10. Ownership Structures for Buying Property in France - Conclusion
In the previous pages we reviewed different property ownership structures in France. What is to be concluded from our review?
Not an easy question to answer when the circumstances of every household are going to be different, so the following remarks should only be used for general guidance and you need to consider whether professional advice should also be taken.
It will be evident that most questions about the different forms of ownership turn on those relating to inheritance rights and inheritance taxes so in this concluding section we focus on the issue of inheritance.
10.1. Inheritance Taxes and Property Ownership
As there is no inheritance tax between husband and wife and those in a French civil partnership the whole issue of inheritance tax in France concerns children and other inheritors.
If you have a potential liability the solution to inheritance tax does not necessarily lie in a particular ownership type, per se, but in other inheritance planning steps you need to take.
In particular, if you grant tax free gifts during your lifetime you can reduce the liability of your successors to inheritance tax on your death.
A French marriage contract between a couple or purchase en tontine means the whole of the property is transferred to the surviving spouse, so the potential tax liability of children is deferred.
However, if your children are later likely to be liable to French inheritance tax this choice will impact adversely on the level of the tax payable by them on death of the surviving spouse.
You may well, therefore, need to make tax free gifts to your children during your lifetime to reduce the impact of this higher tax imposition.
As well as gifts of cash, you should also consider transferring the reversionary interest of real estate (the nue-propriété) to your children, whilst you retain life use (the usufruit). You can read more at Gifts of Real Estate.
You can also buy through an SCI and purchase the property using an ownership structure called démembrement croisé, which would reduce potential liability.
In all cases you need to determine whether your circumstances make inheritance tax an issue about which you need to be concerned, as the costs associated with some inheritance planning steps can be quite significant.
10.2. Inheritance Rights and Property Ownership
In relation to inheritance rights it is clear that, provided you are non-resident (and do not intend to become resident), ownership through an SCI grants you immunity from the forced inheritance rights under French law.
But you need to decide whether you have such a need, because for the average family the laws are not oppressive.
If you are resident then ownership en tontine or purchase of the property en indivision and then entering into a French marriage contract would ensure the property was transferred entirely to the surviving spouse.
Provided you do not have children by a previous relationship you can adopt a marriage contract through the notaire at the time you buy the property, or later if you do not do it at the time of purchase.
If you are a married couple with children from a previous relationship, then you might want to consider buying through an SCI.
Alternatively, discuss with your notaire entering into a family inheritance pact, called a pacte successoral.
If you are an unmarried couple becoming resident in France, you should enter into a French civil partnership and buy the property en tontine.
If you cannot enter into a French civil partnership, you can buy indivision and grant a life interest in the property to the surviving partner, or buy through an SCI, and grant a reciprocal life interest.
The use of an SCI is particularly recommended if several unrelated people are buying a property.
Finally, you can consider using European Succession law and adopt the law of your nationality for inheritance purposes, although with Brexit this may no longer be suitable for British nationals.
10.3. Summary of Property Ownership Options in France
We can summarise the general advice we have given in the following table:
Table: French Property Ownership Options
|Married||Indivision + marriage contract||Indivision + marriage contract|
|Civil Partnership||SCI||En Tontine or Indivision with 'life interest'|
|Free Union||SCI||SCI or Indivision with 'life interest'|
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