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French Inheritance Law and Tax

CHANGES IN THE REGULATIONS ON INTERNATIONAL INHERITANCE

The European regulation, published in the official European Union newspaper on July 27, 2012, entered into force on August 17, 2015 (it took time for each member state of the European Union to put its own legislation in order). The regulation is applied in 25 European Union countries (with the exception of Denmark, Great Britain and Ireland).

Inheritance Law

Traditionally, there were two systems of international inheritance law.

For some EU states the succession law to be applied depended upon whether the assets were moveable or immovable (Germany, Spain, Italy). In other countries, such as France, Belgium or the United Kingdom, property benefits are subject to the law depending on their location. For those individuals with assets in more than one country, various factors were considered by the courts in determining which succession law should apply. Different jurisdictions applied different connecting factors such as domicile, residence, nationality or habitual residence, in order to determine what laws should apply to an individual’s estate The European regulations came out for the principle of hereditary unity.

Before the change took effect on August 17, 2015, individuals had to comply with the laws of whatever country the asset was owned in, which often took precedence over their own wishes regarding the disposition of that property or investment.

After August 17, 2015, the default position is that the succession of those assets on death will be governed by the law of the country in which the deceased individual habitually resided. Alternatively, such an individual may choose, in their will, to apply the law of their nationality to the succession and administration of their estates. The Regulation will apply to deaths that occur on and after 17 August 2015.

The EU Succession Regulation’s underlying concept for all of this can be summarised as follows: one succession case, one court, one applicable law that will be applied to all operations (administration, liquidation and separation) associated with inheritance and one European Certificate of Succession. In other words, each succession case should be handled by the courts of just one country in accordance with that country’s applicable law.

CHOICE OF INHERITANCE LAW

Someone whose habitual residence is not in the country of his or her nationality, but who nevertheless wishes his or her succession to be governed by the law of his or her nationality, can make a choice of law (Article 22 of Brussels IV).

Choosing the law of one’s nationality is also advisable if there are any doubts about the person’s country of habitual residence. This choice must be expressly declared in a will or inheritance contract (via a disposition of property upon death) or must be clearly apparent from the terms of such a disposition. Expressly electing the applicable law is advisable for reasons of legal certainty.

European Certificate of Succession

The European Certificate of Succession(ECS) has been newly created and is applicable in almost the entire EU. It is primarily used to verify an heir’s status and is intended to make the settling of transnational estates simpler and more efficient. The purpose of the ECS is to prove the entitlement to succession. In order to fulfil its purpose, the ECS must provide as clearly and coherently as possible the persons who are entitled to succession and to what extent.

The certificate is valid in all EU Member States (except for the United Kingdom, Ireland and Denmark) and has the same effect in each of these EU Member States. Its use is not mandatory (Article 62 (2) of Brussels IV). The ECS is not a substitute for existing national certificates or procedures, which means that the principle of subsidiarity applies. The ECS will not take the place of internal documents used for similar purposes within the Member States.

The advantage of a European Certificate of Succession is that its effects are the same throughout the EU regardless of the country in which it is issued. You can get a European Certificate of Succession from a court in the EU country with the power to rule on the inheritance, or from another competent authority - for example a notary - in the same country.

The ECS has to state information on the deceased, details concerning beneficiaries relate to information on the heirs or legatees having direct rights in the succession; a marriage contract entered into by the deceased and information concerning the matrimonial property regime. An ECS must further indicate the law applicable to the succession and the elements on the basis of which such law has been determined.

This hereditary simple and clear certificate will facilitate actions related to the regulation of the international heritage succession.

FRENCH INHERITANCE LAW of reserved heirs

French inheritance law is restrictive and 'forced heirship' applies to children. This means that, irrespective of the specifications of a will, a certain proportion of your estate,called the 'la reserve héréditaire’, must be set aside for children, or the spouse if there are no children. That part of your estate that is freely disposable is called the ‘quotité disponible’.

Under inheritance law in France, the amount that needs to be set aside as the 'reserve' is as follows:

·         Table: La Réserve

Inheritors

Réserve

Freely Disposable

Spouse

1/4 of estate

3/4 of estate *

One Child

1/2 of estate

1/2 of estate

Two Children

2/3 of estate

1/3 of estate

Three Children

3/4 of estate

1/4 of estate

*Only freely disposable in the absence of children, as they are protected heirs.

French Inheritance Tax

The inheritance tax (Impôt sur la succession) is levied on the heirs in case of the death of the owner of the real estate in France. The order of inheritance is advised to determinate when buying a property with a notary.

The owner of the property can not freely appoint an heir, but there are mechanisms that control the inheritance process.

According to the French law, the surviving spouse may be the sole heir, or inherit with the relatives of the deceased. The system of inheritance for the siblings and other relatives is based on 3 principles: order, degree of kinship and generation.

 

The right to inheritance is in the following order (each of the queues excludes the following):

1. Children, grandchildren

2. Father, mother, brothers, sisters

3. Grandparents

4. Other relatives

Important! In order to avoid conflict situations (between the legal systems of several countries) it is desirable to plan in advance the inheritance by contacting competent specialists.

 

Table: Tax benefits and rates when calculating the inheritance tax

Beneficiary relationship to deceased

Tax allowance

Tax rate (after application of tax allowances)

Spouse or civil partnership (PACS)

Total exemption of inheritance tax
In case of gifts: taxes are payable at the progressive rate scale indicated below

Children (each),

Father&mother

100 000 €

Band of value

Tax rate

Up to 8 072 €
from 8 072 € to 12 109 €
from 12 109 € to 15 932 €
from 15 932 € to 552 324 €
from 552 324 € to 902 838 €
from 902 838 € to 1 805 677 €
over 1 805 677 €

5%
10%
15%
20%
30%
40%
45%

Brothers, sisters

15 932 €

Band of value

Up to 24 430 €
over 24 430 €

35%
45%

Nephews, nieces

7 967 €

55%

Other relatives

1 594 €

55%

Unrelated beneficiaries / Concubines

1 594 €

60%

Handicapped Child/beneficiary

159 325 €

Dependent on relationship to deceased, see rows above