French inheritance tax law

The settlement of an estate involving French assets will not only be complicated because of the language barrier but also due to the differences between the legal systems. British citizens who own a property in France or who have moved to France often wonder how their estate will be shared between their beneficiaries. What are the rules without a will? Does a will made many years ago still fully apply in France?

The purpose of this article is to provide our readers with a clear understanding of the basic rules of inheritance law as it applies in France. I will not go into too much detail regarding international rules such as the Hague Convention. I will limit my article to the basic rules. I will distinguish between a person dying without a will and one dying with a will.

What Happens to Their Estate When Someone Dies In France?

When a person dies in France, the assets composing the estate are immediately and automatically inherited by his heirs. It is the law that determines who inherits; it is the legal devolution of the succession.

This transmission organised by law is not strictly imperative and exclusive. By a manifestation of his personal and unilateral desires in the form of a written will, the deceased may modify the devolution of his estate.

Resolving the Question of Domicile

Before considering any aspects of the estate, the Notaire will have to resolve the question of domicile, which is the tax residency when dealing with international estates. A deceased domiciled in the UK will only attract inheritance tax in France because his French immovable assets only would be governed by French law. However, if the deceased was French domiciled, his worldwide assets may be taken into consideration, subject to any double tax treaty in place.

The Hague Convention

There is also the consideration of marital status and the application of the Hague Convention dated 14th March 1978 for those married between the 1st September 1992 and 29th January 2019.

Two situations should be distinguished:

• An intestate succession, where a person dies without a will
• The estate of the deceased will be divided up in accordance with a certain order of ranking
• A testate succession is where a person dies and leaves a will

Intestate Succession

In the absence of a will, the estate of the deceased will be divided up between the deceased's nearest relatives in accordance with an order of ranking set out by French law.

1- Legal rights of the children

The first beneficiaries are the children. Considered as reserved heirs as well as the parents, they will all inherit the deceased's estate in equal shares. French law does not distinguish between illegitimate children, legitimate children and children from a previous marriage as they are all entitled to the same rights regarding the estate.

Ex:

1 - Mr A has 3 children and no spouse. His 3 children inherit 1/3 each of his French estate.

2 - Mr A has 3 children and a partner, but he never entered into a PACS or civil partnership. His 3 children inherit his estate in equal shares of 1/3 each. The partner does not have any right.

In the absence of any children, the parents will inherit half of the estate with the other half being passed to the siblings.

Ex:

1 - Mr A has no children, 2 parents and 2 brothers. His estate is split as follows:

- His parents inherit ½ of the estate, ¼ each

- His brothers inherit ½ of the estate, ¼ each. If one of his parents dies, the share accrues to the siblings. Leaving the parent with ¼ of the estate and the brothers ¾.

2 - Mr A has no children, 2 parents, 2 brothers and a partner (without civil partnership or PACS). His estate is split the same way:

- His parents inherit ½ of the estate, ¼ each

- His brothers inherit ½ of the estate, ¼ each. If one of his parents die, the share accrues to the siblings. Leaving the parent with ¼ of the estate, the brothers ¾.

If a person dies without any children, parents or siblings, his estate will pass to the nearest relatives such as his uncles, aunties and cousins.

Legal Rights of the Surviving Spouse

French law has increased the surviving spouse's rights over the years and the most recent law entered into force in 2007.

In the presence of children, the surviving spouse is entitled to inherit one quarter absolutely (1/4) or the whole life interest (usufruit) of the deceased's estate if the children are common law. They get only one quarter absolutely if there is the presence of children from a previous marriage.

Ex:

1 - Mr A is married and has 2 children from his marriage: His estate is split as follows:

- The surviving spouse can choose ¼ or the whole life interest on the deceased share (1/2).

- The children end up with either ¾ of the deceased estate or ½ in bare ownership (Nue-Propriete).

2 - Mr A is married and has 2 children from a previous marriage. His estate is split as follows:

- The surviving spouse has ¼ of the deceased share (1/2).

- The children inherit ¾ of the deceased estate.

In the presence of parents, the surviving spouse can inherit half of the estate should the deceased's parents be alive and three quarters if only one parent survives.

Ex:

1 - Mr A is married and his 2 parents are alive. His estate is split as follows:

- ½ to his surviving spouse.

- ½ to his parents.

2 - Mr A is married and he has his mother only. His estate is split as follows:

- ¾ to his spouse.

- ¼ to his parent.

In the absence of children and parents, the surviving spouse will then inherit the whole estate in priority over the siblings. French law also gives him/her a reserve over the deceased's estate for a quarter absolutely should the deceased wish to bequeath his/her estate to a third party.

Legal Rights of a Partner

A partner will not inherit any share of the estate without a will. Having a civil partnership or a PACS will not change the rules because without a will, the partner will be estranged from the estate.

Succession with a Will

Facing the complexity of cross-border succession, an important step to facilitate the settlement of an international estate was adopted on 4th July 2012 for successions throughout the EU.

The new uniform rules of Regulation (EU) n°650/2012 on jurisdiction, applicable law, recognition and the enforcement of decisions, acceptance and the enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession will make sure that:

• A given succession is treated coherently under a single law and by one single authority.
• Citizens are able to choose whether the law applicable to their succession should France be their habitual residence or their nationality.

The uniform rules of the regulation came into force across Europe for the State members from 17th August 2015 onward. However, and most importantly, England (as well as Denmark and Ireland) have opted out of the regulation and European Succession Law will thus not apply in England. This does not mean that a British citizen cannot use the legislation for his French estate. It only means that a British citizen making a choice of law in a will for a UK property will not be recognised under English law.

