Partner article: Can I leave my property in France to my British children?

Question: I live in the UK and am British. My husband and I bought a French property years ago that we have gradually improved and enjoyed.

We had thought of retiring to France, but Brexit made it complicated. Now nearly 70, I am thinking of how to leave the house to my three British children. I have made a UK will relating to my main home. How can I ensure they are not saddled with tax bills forcing them to sell this much-loved family property?

Answer: It sounds that the property is in the equal joint names of you and your husband. If no estate planning measures were considered at the time of purchase (such as tontine or universal community marriage regime) the default ownership is en indivision so you both have a separate equal half share, which does not automatically pass to the surviving partner.

You can each leave €100,000 tax free to each child before French inheritance tax is charged. So, as you have three children, the property value has to exceed €600,000 tax free before French inheritance tax comes into play.

Above the €100,000 tax free, tax is on each person’s portion at a sliding scale at seven rising rates from 5% to 45%, but note that the fourth (20%) band is large, being levied on taxable amounts (after the €100,000) between €15,932 and €552,234.

The bigger consideration may well be the impact of UK inheritance tax, as the French estate is taken into account if you die domiciled in the UK. 

Read more: New income tax declaration section for some tenants – who is affected?

Lifetime gift of property

In terms of how to reduce tax, you need carefully consider advice specific to your situation and wishes, considered from a cross border perspective.

One option is to make a French lifetime gift of the property. This must be done by a notaire, and signed both by the person making the gift and the children. There are registration duties and notaire fees, typically around 5%.

For UK purposes, it must be a “no strings” gift. You must not reserve a benefit, so the often-proposed French solution of keeping a life interest (usufruit) but gifting the underlying legal bare ownership (nue-propriété) does not work for UK purposes.

I have heard from UK advisers that gifting a percentage of the property, and retaining a percentage, and then only using the property for your percentage of the year may well work. The children must use the property for the exception to be permitted. 

You would need to discuss this with a UK advisor for their view and additional guidance.

For French gifts, the person giving it must survive the gift by 15 years for it not to be assessed for inheritance tax. 

For UK gifts, the duration for full exemption is after seven years.

This is a very complex area, and beyond the limits of a short article. If you think a gift or other inheritance tax planning method may be needed you should seek specialist advice from a UK adviser and from a French specialist.

John Kitching is a director of French Law Consultancy Limited