share these rights. If you die and leave an estate to your stepson or stepdaughter, he or she will pay the full tax rates, with no child tax free allowance.
Another inheritance issue that trips some of us up is what happens when we inherit from our own relatives. Succession tax is payable by a French resident who receives a gift or inheritance and who has been resident in France for at least 6 out of the 10 previous tax years. That’s the bad news. The good news is that under specific provisions laid down by the UK/France Double Taxation Treaty, we are exempt from this tax law as long as the relative was not also a French resident. So if we inherit from a parent, or in fact from anyone who lived in the UK, we do not have to declare this for tax purposes in France. If that benefactor was a French resident though, be prepared to fork out a substantial amount in succession tax.
These are just three of the common areas of confusion that I come across regularly in my discussions with clients. There are many more complicated issues that need to be addressed if you want to have a trouble free transfer of assets when you or your loved ones die. This can be a self-educating process, especially if your family circumstances are relatively straightforward. If not, the best person to approach to establish the facts is your notaire. If your French isn’t up to it, find a notaire who speaks English. There are plenty of them about.
In many cases your financial adviser should be your next port of call, specifically to put in place financial strategies that can help circumnavigate many of the problems. Assurance vie will probably figure highly in this process. It is the ‘aspirin’ that cures many a financial headache.