Life is like a box of chocolates: you never know what you are going to get. This famous quote could also apply to couples that don't understand succession law in France, because inheritance rights and tax obligations vary greatly, depending on your marital status.
Understandably, you will want to protect your partner should you die; however, different legislations will affect both the nature of your assets and your legal rights, depending on your marital and residency status.
That's why it's important to understand these and plan accordingly for your relationship, be it an unmarried partnership, registered partnership or marriage.
Unmarried / simple partnerships (concubins)
Concubinage is defined by article 515-8 of the civil code as an unmarried couple that lives together. Under French law, an unmarried partner has no rights over your estate and will not legally inherit any of it if you die, so you must protect each other with a will. However, even with a will, your estate may be subject to French inheritance tax, which is extremely punitive for unmarried partners.
Unmarried couples are not considered to have a familial relationship, and as such, the highest tax rate (60%) applies to their inherited assets, after a small personal allowance of 1,594â‚¬. If you are a French resident at the time of your death, not only will your French assets be taxed at 60%; so will any other worldwide assets, subject to the provisions of a Double Tax Treaty.
Options for protecting your estate's assets In order to minimise tax and ensure your estate is passed to your partner, you need to distinguish between movable and immovable assets. Movable assets include bank accounts, investments and tangible assets like cars. With immovable assets such as property, you should seek legal advice before entering into such a purchase together, as there are a number of ways to mitigate tax burden and ensure the estate goes to your partner, rather than your children.
- Inserting a tontine clause to protect your partner's right to the estate; however, this will not overcome the 60% inheritance tax owed.
- Setting up a company structure (SCI) through which you purchase property, which can potentially reduce inheritance tax from 60% to 5%
- Taking out life insurance: premiums paid before your 70th birthday will be excluded from your estate. These premiums are also treated differently for tax purposes: up to 152,500â‚¬ of the capital invested can be passed to your partner tax-free. Beyond that and up to 700,000â‚¬ will be taxed at 20%, and anything above will be taxed at just 31.25%.
o If you have children, make sure that your insurance premiums are not disproportionate to your wealth and income; otherwise, if your children feel aggrieved, they may apply in court to have them reinstated in your estate.
Your other movable and tangible assets can be rolled into a life interest (quasi usufruit) under the terms of article 587 of the civil code, which provides for your partner but also protects any children.
Registered partnerships (PACS / civil partnership)
Registered partners are in the same position as simple partners, with no right over their partner's inheritance. As such, without planning, your partner will not receive anything when you die.
However, you can bequeath property to your PACS partner by drafting a will in their favour, which will exempt them from inheritance tax under the same conditions as a surviving spouse. The easiest way is to write the will yourself, but you should seek legal advice before registering it at the Central Register of the Provisions of Last Wishes.
If you have no children, you can bequeath all your property to your PACS partner. You aren't obliged to leave anything to your parents or siblings, other than any family property that your parents gifted you, which will be returned should you predecease them. If you have children and are French residents, you will only be able to bequeath the ordinary available portion of your estate to your partner:
The surviving spouse intestate rights over their spouse's estate have really evolved since 1st July 2002, when the law dated 3rd December 2001 substituted the old quarter in life interest with a full life interest and a right for the surviving spouse to inherit the full estate with no children or parents at the time of death.
A subsequent law dated 23rd June 2006 introduced a full exemption of inheritance tax for any estate opened from the 1st January 2007. In theory, the surviving spouse is always entitled to a share of your estate, but you can increase this share by making a will.
Before law 2021-1109 of 24th August 2021 confirming the respect for the principles of the republic was passed, you could bequeath your entire estate to your spouse by applying a professio juris (choice of law), pursuant to the European Succession law. However, under the conditions of this most recent law, which came into force on 1st November 2021, the choice is now limited.
Depending on your personal situation and relationship with your children, a will is always recommended to protect your surviving spouse; in the absence of children, the will can prevent parents from inheriting.
Estate planning is a subject that should be taken into consideration seriously because French law is not simple or flexible, and even a simple situation can quickly become complicated for a number of reasons, such as the nationality of the deceased, place of residence and assets in different countries.