Reader question: We live in California and are dual UK/US citizens with a second home in France.
Using the EU 2015 option of writing our wills under Californian inheritance law, we planned to leave the French house to my husband’s son who lives in the UK, and other assets to our two other children here.
Before we die, would it be possible to ‘give’ the property to his son or sell it to him for a nominal sum?
As you and all children live outside the EU and are not EU citizens, and as you have UK nationality (for ease, I will assume English or Welsh nationality), you can use the EU Succession Regulation No 650/2012 to elect the law of England and Wales to apply to the French estate.
This allows you to leave the French estate to your husband’s son, not to the other children, who will inherit other assets.
If you leave French property to your stepson, he will face 60% inheritance on the value exceeding €1,594, as he is not a bloodline relation.
If he inherits from his father, he has a tax-free allowance of €100,000 and then a sliding scale of tax from 5% to 45%.
Regarding lifetime gifts, these do not fall within the scope of the EU Succession Regulation, and the French laws of reserved heirs need to be considered.
Gift tax would apply at the same rates as for inheritance.
If a property is sold at an undervalue, the price difference would be taxed as a gift, which could be done if the other children formally agreed to the gift and to them being disinherited.
Any value passing to him from you would be taxed at 60%.
In the case of French gifts, if the giver dies before 15 years have passed, the gift will be deducted from the tax-free allowance with regard to any (other) inheritance that the recipient may receive.
The transfer could, however, work if he were able to use his own funds to buy from you at market value (he would also need to pay notaire fees of around 7%).