Inheritance Tax

[Gardian]

I appreciate that this is a fairly well worn path and I have read the last half a dozen or so threads on the subject.

I think that I understand the rates, but would appreciate confirmation that I'm more or less right.

We are a married couple, two sons (one married, one single) neither of whom have children. We have a UK Will which specifies our sons as joint beneficiaries 50%/50%.

When one of us dies, our assets would pass in their entirety to the surviving party. No Inheritance Tax would be due.

When the other partner dies, the assets would pass to our two sons and IT would be due at 20% after an allowance of E100k each. Thus, if the estate was valued at E300k, we'd be talking about a liability of 300k - (100k x 2) @ 20% = E20k.

I appreciate that any answer is conditional upon future tax rates / legislation, but we just wanted to have a feel for the sum involved. I have also read Parsnip's helpful post in one of the earlier threads about gifts which can be made during one's lifetime, so that's a possible avenue to explore.

Thanks in advance for any confirmation / correction of my assumptions.

[tinabee]

The amount may be less as the rates for inheritance tax for children is applied on a slice by slice basis, starting at 5%.

Details here

http://vosdroits.service-public.fr/particuliers/F14200.xhtml

Also, in case you weren't aware, the regulation allowing the use of a UK will in France does not come into force until August 2015.

Until this date you may need to make special provision for the estate to pass to the surviving spouse should the need arise.

[woolybanana]

Two points: the British tax man may well want to have a bit of your estate even if you live in France, secondly, it is possible to avoid French death duties if you put relevant sums of money in an assurance vie in the names of the kids; it then passes without attracting inheritance tax. And you can retain the usufruit during your life time. I think you have to set all this up before you are 70.

But DYOR

[Alan Zoff]

Subject to deduction of the nil rate band and certain set-offs for foreign taxes, UK inheritance tax is payable on a person's worldwide estate if they are considered to be domiciled in the UK when they die. Domicile is not the same as residence and is not automatically lost if you move abroad. If you establish non-UK domicile, UK inheritance tax will apply to assets in the UK.

[Gardian]

Tinabee ..........

Thank you very much for that. I'd been wondering about whether the rates worked a bit like the tax tables - you've confirmed it.

WB & Alan .............

Thanks too for your suggestions & advice. Will look in to both.

Happily, neither of us are planning on turning up our toes in the near future, but Mrs G got a bit panicky from an article in that Connexions rag. It was focussing on a situation where the heir was umpteen points removed from the deceased, thus punitive tax!

n.b. We don't subscribe the aforementioned - it just turns up from time to time!

[parsnips]

[quote user="Gardian"]I appreciate that this is a fairly well worn path and I have read the last half a dozen or so threads on the subject.

I think that I understand the rates, but would appreciate confirmation that I'm more or less right.

We are a married couple, two sons (one married, one single) neither of whom have children. We have a UK Will which specifies our sons as joint beneficiaries 50%/50%.

When one of us dies, our assets would pass in their entirety to the surviving party. No Inheritance Tax would be due.

When the other partner dies, the assets would pass to our two sons and IT would be due at 20% after an allowance of E100k each. Thus, if the estate was valued at E300k, we'd be talking about a liability of 300k - (100k x 2) @ 20% = E20k.

I appreciate that any answer is conditional upon future tax rates / legislation, but we just wanted to have a feel for the sum involved. I have also read Parsnip's helpful post in one of the earlier threads about gifts which can be made during one's lifetime, so that's a possible avenue to explore.

Thanks in advance for any confirmation / correction of my assumptions.[/quote]

Hi,

    I am not sure from this post whether; 1. you are french tax resident , and 2. you each have a french will.    As has been said the new arrangement comes in next year, and you each have to make a french will opting for UK law to benefit,  France does not recognise "joint" wills.

    As regards your remark in a later post , that neither of you "intends turning your toes up any time soon", I am currently assisting a widow who's husband took the same view , and was awaiting the new rules when he would sort out their affairs .  He died suddenly and unexpectedly at the age of 67 last March , of a stroke ,which precluded any last minute solutions.

   

[Laurier]

Hi

Yes, I also feel guilty about going over a well worn path re Inheritance but things change and will change more in August 2015, it seems, though I don't understand how that will apply if UK haven't signed up to the agreement?

I have followed threads and taken note of advice from Parsnips and seen several Notaires and got varying replies from the latter! (quelle surprise!)

My question, which I hope someone (Parsnips?) can answer is: as a French fiscal resident with a house rented in UK, will I be able to leave that house in my English Will to a step-son (not blood line) without him paying 60%. I keep being told that immoveable property in UK is not within the French 'worldwide estate'. I have no 'reserved' heirs.

Sorry to sound like a recurring record. It all seems so complicated in France - which is the price we pay for loving living in France. I just want to sew up things to the best advantage especially after reading about Parsnips' friend who left it too late.

Regards

A yet again confused Laurier

[parsnips]

[quote user="Laurier"]Hi

Yes, I also feel guilty about going over a well worn path re Inheritance but things change and will change more in August 2015, it seems, though I don't understand how that will apply if UK haven't signed up to the agreement?

I have followed threads and taken note of advice from Parsnips and seen several Notaires and got varying replies from the latter! (quelle surprise!)

My question, which I hope someone (Parsnips?) can answer is: as a French fiscal resident with a house rented in UK, will I be able to leave that house in my English Will to a step-son (not blood line) without him paying 60%. I keep being told that immoveable property in UK is not within the French 'worldwide estate'. I have no 'reserved' heirs.

