Country Guide: France

Inheritance planning is vital to estate planning, especially if you have significant assets or properties in France. However, maximising your inheritance requires careful planning and attention to the legal framework and taxation laws. This guide provides a comprehensive overview of the key considerations when planning your estate in France.

Understand French Inheritance Law

France’s unique legal system governs inheritance and succession, known as ‘forced heirship’ or ‘réserve héréditaire.’ This means that a portion of the estate must be allocated to specific family members, regardless of the deceased’s wishes.

The reserved portions are determined by the number of children:

• With 1 child: 50% of the estate is reserved for the child
• With 2 children: 66.7% is reserved (divided equally between them)
• With 3 or more children: 75% is reserved (divided equally between them)

The remainder (the ‘quotité disponible’) can be freely distributed by will. The surviving spouse or civil partner has rights to a share of the estate, which can be a life interest (usufruct) in the whole estate or full ownership of a quarter, at the surviving spouse’s election.

Since 2021, a ‘clawback’ right (droit de prélèvement compensatoire) exists for French children who have been disinherited through foreign law, wills, or trusts, where the deceased or an heir is an EU national or French resident. This is particularly relevant for UK nationals with assets in both jurisdictions.

It is possible to deviate from this legal framework through a will, but these options have limitations and require careful consideration. It is crucial to seek the advice of a skilled professional who can guide you through the intricacies of French inheritance law.

Plan Your Assets

When planning your inheritance in France, you must consider all the assets you own in the country. This includes real estate, bank accounts, investments, and personal property. You should also consider your assets outside France and how French inheritance tax laws will impact them.

French inheritance tax is calculated based on the estate’s value and the relationship between the deceased and the beneficiaries. The tax rates vary, with higher rates applied to more distant relatives or non-relatives.

There are also exemptions and reliefs available for certain assets and beneficiaries. You may wish to consider the following strategies to maximise your inheritance:

Lifetime gifts: Gifting assets during your lifetime can reduce the size of your estate and, therefore, the inheritance tax liability. France taxes gifts using the same inheritance tax rates and allowances described below. Each beneficiary’s tax-free allowance (for example, €100,000 per child) renews every 15 years, meaning that a programme of regular gifts over time can transfer substantial value free of tax. Gifts must be carefully planned, as any gifts made within 15 years of death are aggregated with the estate for tax purposes.

Trusts: France does not recognise trusts under its own civil law (there is no native French trust concept). Foreign trusts holding French assets or involving French-resident settlors or beneficiaries are subject to specific anti-avoidance tax rules under Articles 792-0 bis to 792-0 quater of the Code Général des Impôts (CGI), including potential taxation at 60% on trust assets in some circumstances and annual reporting obligations (Form 2181-TRUST2). Trusts can create complications rather than benefits if not structured very carefully, particularly for French residents or where French-situs assets are involved. Professional advice is essential.

Life insurance (assurance-vie): French assurance-vie policies have their own separate, more favourable tax regime and are not subject to standard inheritance tax. Funds are excluded from the estate (hors succession) and pass directly to named beneficiaries. The tax treatment depends on when premiums were paid, as detailed in the life insurance section below.

Consider Your Residency Status

Your residency status can impact your inheritance tax liability in France. This is because non-residents are subject to French inheritance tax on their French assets only, while residents are subject to tax on their worldwide assets. However, residency status is not always straightforward. It can depend on factors such as your time spent in France and your ties to the country.

Post-Brexit, UK nationals are no longer EU citizens and are not automatically covered by EU free movement rules. UK nationals resident in France need to hold a valid residence permit (titre de séjour). The EU Succession Regulation (Brussels IV, Regulation 650/2012) remains relevant: its choice-of-law provision allows individuals to elect the law of their nationality to govern their succession, and this option is available to non-EU nationals (including UK nationals) where French courts have jurisdiction. However, Brussels IV does not override French forced heirship rules where French law applies. UK nationals resident in France should also be aware of the France-UK Double Taxation Convention of 1963 (still in force, as amended), which addresses double taxation of estates but does not eliminate French forced heirship rules.

Understand the French Inheritance Tax System

French inheritance tax is calculated based on the estate’s value and the relationship between the deceased and the beneficiaries. Consequently, the tax rates vary, with higher rates applied to more distant relatives or non-relatives.

There are also exemptions and reliefs available for certain assets and beneficiaries. The following are some key considerations when it comes to French inheritance tax:

Thresholds: Different tax thresholds depend on the relationship between the deceased and the beneficiaries. For example, spouses and civil partners (PACS partners) are fully exempt from inheritance tax, while children have a tax-free allowance of €100,000.