However, in the case of British law using common law, I personally doubt that there will be a difference. It is probably a question of drafting and wording a will properly to make sure that it applies in a different country or to have separate wills.

If you are British, there is no restriction in terms of you disposing of your estate as you wish under English law. The rules are slightly different if you are Scottish or Irish, and it is important to assess which law governs the settlement of your estate.

Two situations must be distinguished in relation to a will.

Will made before the EU regulation with no choice of law

In this case, the will cannot apply entirely and it will be governed by the French inheritance rules by reverting to article 34 of the EU regulation. In that case, the limit of disposing of your estate is set out as follows.

Legal rights of the children

Where a testator has children, his estate will be divided into:

• The part of the estate that is reserved for the children by virtue of their legal rights.
• The part of the estate that the testator is free to dispose of under his or her will (the “disposable estate”). The testator may bequeath the disposable estate to any person (including his or her spouse).

The disposable estate is calculated as follows:

Number of children left by the testator Disposable estate

• 1 child: ½ of the total estate
• 2 children: 1/3 of the total estate
• 3 children or more: ¼ of the total estate

Ex:

Mr A has 2 children, is not married and made a UK will in 2011 leaving his estate to his partner only. No express choice of law: His estate will be governed by the French law of “renvoi to article 34 of the EU regulations: his children will inherit 2/3 of the estate and his Partner will inherit 1/3 of the estate as the disposable part.

Since 2007, the parents are no longer “reserved heirs” if the deceased made a will. They can be disinherited to the benefit of a spouse, for instance.

Rights to the Surviving Spouse

If the deceased leaves a spouse and children, French law provides a specific provision for the surviving spouse, increasing his rights over the estate.

The disposable estate is calculated as follows:

In the presence of children:

• With one child: Half (½) of his estate goes to the surviving spouse absolutely or one quarter (¼) absolutely plus three quarters (¾) of the estate in life interest
• With two children: One third (1/3) of his estate goes to the surviving spouse absolutely or one quarter (¼) absolutely plus three quarters (¾) of the estate in life interest
• With three children or more: One quarter (¼) absolutely plus three quarters (¾) of the estate in life interest.

Will made before or after the EU regulation with a choice of law

Please note that the following scenarios apply if the deceased and heirs are residents of a Country outside the EU or do not have an EU citizenship.

This is the easiest scenario where the deceased made a choice of law related to the settlement of his estate. In that case, the estate will be shared between the beneficiaries upon the law governing his estate. There will be no restriction of application of article 34 of the EU regulation.

Ex:

1 - Mr A is married and has 2 common children. He made a will electing UK law and bequeathing his estate to his wife only. The will applies UK law and transfers all of the estate to the surviving spouse, postponing the inheritance to the children after the second death.

2 - Mr A is married and has 3 children from his previous marriage and no contact with 2 of them. He made a will electing UK law and disinheriting 2 of his children. The will applies and the two children will be disinherited under the will. The 2 children will not be able to challenge the will or claim their “reserve” under French law.

3 - Mr A is not married and has a partner with a civil partnership, 2 common children and 1 child from a previous relationship. He made a will electing UK law and bequeathed 2/3 of his estate to his partner and 1/3 to 1 common child only. By the application of the will, his other common child and the child from a previous relationship are disinherited from his estate.

CHANGE OF LEGISLATION IN 2021 (New Article 913 of the civil code)

The French Government introduced on the 1st November 2021 a mechanism to compensate children, who would be disinherited by their parents after selecting a choice of law to govern the settlement of their estates. A new subsection to the article 913 of the Civil Code was created, with the following provision: “When the deceased, or at least one his children, is, at the time of death, a national of a Member state of the European Union or has his/her habitual residence there, and when the foreign succession law does not know a mechanism with a reserved portion protecting the children, each child (or his/her heirs, or those who benefit from his/her rights) can use the assets which are located in France to obtain a compensation at the time of death, in order to benefit from the forced heirship rights which they have under French law, within the limits of these rights.”

Under this legislation, a child can challenge the provisions of their parent's will, should it disinherit or provide them less than their legal rights under French law, if both conditions are fulfilled. The compensation mechanism only applies to assets located in France, and the compensation only applies to French assets.

What are the two conditions?

1. Geographic criteria: The reform applies if:

- The deceased has his habitual residence in a member state of the EU (France for example), or has the nationality of a member state of the EU, or

- One of his children has his habitual residence in a member state of the EU (France for example), or has the nationality of a member state of the EU

2. Absence of forced heirship in the foreign law:

- The chosen law by the deceased does not know the concept of forced heirship, such as common law.

If the criteria are fulfilled, the children, who may have been disinherited, can use the compensation mechanism to recover their réserve héréditaire from French assets.

Conclusion

Whether you are a UK or French resident, you will need to ensure that your estate will pass to your beneficiaries as per the provisions that you make. There are personal circumstances where you may not need a will because French inheritance law will automatically apply according to what you aim for.

For instance, if you are married with no relatives, your spouse will inherit your estate even without a will. If you are happy for the surviving spouse to share the estate with your common children, the inheritance law in France may be sufficient.

A will becomes advisable when you are in the presence of children from a different union or if you wish to try and apply a different law because of your circumstances.

This article does not refer to the tax aspect which in some cases may make a huge difference. Giving advice regarding estate planning is not only the appliance of a law but the consideration of your marital status, your residence, the beneficiaries that you choose and the value of the estate.