Succession law and estate planning in France
By Mary Taylor, Partner, Blevins Franks
One of the most worrying issues facing retired British expatriates in France is its succession law, which imposes strict restrictions on how French residents can divide up their estate. Children are “protected” heirs and may inherit up to 75% of your estate; spouses are not protected.
The good news is that a new EU Directive comes into force this August that will allow British expatriates the freedom to distribute their estate in accordance with the law of their nationality.
The increased global mobility of individuals has created confusion when it comes to the settlement of cross-borders inheritances. The new European Certificate of Succession regulation, commonly known as Brussels IV, was devised to provide increased flexibility in deciding which law would apply in governing succession.
Brussels IV will apply to the succession of persons who die on or after 17th August 2015, although certain transitional provisions are now in force.
It provides a general rule that the “law applicable to the succession in its entirety, shall be the law of the State in which the deceased had his habitual residence at the time of death”.
However, an individual may elect (by way of a statement in his Will) that on his death and when dealing with his estate, the laws of his country of nationality may apply instead.
The Regulation is binding on all EU member states – except for the UK, Ireland and Denmark who have opted out. This may affect French nationals living in the UK, but not UK nationals in France. When it comes to UK residents with property in France, the applicable law would be that of habitual residence – the UK.
Note that the Brussels IV regulations do not apply to tax. UK nationals therefore cannot opt for UK inheritance tax rates to apply instead of French succession tax.
So while you will now be able to more freely leave assets to more distant relatives and also non-relatives, this comes with a much higher tax price. The tax rates and allowances vary according to who the beneficiary is. Transfers between spouses and civil partners on death are tax free; for everyone else the tax rates range from 5% up to 60% and some exemptions can be very low.
It is very important to consider your tax position and the impact on your heirs when deciding to opt for French or UK succession law. Seek specialist advice on how to lower the tax burden for them, so that they receive most of the inheritance you have planned for them, rather than the taxman being the largest beneficiary.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
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