How to transfer an inheritance in France: a lawyer answers your questions

On December 9, 2021, on my Instagram profile, I conducted a joint live broadcast together with lawyer of the Parisian Chamber of Lawyers Olga de Weck on the topic of: “How to transfer an inheritance correctly so as not to ruin the heirs.” ⠀

At the meeting the following topical issues were discussed: Who has the right to inheritance in France? How to enter into inheritance rights? Who pays inheritance tax? What are the inheritance tax benefits? ⠀

Watch the live broadcast...
In comments to the broadcast announcement there were a lot of questions and answers and I decided to collect them in an article, for convenience, for those who are interested in this important topic.

Next week we plan to continue the topic of transferring inheritance in France and will record a new joint live broadcast. Subscribe to my profile on social networks, set notifications about publications. I will announce the date and time later.

Question

Inheritance of real estate through SCI, can minor children be among the founders?

Olga de Weck's answer

Minor children may be among the founders of SCI. On the one hand, this helps in optimizing inheritance tax, but on the other hand, the presence of a minor may be “inconvenient” for the functioning and management of SCI.

The Court of Cassation recognized the fictitiousness of one SCI, among the founders of which were a father and two minor children aged 8 and 11, since the amounts used to create the SCI and purchase real estate (without a loan) were paid exclusively by the father. The conclusion is, “it’s possible, but be careful.” It is better to contact a lawyer who will help you prepare the documents correctly.

Each parent has the right to donate €100,000 to each child every 15 years, tax-free. From grandparents - 31,865 €, from great-grandparents - 5,310 €. These rights can be combined with other tax benefits under certain conditions, such as

• benefit for disabled people,
• dons familiaux de sommes d'argent.

Inheritance of property and business abroad and features of taxation in France.

If the heir lives abroad, there is a “testament international” Convention de Washington, signed by France, Russia, the USA, Canada, Australia, etc., to simplify the transfer of an international inheritance.

Helpful information

If the heirs are not tax residents of France, then the tax authorities block the bank, that is, they do not allow banking institutions to send money available in the accounts until the inheritance tax is paid by non-residents.

That is, an heir living abroad (outside Europe) must first pay inheritance tax, and then the bank will send the money to the notary’s account, and only then can the notary begin dividing the inheritance and signing an act of division of the inheritance.

Question

I am interested in the question of the role of the will of one spouse in favor of the other if there are children from the first marriage.

Olga de Weck's answer

The legal spouse of the deceased has the right to claim the inheritance, regardless of the presence of other heirs of the first, second, third or fourth priority.

However, its share depends on many factors:

• the presence of other heirs at the time of death, especially in the descending line;
• regime of property relations chosen by the spouses (community of jointly acquired property of the spouses or conclusion of a marriage contract);
• Concluding a gift agreement between spouses or having a will.

Each specific case must be considered separately.

Question

Does a spouse have the right to inherit if there is a will? Régime de la communauté réduite aux acquêts, no agreement, donation in favor of the surviving spouse.

Lawyer's response

A will, as well as a donation entre époux au dernier vivant or changement de régime matrimonial, has the opportunity to increase the share of the surviving spouse. If none of the above methods (or a combination of these methods) were used, then only 1/4 of the inheritance will go to the surviving spouse.

Using a will, you can deprive your spouse from your second marriage of his obligatory share (1/4 of the full property) and give him a “usufruit” of all or part of the property so that he (s) can continue to lead the same lifestyle. Thanks to a will, it becomes possible to combine the protection of the second spouse with the interests of children born from a previous marriage. After the death of this spouse, the children will thus be able to regain full ownership of the entire inheritance.

Question

Is “usufruct” a lifelong share? After all, the spouse can refuse the usufruct and sell it to the children; the remaining share is determined by the age of the inheritor.

Olga de Weck's answer

You can envisage a “usufruct” as a lifelong share, but everything must be spelled out and there are additional rules. The most important thing is to ask all the questions and anticipate all these conditions with the notary. Don't wait for life to ask you this question.

You can always refuse a “usufruct” using the “clause de cantonnement”. You can not accept the “usufruct” if you are not interested in the property, or replace the “usufruct” with the right of use (un droit d'usage). But depending on the situation, you need to think through and describe all the necessary details with a notary, since notarial law is very complex.

Do not forget that you must also analyze each situation from the point of view of paying inheritance taxes, since cantonnement can increase the amount of taxes.

Each situation must be considered separately with a notary. Cantonnement should be limited in time (encadrer dans un délai)

Question

Interested in inheritance from husband to wife or vice versa. What and how in France?

Lawyer's response

The rules for determining the mandatory share of a spouse depend on many factors:

• compulsory share of the spouse, its size depending on the situation: régime matrimonial, presence of common children and children from previous marriages);
• it is possible to increase/adapt it using testament, donation au dernier vivant, or donation et un legs graduel...
• In any case, a number of rules must be observed, including the rules of distribution “réserve héréditaireс;
• do not forget about the “assurance vie”, which will go to the spouse in addition to his share of the inheritance.

In fact, the situation of a wife in the presence of children is not so simple. There is a risk of being left without pants, and this happens often. Since 1/4 of the inheritance is not reserved for the wife, this part can be deprived of the wife through a will, since the testator disposes of this part at his own discretion.

It's difficult to explain all the nuances. The conclusion is: children are always “privileged heirs”, and the wife’s status is “shaky”, since there are “loopholes” that can be used to deprive the wife of “her” share of the inheritance that is not reserved for her. This is possible, so it is impossible to say with certainty that the wife will definitely inherit 1/4. Each competitive case must be considered.

It is even possible to deprive the remaining spouse of “le droit d'occupation à titre onéreux” if you do not formalize this opportunity with a notary - you simply “forgot” and wrote it into an ordinary will instead of registering this will with a notary - and that’s all - you deprived your wife of this opportunity due to non-compliance with clearly defined registration rules... The wife’s rights are still “fragile”.

Question

I don’t know my rights at all, or how to enter into an inheritance, if something happens. And how to leave an inheritance or join without large tax payments. We have two small children and a separation agreement. We have no previous marriages.

Olga de Weck's answer

In order to avoid paying high inheritance taxes, heirs need to do a financial diagnosis and transfer part of the funds to PER and Assurance Vie. Because they do not fall into the hereditary mass, but there are conditions there.

My comment

As for Assurance Vie, the spouse must name his wife as the beneficiary of the contract in the event of his death. If not, then the capital will be inherited by law and will fall into the general inheritance. Which is sad because the heirs will have to pay notary fees and inheritance taxes. Therefore, I always recommend that my clients fill out the beneficiary clause. It is very important!