Splitting heirs

How do the french deal with the separation of assets in the event of a break-up? Christophe Dutertre reports...

Divorce is always a distressing and emotional time for any family, but the issues become more acute if the couple moves abroad.

Most couples investing in France purchase as a married couple and this married status has some real advantages from a legal or income or inheritance tax point of view.

One of the issues which is regularly raised is how to protect the surviving spouse in a country that tends to favour children. France has forced heirship rules and statutory inheritance rights which aim to protect the children. From an inheritance standpoint, it is much easier to protect the surviving partner on the first death in France when you are married.

 

WHO INHERITS?

Often there is an issue with the presence of children from a previous relationship. This issue can normally be circumvented for those who intend to become permanently resident in France by entering into a survivorship scheme such as the tontine, or by signing a French marriage contract and setting up a communaut� universelle regime. Regarding the latter, children from a previous relationship should sign a waiver by which they will waive any claims against the surviving spouse. Those who intend to remain UK resident can hold French-based assets under UK inheritance law (and therefore their UK will) by purchasing their property through a French property-holding company (i.e. soci�t� civile immobili�re). On their death they can decide under their UK will to whom the estate should pass. The use of the French company has recently regained the favour of professionals as the threat of shareholders incurring a ‘benefit in kind’ charge in the UK has disappeared (subject to conditions).

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A QUESTION OF JURISDICTION

When a relationship is falling apart, spouses may look to lodge a divorce petition through a court. Which country will have jurisdiction over the divorce? Jurisdiction is a complex and technical subject.

It is usually more convenient and preferable to issue a divorce petition in your home country, without the additional cost and impracticality of enduring foreign proceedings with transport and language barriers for both parties, their families, witnesses and lawyers.

Those who are living in the UK would normally choose a UK court, while those who have established a new residency in their French home are likely to have the choice under the European r�glement ‘Brussels II bis’ to bring the divorce through either a French or a UK court.

Within the EU there are significant differences between member states in both their procedures and the law concerning grounds for divorce, due to different social policies and cultural beliefs of the individual states. In France, divorce can be granted on the autonomous ground of mutual consent. In the UK and other member states, irretrievable breakdown of the marriage is the sole ground for divorce.

Conflict between divorce laws of member states may cause difficulties in getting the divorce proceedings off the ground. Other potential legal problems may arise, such as enforcement of the financial settlement in France and the treatment of financial issues when choosing the court of issue. Being caught between two competing legal systems is a very complex position for a client to find themselves in and the choice of forum can make a huge difference to the outcome.

Therefore, it may be worth choosing the jurisdiction that will be more favourable towards one spouse over the other. The UK’s view is to look at the couple’s aggregated wealth and start dividing on a 50/50 basis, irrespective of the origin of the assets, and then adjusting it in the light of the couple’s particular circumstances – this is the judge’s decision. The French way is likely to be different and a French judge will generally be bound by a pre- or post-nuptial agreement signed by the parties.

It is worth remembering that if proceedings are issued in a foreign jurisdiction, there will be additional costs in retaining two sets of lawyers. As advantages may be gained in electing a preferred jurisdiction, in terms of certainty, practicality, cost and legal results, a race to issue proceedings is therefore common.

Christophe Dutertre, French legal team, Blake Lapthorn Tel: 02392 530379 www.bllaw.co.uk

 

HOME FRONT

When a French property is part of the overall family assets which will have to be divided or dealt with under the financial arrangements, it is essential to ensure that the financial settlement approved by the court gives directions as to what should be done with that property.

The couple might wish to keep it jointly but generally one party will transfer their interest into the ex-partner’s name. The arrangement should indicate who will bear the costs of the transfer.

The legal title will need to be amended through the French Land Registry and a stamp duty of 2.5% (from 1 January 2012) will be due on the whole property value if one spouse is to become the sole owner. The notaire who will be dealing with this will require an English translation of the divorce documentation i.e. the court order, the decree absolute.

It is wise to remember that the notaire will probably require a period of around two months to carry out the searches and transfer the property to one or the other spouse. Therefore, when dealing with the preparation of the court order, the parties and their solicitors should make sure that a length of time of around 60 days from the court order should be given to a notaire to allow the transfer of the French property.

Although it is common to see court orders stipulating that the property should be transferred within 28 days from the court order, it is usually difficult to fulfil this condition because the process of transferring a property in France has not been taken into consideration.