What are the financial advantages of a French civil partnership?

Partner article: Christopher Davenport from Kentingtons explains how current and future assets, debts and earnings could be affected by a pacte civil de solidarité

Pacs couples count as one financial household

A pacte civil de solidarité (usually abbreviated to pacs) is effectively the French equivalent of a civil partnership. It can be made between partners of the same or different sex.

Statistics show that pacs is almost as popular as marriage in France.

Excluding 2020, which was distorted due to Covid restrictions, over the past five years there have been around 200,000 new civil partnerships registered annually in France, compared to 230,000 marriages.

From a financial perspective, those in a civil partnership benefit from many of the same advantages as a married couple.

A pacs is a way for couples to become one financial household (foyer fiscal) without actually getting married.

This is particularly interesting when there is one member of the couple who earns significantly more than the other, because the total income of the two will be split equally through the tax bands.

If there are children in the household, the tax bill will again be reduced.

The second main advantage concerns inheritance tax.

For unrelated people, as would be the case for a cohabiting (non-married and non-pacs) couple, this is a hefty 60% tax due after a small allowance of €1,594.

A pacs partner, on the other hand, is exempt from inheritance tax.

Differences from traditional marriage

However there are also some important differences between a pacs union and traditional marriage that readers should know about.

First, pacs partners do not automatically inherit their other half ’s estate.

This means they will need to make a will to guarantee the surviving partner will inherit it.

Note too that those married under a séparation des biens regime will also need to make a will, and indeed we recommend that all couples do this.

Secondly, a pacs partner is not entitled to receive their partner’s pension, unlike the situation for married couples.

Other general points worth considering include that it is possible for just one person to end a pacs.

In other words, there is no need for both members of a couple to agree to it.

A pacs is regarded as a simple contract between two people.

Status outside of France

As such, it is not recognised everywhere, whereas marriages do tend to be almost universally respected.

The US, for example, does not recognise pacs and thus pacs couples are treated no differently there to partners who ‘just’ live together.

The UK does, however, recognise French pacs arrangements.

Bear in mind that although a marriage between a French national and a foreigner can at times fast-track French nationality, a pacs will not do the same, although it might help to obtain a French residency card.

There are good financial reasons for a cohabiting couple to consider a pacs, but there is one potential downside that would only concern those with significant property assets.

It could be that combining property assets into one household means you become liable to France’s IFI (impôt sur la fortune immobilière) property wealth tax, whereas as two individual households you were not.

Nevertheless, this negative on its own should not necessarily outweigh the overall positives.

As ever, a lot depends on individual circumstances, as each household profile is different.

It is worth giving thought to current and future assets, debts and earnings and how the members of the couple intend to fund household expenses.

It is usually best to enter into a specific agreement on these points and to obtain independent financial advice.

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