Please mention The Gers Local when responding to adverts A UNDERSTANDING INHERITANCE RULES IN FRANCE.


purposes and yourworldwide estate will be subject to French inheritance rules and taxes.


s a permanent resident of France, you will be considered “domiciled” in France for inheritance


French inheritance rules state that your children are “protected heirs” andmust inherit part of your estate. The amount involved depends on the number of children, but is at least 50%, with the percentage increasing for more than one child. This part of the estate that must go to children is called the “Réserve Héréditaire”.


The remaining portion of your estate is freely disposable by will (“Testament”) and is called the “quotité disponible”.


Therefore, you need to know that, if you have children, a will leaving everything to the surviving spouse and then to the childrenwill not be upheld in France, since the children must inherit their minimum share.


The question of the protection of the surviving spouse is therefore one of the main concerns of the British community in France. Importantly, there are various solutions, which are more or les effective, depending on your situation and ultimate wishes.


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use of a Trust was an efficient way of avoiding French taxes, especially Wealth Tax and Inheritance Tax, on the basis that the Trust will take the legal ownership of the assets held in the Trust away from the person concerned and pass it to the “Trustee”.


Indeed, legal opinion has often historically upheld this position, in relation to certain forms of trust, which are deemed “Discretionary”.


The “Loi de Finances Rectificative”, which was formally adopted in late July, has reopened the debate on how trusts should be taxed in France, and may now mean that certain people will have to think again.


The problem is that there is no Trust law in France, which means historically there was no official interpretation of how they were viewed by the French authorities. Moreover, you will see from the comments below that any mentions of Trusts in French law are completely contradictory and show how difficult the concept was here.


There are only two significant mentions of Trusts in French tax law:


1. Any “product” from a Trust, received by a French resident beneficiary, is considered to be investment income for tax purposes, irrespective of where it came from. The


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e have found that many expatriates in France were advised, before they arrived here, that the


French inheritance tax is a completely different system to that of the UK, since it is the beneficiary who pays the tax, not the estate, and tax rates and allowances vary according to your relationship to your heir.


In 2007, inheritance tax between spouses was abolished, as was tax between unmarried couples with a “Pacte Civile de Solidarité”. Therefore, the problem of the actual tax bill lies with your eventual heirs. For your children, French inheritance tax is perfectly reasonable, since allowances were significantly raised in 2007 and tax rates are reasonable. For a large estate, inheritance tax is normally considerably lower than in the UK and France also offers more opportunities for reducing the tax through appropriate planning.


The main problem is for those who want to leave assets to other family members or friends. For example, nephews and nieces pay 55% tax, after allowances of only €7,967 each and unrelated persons pay 60% tax after an allowance of only €1,594.


If you want to leave assets to your partner (without a PACS), to stepchildren or to friends, you know that over half of your assets will be taken by the state, so it is imperative to find another solution. Download the tax rates from our website www.siddalls.fr


NEW RULES FOR THE TAXATION OF TRUSTS IN FRANCE.


definition of “product” is, in theory, the equivalent of income or gains, but is normally considered to mean any distribution. Thus distributions of capital from trusts can create an income tax problem. This is the traditional view taken by the tax authorities, which meant that they did not try to look “inside” a trust, but simply taxed anything that came out.


2. A French resident “owner” of a foreign trust, based in a “tax favourable” location, is liable to tax on his share of the annual “profits”, even if they are not taken out.


This rule was only recently invented and no one knows how it can be applied, since French law cannot define the “owner” of a trust, nor its “profits”, but the measure was the result of increased suspicion of trusts in “tax havens”. This measure is obviously completely contradicting the one above, since it implies that the authorities will look through the trust and tax any income or gains within it, as if they are “yours”. This is negative, in that it suggests that no protection from taxes at all can be obtained through an Isle of Man Trust, for instance. However, it is not entirely negative, since at least the authorities would be obliged to accept any tax efficiency created by the underlying investment.


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