Sean O’Connor explains the implications of French inheritance law for those with a property in France, and outlines the different options available to you
French inheritance law differs significantly from that of the UK, so it is advisable to ensure that you understand your position when purchasing a property in France.
One cannot cover everything in an article such as this, so you should take specific advice on your particular situation. However, these are the main points to consider for those who live permanently in France, and those who don’t.
IF YOU LIVE IN FRANCE
If you do not make a will, your moveable assets including those in the UK will devolve under French law, so your children will have compulsory rights in them. Under European Union Regulation (EU) No 650/2012, which enters into force on 17 August 2015, you can and should make a will declaring that all of your worldwide moveable assets and also your property in France are to devolve under English law. The will can be made now.
If you have a tontine clause in the deed of sale of your French property, and if in your will you want to leave everything to your surviving spouse, the will simply confirms the tontine clause under which the surviving spouse becomes the absolute owner of the property. However, more importantly, it will enable you to leave all of your worldwide moveable assets to your surviving spouse if you want to do so.
Alternatively, provided that you have already been resident in France for two years, you can change your matrimonial regime to the French matrimonial regime of communauté universelle (joint ownership of all assets), whereby upon the death of the first spouse the surviving spouse takes all, but this only works if all of your children are born of your marriage. It does not stand up against children from any previous relationships.
If you do not have any children, and if most of your assets are in France, you can simply make a will stating that all of your assets are to devolve under French law. Note carefully that if you do not have any children and you do not make a will, and if your parents survive you as well as your spouse, they will take half of your assets. If only one parent survives, he or she takes half of your assets.
IF YOU LIVE IN THE UK
If you live in the UK and have a property in France as a holiday home, French law will apply to the devolution of the French property. Brussels IV, the European Succession Regulation, does not apply because the UK has opted out of this.
The compulsory reserves laid down by French law in favour of children are one half if you leave one child, two thirds if you leave two children, and three quarters if you leave three or more children who, if more than three, must share the three quarters between them.
If you make a will, the above can be modified so as to leave a quarter of your assets to your spouse absolutely, and three quarters in life interest. In this way, the surviving spouse can keep the property for life but if he or she wants to sell, a portion of the sale proceeds must be handed over to the children.
There are a number of ways to avoid the compulsory reserves, which are as follows:
(a) Tontine clause: when purchasing the property, and provided that the two spouses are contributing roughly half each to the purchase, are roughly the same age (not more than 10 years difference) and are in roughly the same state of health, you can add the tontine clause, which provides that upon the death of the first spouse the surviving spouse takes all.
The tontine clause must be inserted into the deed of sale, as it cannot be added afterwards. With the tontine clause, neither spouse can sell the property without the consent of the other. So if sir wants to sell the property and madame does not, madame wins hands down. In the same situation but without the tontine clause, sir wins.
(b) Change of matrimonial regime to French matrimonial regime concerning the house only. The result of this is that when the first spouse dies, the surviving spouse takes all. Note that there is no residence requirement in this situation. However, it is still the case that it does not apply when there are children from previous relationships.
(c) Société Civilie Immobilière (SCI): a property can be purchased through an SCI, and the owners effectively become non-paying tenants or occupants. The shares in it rank as moveable assets, which devolve in accordance with the law of the domicile. Therefore the shares can pass to the surviving spouse under English law.
Unlike with the tontine clause, this can be done after you have bought the property, and unlike the change of matrimonial regime it applies when there children from previous relationships.
The SCI must have one or more directors, and usually you should both be the directors. The costs of setting up the SCI in France will be roughly €3,000-€4,000. Once this has been paid there are no ongoing costs, and normally no ongoing administrative matters, apart from the requirement to lodge a special tax declaration form with the local French tax administration in year one.
If, however, you are going to rent the property out on a commercial basis, the on-going situation becomes more complicated and you should take further advice.
Your moveable assets in France will devolve in accordance with the law of the domicile, so English law applies. This means that two different laws apply to the devolution of your assets, even in France. As moveable assets, your French bank account, car and furniture devolve under English law, while the property devolves under French law.
Reverting to Brussels IV for a moment, the idea behind it is to make one law apply to the devolution of all of your assets worldwide. However, this is academic as far as you are concerned because, as already stated, the UK has said no to Brussels IV.
I trust that all this is clear enough to be going on with. But as I said at the beginning, each case is different, so I recommend that you take specific advice concerning yours.
Sean O’Connor is a bilingual solicitor
Tel: 01732 365378