Sorry to sound like a recurring record. It all seems so complicated in France - which is the price we pay for loving living in France. I just want to sew up things to the best advantage especially after reading about Parsnips' friend who left it too late.

Regards

A yet again confused Laurier[/quote]

Hi,

     Under the double tax treaty for successions (see;      www.legislation.gov.uk/uksi/1963/1319/schedules/made)       Real estate in the UK is subject to UK law and succession taxes.   However , France counts it as part of worldwide assets , and can also impose succession tax - whilst giving credit for any IHT paid in the UK.    Next year's changes do not affect the tax arrangements, so will not solve your problem.

     You need to look for methods to avoid your stepson paying  60% french IHT.

     Without knowing your full details it is not possible to give an exhaustive answer, but here are a few suggestions;

 If  you are still married to the father of your stepson , you could make a french will leaving it to your husband  "vivant ou réprésenté " at your decease.

  Thus if your husband has pre-deceased you his son and any other of his descendants will inherit as if from him with the usual abattements and rates between parent and child.

      If you are no longer married to him, you could , if you are old enough (say, over 65) look into the possibility of "selling" to the stepson "en viager" , where he pays a deposit and then a monthly pension to you based on the house value.   If he lives in the UK , you could arrange to refund these payments , via UK bank accounts in the form of "presents d'usage" on his birthdays and christmas etc (also his family , if any).

      It may be possible to put him on the deeds in a "joint tenancy with right of survivorship", which is like a french tontine , in that neither "tenant" is deemed to own any defined part of the house , until the first death, when it is deemed to have always belonged to the survivor.  As he would immediately become the owner it would not pass through a UK succession , and possibly would be invisible to the french, as the notaire would not deal with it.

You need to discuss these suggestions with a notaire or solicitor with deep knowledge of both countries' systems , before deciding anything.

 

        

  

[Gardian]

Parsnips .........

1. Yes. 2. No

Both points taken & thanks.

[Laurier]

Thanks Parsnips. The Joint Tenancy sounds the easiest option.

Finding a solicitor with a deep knowledge is a problem. I have seen two in the UK: the one is French but is a UK solicitor and also was a French notaire. I was told a UK property was definitely not within the French worldwide estate.

Another UK solicitor who advertises and deals with French properties/estates also said that a French Notaire 'would not be interested' at the time of death in the UK side. However, having read the links that you provided once before, plus considerable other readings, I was doubtful.

Since the UK property would have my French name and address, it seemed illogical that they wouldn't be interested?

The two Notaires I have seen in France don't seem to have a deep knowledge. The one was sure that UK investments weren't in the worldwide estate and I definitely know that not to be true!

The property would be considerably below the UK IHT level.

Do you have a French Notaire you could recommend as having considerable knowledge?

Perhaps p.m. me

Thanks once again

Laurier

[parsnips]

[quote user="Laurier"]Thanks Parsnips. The Joint Tenancy sounds the easiest option.

Finding a solicitor with a deep knowledge is a problem. I have seen two in the UK: the one is French but is a UK solicitor and also was a French notaire. I was told a UK property was definitely not within the French worldwide estate.

Another UK solicitor who advertises and deals with French properties/estates also said that a French Notaire 'would not be interested' at the time of death in the UK side. However, having read the links that you provided once before, plus considerable other readings, I was doubtful.

Since the UK property would have my French name and address, it seemed illogical that they wouldn't be interested?

The two Notaires I have seen in France don't seem to have a deep knowledge. The one was sure that UK investments weren't in the worldwide estate and I definitely know that not to be true!

The property would be considerably below the UK IHT level.

Do you have a French Notaire you could recommend as having considerable knowledge?

Perhaps p.m. me

Thanks once again

Laurier[/quote]

Hi Laurier,

   I wanted to PM you , but for some reason the only way I can communicate on this forum is via the "Quote" .

I cannot recommend anyone at the moment;  the notaire I had faith in -Mê Marie-Claude Bessout has moved on to greater things practicing international law.

   You may be able to find her contact details via her old office at Montpon 33.(Mê Blin)

  

    I think you could not lose anything by putting the house in "joint tenancy with right of survivalship" (but check with a UK solicitor).

As such, the house passes outside the UK IHT system and so should probably not come to the notice of the UK revenue or the french - but again -check with a solicitor.  Needless to say, once in the joint tenancy, you should not mention it in either a UK or french Will.

[Alan Zoff]

In the UK, joint tenancy does not put a property outside the IHT regime - it simply avoids the need for probate. This doesn't much matter if the joint owner is a UK spouse/civil partner but if owned with anyone else, a notional share (usually 50% but depends on respective contributions to purchase price) is subject to UK IHT, depending of course on the value of the estate.

[parsnips]

[quote user="Alan Zoff"]In the UK, joint tenancy does not put a property outside the IHT regime - it simply avoids the need for probate. This doesn't much matter if the joint owner is a UK spouse/civil partner but if owned with anyone else, a notional share (usually 50% but depends on respective contributions to purchase price) is subject to UK IHT, depending of course on the value of the estate.[/quote]

Hi,

      Thanks for that, I confused IHT with probate, but i think the absence of probate would make the transaction less visible to the french.

[Laurier]

Thanks again Parsnips, for the info and the points you mentioned, and Alan for the further contribution.

Joint tenancy sounds the best option.

rgds

Laurier