Phil the Francophile

As a post-script, the reason for requiring separate bank accounts for a tontine arrangement is to ensure that each purchaser can prove that the payment was financed by each in equal share, should this become an issue at the death of the first spouse/partner.  This is based on the grounds that can be raised by the children of the first deceased spouse to declare a clause tontine invalid.  If a purchase en tontine is financed only by one purchaser, then under French law if the heirs of the first deceased spouse could prove this, then they would have a ground to have the tontine set aside. And the best of British luck!!

After much soul searching, and a very intensive few weeks activity and consultation we have decided not to buy in France. That is a great shame, but the more we dug into the why's and wherefore's of Napoleonic inheritance rules, and taxation, the less we wanted to do it. So the dream of retiring to sunnier and very friendly climes has gone. I know many of you are content to take the chance, but we could not see it was reasonable to hand our fate to others. I will try to explain, for there may be things in here that others are not aware of. First, our situation. My partner and I are both divorced, and have not, as yet, re-married, I have two children from my former marriage and my partner has three from hers. We looked very carefully at the options, and employed an excellent French solicitor based in Plymouth, who is also a Maitrise Droit for advice. Indivision is the standard French way of house purchase, where each party owns a share. On the death of the first party the ownership of their part is split in accordance with inheritance laws, with the step-children taking a percentage of that share. Without any protection, the step-children can force the sale of the property to realise their share, and can block the sale of the property if they do not want to take their money immediately. Indivision can be circumvented by passing on the usufruct to the surviving partner, or by insertion of a clause tontine in the final act of purchase. Passing on the usufruct means the surviving partner can remain in the house, but still needs the permission of the step-children to sell it. So in the case of a widow(er) wanting to sell up and return to England this can only be done with the step-children's permission. At that stage, if it is sold, then the step-children will receive their share. With a clause tontine the effect is to disinherit the step-children, which removes their rights to be obstructive, or to force a sale. A will is then needed to ensure that ultimately they do not lose out on their reasonable entitlement. In any event, either with a donation entre epoux or a clause tontine inheritance tax is payable on the death of the first partner. Outside of marriage this is levied at 60% and if married at 20%. If a property was valued at 300,000 euro, and the shares were half each, then 150,000 would be assessable for tax. There is a tax free element of 76,000 euro, but whilst that is deducted, 5% of the total value is added as "other assets", ie. furniture. In the case I have quoted, a 300,000 euro house a tax bill of around 17,800 euro would be payable for a married couple and 53,400 euro for an unmarried couple. It is possible to avoid paying inheritance tax by adopting a communaute universelle where the property is deemed to be in joint ownership and passes automatically to the surviving partner. However, the succession rules mean that the children still have the right to force a sale, or block a sale, depending on their mood at the time. It is not possibe to combine a clause tontine with a communaute universelle. We tried to get that past a Notaire in France, but he, and the tax people, slapped us down very sharply. It was a disinheriting, tax avoiding scam in their eyes. How true!! As an aside, another curiosity was the French Notaire's inability to get to grips with the concept of a joint bank account! To purchase with a clause tontine we were required to prove how much each of us at put into the purchase. It was suggested that we opened separate bank accounts to achieve this!!! From our personal perspective, we were not happy to have control over our future handed over to our children in this way. Of course we love them, and we hope they love us too. But can anyone guarantee things will never change? Given that the only alternative was to be faced with potentially crippling tax demands on the death of one party, we decided to give it all a very wide berth. For those of you brave enough to take the risk, good luck!!