Guide to French Inheritance Laws and Taxes
4. Inheritance Planning in France
Property Ownership Options
- Adopt a French Marriage Contract
- Enter into a French Civil Partnership
- Make a Family Inheritance Pact
- Make a Will
- Create a Trust Structure
- European Succession Law
Financial Planning Options
- Buy or Improve with a Mortgage
- Make a Gift Between Man and Wife
- Make a Gift to Children/Grandchildren
- Make a Gift to Others
- Take out Life Insurance
4.4. Enter into a French Civil Partnership
4.4.1. What is a 'Pacte civil de solidarité (PACS)'?
If you do not intend to get married, or you are unable to do so, then, in order to offer some protection to your surviving partner, you should consider adopting a French civil partnership.
A civil partnership in France is called a Pacte civil de solidarité (PACS).
A French civil partnership is only available to those who are resident in France. It is available to same sex partners.
If you are already in a civil partnership from your country of origin then you will normally be exempt from the payment of French inheritance taxes, provided this rule applies in the country of jurisdiction of your civil partnership.
Existing civil partners are not permitted to enter a French civil partnership, but there is normally no need to do so, as you will have the same rights as those in a PACS.
One of the other advantages of civil partnership status is that it will allow you to benefit from health insurance cover granted to a partner who may be running a business in France (assuming you are not otherwise able to obtain insurance cover through other means).
You can enter a civil partnership on the basis of ownership of the property en indivision in which all property is said to be jointly owned.
However, even with indivision it is possible to make a distinction between your own personal effects and assets brought into the partnership, and those held jointly by the partners.
If you enter a partnership as part of the process of house buying, you can also stipulate in the title deeds of the property, the ownership spilt between you and your partner. It may be 50/50, but it could equally be 75/25, a spilt which will be reflected in the inheritance calculation.
Accordingly, even with en indivision the personal assets do not form part of the shared inheritance on your death, which you can dispose of as you wish.
While entering into a PACS increases the protection afforded to the surviving partner, it also needs to be accompanied by other inheritance planning measures.
4.4.2. Inheritance Tax Implications
By entering into a PACS the surviving partner benefits from an exemption from liability to inheritance tax on any property left to them by their deceased partner.
Otherwise they are liable for inheritance tax at the rate of 60%, with only a allowance of around €1,500 available to them.
So, if you are not married, a civil partnership is an effective way of getting round inheritance taxes to the surviving partner.
If you are already in a civil partnership from your home country, then you will also normally be exempt from French inheritance tax.
There is no exemption for other beneficiaries of the inheritance, who will be taxed (if they are taxed at all) on the basis of their relationship to the deceased.
4.4.3. Inheritance Rights Implications
Entering into a civil partnership does not grant automatic rights of inheritance to the surviving partner. It does not get around the entrenched inheritance rights of children.
Accordingly, a surviving partner in a civil partnership will share ownership of the property with any children of the deceased. If they so wished, the other inheritors en indivision could force the sale of the property. This may be a real risk if the children of the deceased were from a previous relationship.
Whilst recent changes in the law now grant the surviving civil partner a right to remain in the home for at least a year, they do not retain a right to remain in the principal home indefinitely.
One solution to this problem is to buy your French home en tontine, which has the effect of transferring the whole of the property to the surviving partner.
However, whilst the use of en tontine is suitable for those with no children outside of the relationship, on its own it is not suitable for those with children from another relationship. This is because it disenfranchises one side of the wider family.
If you do not purchase en tontine, then there are other options available to you.
You may wish to reinforce the rights of your partner by a mutual gift procedure, a process which might be most conveniently carried out at the same time as your enter into a civil partnership. Such a procedure is irrevocable so, in the event of breakdown of the relationship, the gift cannot be withdrawn. There may be a gifts tax payable, depending on the value of the gift. An allowance of €80,724 (2020) is available before gift tax is payable.
Perhaps a better procedure is to each make out a Will, on which no gifts tax would be payable, and which can later be changed, if you so wished. You can elect through a Will to adopt the inheritance laws (but not taxes) of your nationality.
It is possible in the terms of a will to provide that the surviving civil partner retains a right to remain in the home for the remainder of their life, a process called l'attribution préférentielle du logement familial. This is only available to those in a civil partnership.
In the case of either a gift or will, both are subject to the entrenched inheritance rights of any children of either party.
In order to get around this problem it is possible for children to renounce (or more properly, 'defer'), in full or in part, the right to their inheritance in favour of another inheritor e.g. surviving partner. This procedure is a family inheritance pact.
Finally, you should also consider purchasing your French home through a property company as this also offers the possibility of getting around the entrenched inheritance rights of children.
These options will sort the main home for the surviving partner, and as to funds by which to live, then the best option is to set up an assurance vie policy.
In order to enter into a PACS you would be best advised to visit your local notaire to start the formalities and prepare the agreement.
The cost is regulated by the government and since January 2021 is fixed at €102, plus registration taxes of €125.
The process can also be undertaken free of charge by the local mayor (excluding registration tax), but given that there may be a range of other family, legal and fiscal issues to consider, obtaining advice from a notaire may be a more secure option.
Next: Make a Family Inheritance Pact
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