French inheritance tax, or ‘droits de succession,’ can be complex, especially for expats. With forced heirship rules reserving portions of estates for direct descendants and tax rates as high as 60% for distant relatives or unmarried partners, careful planning is essential.
Strategies such as electing UK succession law, structuring property ownership, or using life insurance can help mitigate these challenges. Our expert advisors are here to guide you in optimising your estate plan while ensuring compliance. Contact us today to protect your family’s financial future.
More commonly known as ‘French succession tax’ or ‘droits de succession’ the French inheritance tax system is often considered fairly rigid.
It adheres to Napoleonic law which is the basis of Civil Law and is what many European countries use. The UK system is based on Common Law and whilst they are both good systems in isolation they can cause problems when mixed together akin to using Microsoft on a Mac.
Due to its rigidity many French people don’t even have a will because they know that the inheritance laws cover their family and that there is no negotiation (termed forced heirship).
French inheritance laws practice forced heirship, protecting the direct line of descent – that is, children, grandchildren, and parents. Depending on the number of children, a certain portion of the inheritance must be set aside. The figures are as follows:
Other nationalities, though, with assets and/or loved ones outside of France, or non-residents who have assets in France would typically find it best to make a will expressly noting their wishes.
The key point to note here is that heirs have an automatic right to a portion of the deceased’s estate, which includes bank accounts, investments, and properties.
Particular exemptions, reductions or other variables may alter the amounts paid and clearly specialist advice should be sought, especially where there is a Double Tax Treaty and people are of a different nationality or have assets in a different country.
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We can now consider the tax rates in France on the amounts inherited.
It differs from the UK which levies a flat 40% rate on the estate above £325,000 (I am deliberately ignoring main Residence Relief for the sake of simplicity).
France is slightly more complex than this as it depends on multiple factors such as: the relationship between the donor and done.
As an example, there is no tax between spouses/civil partners in either the UK or France but after this then everyone will pay tax at a rate of up to 60%.
Under French Inheritance tax law, If you and your partner are not officially married, they could pay at a rate of up to 60%, and that would apply to stepchildren also.
| Relationship with the Deceased | Tax Rate |
|---|---|
| Spouse or Civil Partner | Exempt |
| Child | 5-45% |
| Sibling | 35% |
| Niece, Nephew, Aunt, Uncle, Cousins | 55% |
| Other (including Unmarried Partners and Stepchildren) | 60% |
Gifts and inheritances made to children benefit from an allowance of €100,000 each and then attract a starting rate of just 5%
For children, the tax rate bands are as follows and crucially depend on the amounts they receive AFTER taking into account the €100,000 allowance.
This category includes children, grandchildren, and great-grandchildren.
| Amount Received | Tax Rate |
|---|---|
| Less than €8,072 | 5% |
| €8,072 - €12,109 | 10% |
| €12,109 - €15,932 | 15% |
| €15,932 - €552,324 | 20% |
| €552,324 - €902,838 | 30% |
| €902,838 - €1,805,667 | 40% |
| Amount over €1,805,667 | 45% |
It is important to note that the rates are banded so that the marginal rate of tax depends on where the amount stops.
The French inheritance tax rates are the same as for direct descendants, but the tax-free allowance is lower.
| Amount Received | Tax Rate |
|---|---|
| Less than €24,430 | 35% |
| Over €24,430 | 45% |
Relatives falling within the fourth degree (great-great grandchild, grandniece, grandnephew, first, cousin, great aunt, great uncle, great-great grandparent) are subject to a fixed tax rate of 55%.
This group includes all other individuals, such as friends, more distant relatives, or those unrelated to the deceased. The applicable tax rate for these beneficiaries is a flat 60%.
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French inheritance tax laws can be challenging to navigate, particularly for British expats whose estate planning must balance UK and French rules.
While the rigidity of French law may seem daunting, there are several strategies that can help you potentially reduce its impact and align the distribution of assets with your wishes.
The EU regulation Brussels IV allows British nationals living in France to elect the succession law of their nationality (e.g., England and Wales) to govern their estate, rather than French law. This option must be explicitly stated in your will and can offer greater flexibility for asset distribution.
However, recent French legislation from 2021, Article 913 du Code Civil, now allows protected heirs to challenge this decision for assets located in France. This highlights the importance of consulting an expert to determine the best approach for your situation.
How you own property in France can also significantly affect inheritance outcomes.
Adding a tontine clause during the purchase process ensures the surviving owner automatically inherits the property.
A tontine clause (or clause d’accroissement) is therefore used to avoid the rigid French inheritance tax rights of forced heirship, so that no part of the property passes to them during the lifetime of any of the existing owners.
Under tontine there is no recognition that each owner has a separate share in the ownership of the property, as is the case with indivision. In effect, the purchase of the property is made to the benefit of the last survivor.
However, this option may not be suitable for unmarried couples, stepchildren, or other non-direct heirs.
Exploring other ownership structures, such as setting up a French property company (société civile immobilière or SCI), can also help minimise tax liabilities and give greater control over the inheritance process.
France offers different marriage contract regimes, each affecting how assets are owned and inherited. Most British expats default to a séparation de biens (separation of assets) regime, but other options, such as communauté réduite aux acquêts (community property ownership), may better suit your family situation.
A Donation entre époux (gift between spouses) can be particularly useful in protecting the surviving spouse, especially in blended families.
However, the effectiveness of these strategies depends on careful planning and an understanding of the tax implications, and you should get in touch with an expert advisor.
Life insurance policies in France (assurance-vie) are a powerful tool that can help bypass forced heirship rules and can reduce certain tax burdens. Proceeds from these policies fall outside the estate and can be distributed according to your wishes.
Additionally, beneficiaries typically enjoy favourable tax treatment, with allowances of up to €152,500 per beneficiary (if specific conditions are met such as the donor is below the age of 70) and lower tax rates on amounts exceeding this threshold.
A pacte de famille or pacte successoral allows family members to agree in advance to defer or waive their inheritance rights in favour of others.
While a less common approach in mitigating French inheritance tax, this can be a valuable tool in ensuring assets are distributed according to specific wishes, particularly in blended or complex family structures.
Unmarried couples face unique challenges under French inheritance tax law, with the surviving partner subject to a 60% tax rate and as previously mentioned no automatic inheritance rights.
Entering a PACS (civil partnership) agreement can provide some relief by ensuring tax-free transfers between partners.
However, PACS partners must still plan carefully to mitigate the effects of forced heirship rules.
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Navigating French inheritance tax can be challenging due to its nuances and legal rigidity.
Whether you’re an expat, a non-resident with assets in France, or someone considering investments in the country, understanding the implications of French inheritance laws and taxes is crucial.
Specialised advice can help ensure compliance while optimising tax efficiency for your estate. Contact on of expert French Inheritance Tax experts today to discuss how we can assist you in planning effectively and protecting your loved ones’ financial future.
Disclaimer: Tax laws, rates, and reliefs are subject to change and may vary depending on individual circumstances and residency status. Any information provided on this website is based on our understanding of current regulations (or the date of when the content was published) and should not be considered personalised financial or tax advice. As tax obligations can differ across regions, countries and evolve over time, we strongly recommend seeking professional advice tailored to your specific situation before making any financial decisions.
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