Avoid succession law with clause

THE tontine – a legal arrangement whereby a couple can own a house jointly with ownership then going directly to the survivor – can be appealing to Britons in France, especially considering the latter’s inheritance laws.

The procedure is often considered one way of bypassing these laws which include a minimum réserve héreditaire (set percentage of a person’s estate) that should go to their children.

However some readers tell us they are unsure about its affects.

Reader D.O. wants to know if there are any consequences of having a tontine if a couple live together without being married or having a formal civil partnership. Another reader, G.F, says he and his wife bought a house under a tontine some years ago but have decided it is no longer the best option for them due to changes in rules. He wonders if they are able to cancel it.

Reader S.M. says she and her husband have a tontine on their house but are unsure if the survivor of the couple will face any claims from children they both have from previous marriages should they wish to sell the house.

Notaire Laurent Cozic, a partner in the Groupe Monassier, Dinard (www. notaires-dinard.com), explains some of the key facts which have bearing on these areas.
The tontine is a clause by which several people buy property on the understanding that the survivor will become the sole owner of it.

These clauses are sometimes inserted into property purchases, as often as not where the people buying are not married. It is always possible to go back on the clause by substituting for it a convention d’indivision (agreement of ownership in common), by way of an acte authentique (official notaire’s deed). For it to be valid there must not be too great an age difference between the people concerned – this is because there must be uncertainty over who is more likely to die first.

When one of the signatories to the agreement dies, then the survivor is deemed to have been the owner of the property since the beginning.

Because of this, the rights of any heirs to the deceased are overridden – they have no right to take any legal action against the survivor.

However the rules on taxation are not in step with the legal position.

As a result, when someone dies, 60% inheritance tax falls due on the deceased person’s half of the property in the case of a couple who are neither married, pacsed nor in a recognised foreign equivalent to the pacs such as a British civil partnership.

There is an exception in cases where the property in question was the couple’s main home and it is worth less than €76,000 at the time of the first death. In this case the transfer is instead subject to property transfer fees at 5.09%.

The above tax rules do not apply where the property was bought before September 5, 1979, in which case the property transfer fees are due.

It is also possible to bypass the inheritance tax problem in a procedure involving a combination of a tontine and buying through an SCI (company set up to own property), though this can create its own complications.

Inserting a tontine clause can be done at the time of purchase or afterwards. The procedure usually costs less than €1,000.