Rates: The tax rates vary from 5% to 45% depending on the estate’s value and the relationship between the deceased and the beneficiaries. The following are the current inheritance tax rates and tax-free allowances for different categories of beneficiaries in France:

For parents, children, and grandchildren, the tax-free allowance is €100,000. A 5% tax applies to amounts up to €8,072, 10% on €8,072-€12,109, 15% on €12,109-€15,932, 20% on €15,932-€552,324, 30% on €552,324-€902,838, 40% on €902,838-€1,805,677, and 45% on amounts exceeding €1,805,677.

Brothers and sisters have a tax-free allowance of €15,932. They are subject to a 35% tax on amounts up to €24,430 and 45% on amounts over €24,430.

Relatives up to the fourth degree, that include nephews and nieces, have a tax-free allowance of €7,967 and are subject to a flat-rate tax of 55%.

Remote relatives and other beneficiaries have a tax-free allowance of €1,594 (€159,325 if disabled) and are subject to a flat-rate tax of 60%.

Exemptions and reliefs: Exemptions and reliefs are available for certain assets and beneficiaries. Spouses and PACS (civil partnership) partners are fully exempt from French inheritance tax with no upper limit. Primary residences benefit from a 20% reduction in taxable value if the surviving spouse or a dependent child continues to occupy the property. Reliefs are also available for gifts to charity and certain types of businesses.

It is crucial to seek the advice of a skilled professional who can guide you through the intricacies of French inheritance tax laws and help you develop a plan that maximises your inheritance.

Plan for Succession

Planning for succession is essential to ensure your assets pass to the intended beneficiaries. This involves identifying your heirs and developing a plan to distribute your assets. You may consider creating a will to achieve this, bearing in mind the forced heirship rules described above. It is also essential to review and update your plan regularly, particularly if your circumstances change, such as a change in your residency status or a significant change in your assets.

Seek Professional Advice

Maximising your inheritance in France requires careful planning and attention to the legal framework and taxation laws. Thus, it’s essential to seek the advice of skilled professionals who can guide you through the intricacies of French inheritance law and taxation. An estate planning lawyer can help you develop a plan that meets your specific needs and goals, taking into account your assets, residency status, and beneficiaries. A tax advisor is trained to help you navigate the complex French inheritance tax system and identify opportunities for tax planning.

Consider Lifetime Gifts

Lifetime gifts are a useful tool for reducing the value of your estate and minimising inheritance tax liability. France taxes lifetime gifts using the same rates and allowances as inheritances (described above). Each beneficiary’s tax-free allowance renews every 15 years: for example, a parent can give each child up to €100,000 every 15 years without triggering any tax. Gifts made within 15 years of death are aggregated with the estate when calculating the inheritance tax due.

In addition to the standard allowances, there is a separate exemption for gifts of cash (dons familiaux) of up to €31,865 per recipient per 15-year period, available where the donor is under 80 and the recipient is over 18.

Gifts to your spouse or PACS partner are fully exempt from tax, as are certain gifts to charities. You may also wish to consider making use of the démembrement de propriété (splitting ownership into usufruct and bare ownership) to reduce the taxable value of gifts, particularly for real estate.

Understand the Community of Property Rules

In France, married couples are subject to the community of property rules by default (communauté réduite aux acquêts), meaning all assets acquired during the marriage are jointly owned. This can affect inheritance planning, as half of the couple’s community assets will automatically pass to the surviving spouse.

However, it is possible to opt out of the community of property rules and establish a separate property regime (séparation de biens). This can be useful for inheritance planning, as it allows each spouse to control their own assets and ensure they pass to their intended beneficiaries.

A further option is the communauté universelle avec clause d’attribution intégrale regime, under which on first death all community assets pass automatically and tax-free to the surviving spouse (since spouse-to-spouse transfers are already exempt from inheritance tax). This can be a powerful planning tool, but it can disadvantage children, who lose access to their reserved share until the second death, and it needs to be coordinated carefully with any assurance-vie planning.

It is vital to seek the advice of a skilled professional when considering the community of property rules and other legal issues related to marriage and inheritance planning in France.

Consider Life Insurance (Assurance-Vie)

French assurance-vie policies are one of the most important estate planning tools in France. They benefit from their own separate and more favourable tax regime, and funds held in an assurance-vie are excluded from the estate (hors succession), passing directly to named beneficiaries outside the standard inheritance tax rules.

The tax treatment depends on when premiums were paid:

Premiums paid before the policyholder’s 70th birthday (Art. 990 I CGI)

Each named beneficiary receives a tax-free allowance of €152,500. Above that amount, a rate of 20% applies up to €700,000 and 31.25% above €700,000. Spouse and PACS partner beneficiaries are always fully exempt, regardless of amount.

