Partner article: Can I leave my property in France to my British children?
If you are not careful heirs may have to sell up due to tax bills
The bigger consideration may be the impact of UK inheritance tax, as the French estate is taken into account if you die domiciled in the UK
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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. How can I leave it to my three British children without saddling them with tax bills and forcing them to sell? I have made a UK will relating to my main home.
Answer: It sounds like the property is in both you and your husband’s names. If no estate planning measures were considered at the time of purchase (such as tontine) 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. 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 on each person’s portion at a sliding scale at seven rising rates from 5% to 45%, but note that the fourth (20%) is very large, being levied on taxable amounts (after the €100,000) between €15,932 and €552,234.
The bigger consideration may 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
One option is to make a 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 French solution of keeping a life interest (usufruit) but gifting the underlying legal bare ownership (nue-propriété) does not work in this instance.
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.
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 seven years.
This is a very complex area, and beyond the limits of a short article. Seek specialist advice from a UK adviser and French specialist.
John Kitching is a director of French Law Consultancy Limited
