What are tax benefits of giving house to children?
Following the death of my husband my two children each now own a third of the house I live in and I have the usufruit (lifetime use) and the full ownership of the other third. I am considering making my third over to them in order to reduce any inheritance tax in the future. I am a French resident and tax payer, my children are UK residents and tax payers. What are the tax implications? U.C.
Since you are French fiscally resident, French inheritance law and tax will apply.
Unlike in the UK, in France it is the beneficiaries individually, not the estate, who pay inheritance (or gift) tax. The children will each have an allowance of €100, 000, and then they will be liable to inheritance tax on the excess as follows :
• 5% up to €8,072
• 10% to €12,109
• 15% to €15, 932
• 20% to €552,324
• 30% to €902,838
• 40% to €1,805,677
• 45% above that
You can, however, make a donation partage (with help from a notaire) where you gift the nue-propriété (ownership element) of your share to the children now and retain the usufruit. This value of the ownership element on which gift tax would be due by the children would be reduced depending on your age according to the following table :
• age 50 - 60: 50% reduction in the value of the ownership element assessed to tax for the children
• age 60 - 70: 40%
• 70 - 80 : 30%
• 80 - 90 : 20%
• 90+: 10%
As a result, bearing in mind the €100,000 allowance per child, and the fact that you only have a one-third value to give away, the house would, for example, have to be worth more than €1million for there to be any tax payable by your children on their individual shares of the nue-propriété if you are aged 60 to 70.
This said, for there to be any tax benefit to the children, you would need to survive 15 years after making the gift, since, if you were to die before then, the value of the gift made now would be added to the value of the estate at the date of death.
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