UK wills appointing trustees: Watch out for tax effects in France

Reader Question: My UK will leaves my solicitors to act as trustees so they can decide how best to divide my estate between my children. However, a friend said that as I have a French holiday home, this might be heavily taxed in France. Is this right?

Unfortunately, French authorities will most likely see the will as creating a discretionary trust.

Where the will does not identify who inherits the estate (because it is at the discretion of the trustee), then a 60% inheritance tax rate applies.

Where it is possible to identify that the children are the only intended beneficiaries, then 45% inheritance tax applies.

However, the tax-free allowances for children of €100,000 each are not applied in this case.

Discretionary trusts can creep in even where they are not especially needed or intended, and are very difficult and expensive to navigate in relation to French law. If you are not French-resident, and the children and trustees are not French-resident, then you could consider retaining the UK will and its discretionary aspects but limiting it to the non-French estate.

If, however, you live in France, or the trustees or beneficiaries live in France, it is advisable not to be involved in a trust as it involves serious reporting obligations, penalties, and possibly onerous taxation.

Likewise, a trust would usually be well advised not to hold French assets, unless you are fully aware of the obligations and consequences.

Using a British will in France also generally requires a translation.

In summary, it would be advisable for you to consider having a professionally drafted separate will, specifically for the French assets, and being very clear about who inherits what, without leaving it to anyone else’s discretion.

Author: John Kitching, French Law Consultancy. French Law Consultancy provides French legal advice

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