From 1 January 2007, significant changes to French law governing successions and donations have been in effect. Historically, the rules have been viewed as very rigid and problematic. The new law will introduce increased flexibility in the way that individuals can pass on their wealth, with some of the most significant changes outlined below.
Removal of the protected rights of ascendants
Until 31 December 2006, in the absence of children, surviving parents (ascendants) are each reserved heirs in a quarter of the estate, even if the deceased was married. From 2007, under the new legislation, they are no longer reserved heirs. However, they are still on the same inheritance ‘rank’ as before and so can preferentially inherit in the absence of a will.
Previously, children and other reserved heirs (réservataires) could only renounce their reserved rights from the date of death of the parent.
From 1 January 2007, reserved heirs can renounce in advance the right to claim back any inheritance that he or she has been deprived of by a will or, in the case of children outside a marriage, via a parent’s adoption of the community marriage regime. Therefore, children can now renounce inheritance from their parents in advance, allowing parents to freely leave property to each other under the terms of their wills (if they have not adopted the community marriage regime) or, in the case of a child outside the marriage, where the natural (or adoptive) parent has entered into the Community Marriage Regime.
Parents are now able to renounce all or part of an inheritance from their own parents for the benefit of their children (ie the deceased’s grandchildren), thus skipping a generation and avoiding two lots of inheritance tax charges. This will also allow the younger generation to inherit sooner.
A child is able to renounce their share of the inheritance (or part of it) for the benefit of a sibling or a parent in need, or who requires special care.
An heir is also able to renounce his share in professional assets for the benefit of the person who will continue the activity.
Changing your marriage regime
The UK marriage contract is considered equivalent to the séparation de biens regime in France, whereby assets acquired by one spouse (whether before or after the marriage) belong to him or her personally. Each spouse is treated as having a 50 per cent share in jointly held assets, unless the actual ownership is different and reflected in the appropriate documentation.
Under the French community marriage regime, it possible for all the couple’s assets (movable or immovable, present or future), whether acquired before or after the marriage, to be considered part of the ‘community marriage’, regardless of whose name the asset is held in.
It is possible for couples married in the UK to change their marriage regime in France to the community marriage regime by going before a notaire – there is no need to remarry in France. Until now you could not have a community marriage contract if there is a child from an earlier relationship unless his/her right to inherit is recognised or unless the other spouse legally adopts that child.
In the same circumstances, from 1 January 2007, adoption of the community marriage regime is possible without the risk of challenge, so long as the children concerned have renounced their inheritance rights in advance, something they are now able to do.
Changes to rules governing PACS
With effect from the 1 January 2000, French law introduced the PACS (Pacte civile de solidarité) in order to improve the position of unmarried (whether hetero- or homosexual) couples in relation to French inheritance tax and other taxes.
The rules governing the PACS have been reformed from 1 January 2007. It can now be achieved simply by going before a notaire who then registers it with the authorities. The relations between the partners are now brought closer to those of husband and wife. The rules governing the duties and obligations of husband and wife such as communal life, reciprocal assistance, and material aid are now applicable to the PACS.
The regime of ownership of the assets becomes that of separate assets (séparation de biens) with rules similar to the regime between spouses. It is possible to opt for a regime closer to that of community of assets (organised en indivision) but not full Community Marriage Regime.
In addition, the surviving partner will now benefit from the temporary right of occupation of the main residence formerly occupied by the couple upon the death of the other (provided that this right has not been removed by way of will). The survivor can further benefit from the right to require preferential allocation of the use of the home and furniture if the deceased specifically allows this in a will.
Extension of the rules of ‘donation-partage’
Donation-partage is the lifetime gifting to beneficiaries of all or part of what they would ultimately be entitled to on inheritance as reserved heirs. From 1 January, it is now possible for a person to do a donation-partage for the benefit of his presumptive inheritors where there is no reserved heir. For example, a person without descendants or ascendants can do a donation-partage for the benefit of his or her brothers and sisters.
‘Graduated’ bequests
It is now possible to make graduated bequests (liberalités graduelles) by either will or gift subject to the condition that on his or her own death the beneficiary must leave the property or rights in question to a specified second beneficiary.
Changes to time limits and procedures
The time span over which an heir may accept or renounce a succession has been reduced from 30 years to 10 years. Measures have also been introduced to offer better protection of heirs in respect of an estate’s liabilities.
In total, over 200 modifications have been made to the legal code. The rules and procedures remain complicated, and it is very important that you are aware of what the implications are in your personal circumstances and seek advice where appropriate.
Bill Blevins is Managing Director of Blevins Franks International, one of the largest independent financial advisers, which specialises in advising retired expatriates in southern Europe