Premiums paid after the policyholder’s 70th birthday (Art. 757 B CGI)

A total allowance of €30,500 applies across all beneficiaries combined (not per beneficiary). Only the capital (premiums paid) is subject to tax under this rule; growth and investment gains are excluded from the taxable amount. Spouse and PACS partner beneficiaries are always fully exempt, regardless of amount.

Assurance-vie can therefore be a highly efficient way to pass assets to the next generation, particularly where premiums are paid before age 70. It is essential to structure beneficiary designations carefully and to coordinate assurance-vie planning with the overall succession plan.

Consider the Impact of Other Taxes

In addition to inheritance tax, there are other taxes to consider when developing your inheritance plan in France. Capital gains tax may be due on the sale of assets, and there may be implications for high-net-worth individuals.

France levies an annual Real Estate Wealth Tax (Impôt sur la Fortune Immobilière, IFI) on net real estate assets exceeding €1.3 million. For French residents, this applies to worldwide real estate; for non-residents, it applies to French real estate only. Rates are progressive from 0.5% to 1.5%. While IFI is separate from inheritance tax, it is relevant to the same client base and is commonly confused with it.

Consider the impact of these taxes when developing your plan, and seek the advice of a skilled professional who can guide you through the complex tax landscape in France.

Consider the Implications of Multiple Nationalities

If you hold multiple nationalities, it is important to consider the implications for inheritance planning in France. France has a succession law that applies to everyone with assets in France, regardless of their nationality. So, even if you hold another nationality, your French assets will be subject to French inheritance law and taxation. However, France has agreements with some other countries to avoid double taxation and ensure that inheritance law is applied consistently. It is important to understand the implications of your multiple nationalities and seek the advice of a skilled professional who can guide you through the complex legal landscape.

Be Aware of Forced Heirship Rules

In France, forced heirship rules (réserve héréditaire) dictate how a person’s assets must be distributed upon death. These rules ensure that children receive a minimum share of the estate, as set out above (50% for one child, 66.7% for two, 75% for three or more). The surviving spouse also has protected rights to a share.

It is important to be aware of these rules when developing your inheritance plan and to seek the advice of a skilled professional who can help you navigate them. The quotité disponible (the freely disposable portion) can be used to provide for other beneficiaries, including a surviving spouse beyond their statutory share, but must be planned carefully to avoid legal challenges from forced heirs.

Consider Estate Planning Vehicles

Several estate planning vehicles can be used to maximise your inheritance in France. One popular option is the SCI (Société Civile Immobilière), a type of property holding company that can be used to hold and manage real estate assets. An SCI can provide tax benefits, protect assets from creditors, and ensure that assets pass to the intended beneficiaries. Working with a skilled professional when setting up an SCI or other estate planning vehicle is essential to ensure it is properly structured and meets your specific needs and goals.

Plan for International Inheritance

If you have assets in multiple countries, it is important to consider the implications for inheritance planning. Countries have different inheritance laws and tax systems, making it challenging to ensure your assets pass to the intended beneficiaries. Seek the advice of a skilled professional who can help you develop an international inheritance plan that considers the laws and tax systems of each country where you hold assets.

Develop a Succession Plan

Developing a succession plan that outlines how your assets will be distributed upon your death is important. This plan should consider your personal wishes and goals and France’s legal and tax framework. A succession plan can provide peace of mind and ensure your assets pass to the intended beneficiaries. You must work with a skilled professional when developing a succession plan to ensure it is legally valid and meets your needs and goals.

Reviewing Your Estate Plan Regularly

Please review your estate plan regularly. This is necessary to ensure that it remains up to date and reflects your current wishes and circumstances. This is especially important if you experience significant life changes like marriage, divorce, or childbirth.

By reviewing your estate plan regularly, you can make sure your assets pass to the intended beneficiaries and minimise the amount of inheritance tax they must pay.

A Note on Trusts

While trusts are widely used in common-law jurisdictions such as the UK, it is important to understand that France does not have a native trust concept in its civil law. Foreign trusts involving French assets, French-resident settlors, or French-resident beneficiaries are subject to specific anti-avoidance rules (CGI Articles 792-0 bis to 792-0 quater), which can result in taxation at up to 60% and require annual reporting (Form 2181-TRUST2). Any trust-based planning involving France must be undertaken with specialist French tax advice to avoid unintended consequences.

Maximising your inheritance in France requires careful planning and attention to the legal and taxation framework. It is essential to understand French inheritance law, plan your assets, consider your residency status, understand the French inheritance tax system, plan for succession, and seek professional advice.

Please note that this article is only provided as information and should not be relied on as legal or tax advice. French inheritance law and taxation are complex, and it is essential to seek the advice and guidance of skilled professionals before taking any decisions.

With careful planning and the guidance of skilled professionals, you can maximise your inheritance and ensure your assets pass to the intended beneficiaries.