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Guide to Inheritance tax for UK expats in France

I always remember someone saying to me “I love France, but I have never spoken about dying quite so much as I do since I got here!” I knew just what they meant. Inheritance and succession law in France is complicated and is a frequent topic of conversation amongst expats. We asked Robert Kent at Kentingtons, the professional tax and financial advisors in France for British expats, to explain inheritance tax and the law known as Brussels IV…

Inheritance tax in France

Well, there are much more fun conversations so it’s a good idea to deal with the elephant in the room and move on. And talking about it with your friends doesn’t really help since everyone’s situation is different. So what is right for the person you are chatting with might not be a good solution for you. Their advice might lead you to disaster. I can tell you first hand, just how this can affect people’s lives after I helped the surviving spouse of a couple I served, with a very messy situation.

It can go very wrong

When we originally met, they stated that they had several children and their main objective was to protect the surviving spouse. They wanted their children to inherit their estate, but only when they had both finished with it. I suggested that they consider a change of marriage regime to communauté universelle (universal community) with a survival clause which would need to be discussed with a notaire, who would give legal guidance and draw up the contract.

A change to community meant that when one of them died, everything would automatically pass to the survivor, in full ownership, with nothing (yet) passing to their children, and with no accountability to them. Within a couple of weeks they sent me a copy of the act, confirming it had all been done.

The details are critical

Many years later, I was advised that sadly one of the couple had died.  But I was confident that all was well with their inheritance planning, or so I thought. Sadly, the couple had talked to friends about inheritance tax which led them to do something drastic without seeking professional advice or even informing their advisor (that would be me). They had been told by the friend that they should do a will using Brussels IV. The friend said it meant you can sidestep French succession law. This is true, but they interpreted it as treated under UK rules, meaning UK inheritance tax, in place of French inheritance tax – which is not the case.

Here is the big problem. They had instituted a marriage regime change which placed the joint assets into a community, which now was legally outside of the couple’s estate, leaving a UK will citing that UK law applied to the now empty estate.

If the marriage regime is universal, it usually covers the whole estate, though technically it is possible to exclude things. Normally assets are viewed as “biens propres” (cleanly owned). For the sake of sanity (I can see your eyes glazing over), let us say that everything is joint. As is common with marriage regimes, the contract said that it applied exclusively to “biens situés en France” (goods situated in France).

You can’t have it all ways

Generally speaking, UK assets that are not buildings, are treated as in France. This is  because the UK/France succession treaty states that only UK situated buildings are under UK rules, with the rest under French law. We now, however, have a conflict, because there is a UK will asking for UK law to apply, so how does that work? Spoiler alert, it does not! It’s a bit like buying two cars and then attempting to drive them both at the same time. It is simply not possible, since you can only sit in one car at a time. Had my clients left the marriage regime as the only solution, the only thing the survivor would need to provide to the notaire is a death certificate.

The technical legal reason for this is that the survivor is deemed to have always been the original owner, since they were part of the community and now there is only one person left, so it dissolves, assuming they are the full owner. The death certificate is merely to prove death, so the name can be removed, as there is no actual transfer of assets per se. My client was asked for a list of things covering several pages because the notaire needed to asses what was in the community, what was under UK law and needed evidence of each asset and value. It was a total mess. Had the client approached me or any suitable professional (one qualified and based in France) before doing a will under Brussels IV, they would have learned that they were better off as they were.

If they insisted on having Brussels IV, they should have redone their marriage regime, going back to separate estates to avoid any conflict. It can be done but it’s complicated – and expensive.

So when should I apply Brussels IV?

Brussels IV can be a good idea for some situations. If you have children from a former marriage, which makes a marriage regime change almost impossible, this can be a good option.  But every situation is different and every solution should reflect this.

You could of course go to law school and study French civil and fiscal law, UK inheritance law, Brussels IV (EU law), international tax treaties and the Hague Convention (international law). They make sure you have a good understanding as to how all these work together or conflict, so you can avoid any problems. You could take advice from someone who hasn’t done this but says they know how it all works. Or you could do nothing (this is a surprisingly popular option) and can leave a whole heap of problems for loved ones just when they don’t need them.

My advice? Get professional advice relevant to your situation.

By Robert Kent is a senior partner at Kentingtons, experts in French succession law. Kentingtons offer a no-cost, no-obligation discussion about individual situations. See their website for details: kentingtons.com

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