French Inheritance Tax | Strategies For Wealth
LEARNING OBJECTIVES
We’re passionate about providing high quality, relevant and up-to-date financial information to British Expats in France.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
How Inheritance Tax works in France
Strategies for optimising your finances
How trusts and gifting can be used to complement financial planning
The importance of regulated advice
French inheritance tax, known as "droits de succession," can pose a significant financial burden on heirs. Understanding the complexities of the French tax system and implementing strategic planning can help minimise these liabilities. This can ensure a smoother transfer of assets to your loved ones factoring in French succession laws.
In this article, we explore French inheritance tax and strategies for avoiding or mitigating its impact.
Understanding French Inheritance Tax
In France, the rates and exemptions for inheritance tax fluctuate depending on the connection between the beneficiary and the deceased.
Surviving spouses and civil partners benefit from full exemption, while children and other close relatives enjoy different tax allowances. Tax rate liabilities can be substantial, reaching up to 45% for non-relatives.
French Inheritance Tax Rates
Taxation rate
Up to €8,072 = 5%
Between €8,072 and €12,109 = 10%
Between €15,932 and €552,324 = 20%
Between €552,325 and €902,838 = 30%
Between €902,839 and €1,805,677 = 40%
Above €1,805,677 = 45%
Strategic Lifetime Giving
One effective way to reduce the taxable estate is by making strategic lifetime gifts. However, it's important to note that gifts made within 15 years of the donor's death may still be subject to inheritance gift tax. Careful planning and consideration of the timing and nature of gifts can optimise this strategy.
Optimising Tax Allowances
France provides specific allowances for each category of heirs. Distributing assets strategically among your heirs can help maximise the use of these allowances, minimising the overall tax burden on the estate. You can also use locally compliant investment solutions in France to increase your tax-free allowances.
Leveraging Life Insurance
Life insurance policies can serve as a tax-efficient tool for transferring assets. Proceeds from life insurance are generally exempt from inheritance tax when paid to a spouse or close relative.
They also include various other tax-benefits, including reduced income tax on growth as well as tax-free annual allowances.
Including life insurance in your estate planning can provide a financial cushion for heirs while minimising tax exposure.
To understand more about the best life assurance policies in France, see our Assurance Vie page.
Utilising Marriage Contracts and Civil Partnerships (PACS)
Marriage contracts and civil partnership agreements offer legal frameworks that can be strategically employed to structure the ownership and distribution of assets.
These contracts can provide tax advantages, and their implementation should be tailored to the specific needs and goals of the individuals involved.
Real Estate Planning Strategies
Real estate often constitutes a significant portion of an estate. Furthermore the majority of French residents own property in France. Consider structuring real estate ownership through company structures or real estate holding companies to optimise tax implications.
Exploring Trusts in a French Context
While trusts are less common in France compared to other jurisdictions, they can still be effective in specific situations. Trust structures may offer benefits in terms of asset protection and tax planning for married couples and their family members.
Professional Tax Advice In France
Given the complexity of French inheritance tax laws, seeking professional advice is paramount for British expats living in France. French notaries, tax advisors, and estate planners can provide personalised guidance based on your unique circumstances.
This ensures compliance with current regulations for French succession tax and optimising your estate plan.
How To Avoid French Inheritance Tax
Effectively navigating inheritance tax in France requires a comprehensive understanding of the legal and financial landscape.
Individuals can reduce inheritance tax and pass assets to their heirs smoothly through various strategies. These strategies include lifetime giving, maximising tax allowances, using life insurance, and seeking advice from professionals.
It is important to plan ahead and consider all options available to make the process as efficient as possible. Consulting with experts can help you make informed decisions and pass on your assets without overpaying the tax authorities.
Taking proactive steps and staying informed about changes in tax laws will contribute to a more secure and efficient estate plan in the context of French taxation.
The Wealth Genesis helps British expats in France with their financial requirements including protecting their assets from IHT.
As a regulated expat financial advice company we do not advise on tax matters in isolation. Instead, we work with a panel of tax local tax experts throughout France to reduce your tax liabilities.
Upon receiving advice specific to your situation, we can implement an investment strategy to meet your financial goals and estate planning objectives.
To discover connect with one of our expert advisers based in France, use the button below.
