property ownership

[retirement planner]

Hi,

We have been following the forum for a while now as we are planning to buy

in France in the not too distance future. We are therefore trying to gather

information together now, so we should be better informed when the time

arrives.

My husband is early sixty's, so have a few years before we retire fully to

France, but we are planning to buy a couple of years before then, so we can move

in full time when the pension starts and the house is ready.

We have a couple of questions regarding the way we buy the property, if

anyone can advise us on these points would be great.

Our situation is we are UK married and we have two children in

their thirty's (both ours, not stepchildren or adopted)  

 

Please correct me if I am wrong but, I believe the rules were changed

recently to allow spouses to pass on to each other all their estate, with no tax

payable on death?

I understand from a tax point of view in the long term this may not be the

best way, and that if some of the deceased estate was left to the children on

the first death, then they would each receive a tax free allowance on their

inheritance, from each parent?

 

So, does anyone know which of these ways is how things would work on first

death.

 

A

 

If the house was brought in joint names both owning an equal share, the

remaining spouse would receive the deceased spouses estate fully and with no tax

to pay, but on the death of the second spouse then the property would be left

50/50 to the children who would have a tax free allowance of  100K euros each,

then would have to pay tax on any remaining value.

 

B

 

If the house was brought in joint names both owning an equal share, on the

death of the first spouse is the house treaded as each spouse owning 50%,

therefore the deceased spouse’s 50% would be split up according to French

inheritance law, with 1/3 each for the children and a third for the surviving

spouse.

 

Purely as an example,  on a house with a value of 600K , would it work

out that each spouse owned 300K, then on first death that 300K would be divided

in line with French law, with 100K going to each child and 100K to the surviving

spouse, therefore no tax to pay on death.

On the death of the second spouse, the children already owned 100k each of

the property and the second spouse owned 400K.  This 400K is then split 50/50 to

the children, each would again receive 100K tax allowance each and each would

have to pay tax on the 100K they received.

 

Is it this straightforward, or are we missing anything?  We have read that

it is important to set up how you wish things to happen at the time of buying. 

Sorry its a grim subject for our first post.

 

Thanks,  Julie.

 

[NickP]

Forgive me for seeming negative but as you're asking for advice; my advice would be. There is no way at your OH's age would I consider spending £600K on a house in France. I would rent in France there are loads of rental properties. Keep my UK residency, I know "you can't stay more than so many days", absolute nonsense as no body cares, and when the awful moment arrives do what you want to do with your money that is invested in the UK. A reasonable UK investment would pay for the French rent and you have no French inheritence minefileds to go through, also the French property market is not a good one to get involved in if you want to sell quickly. France is a wonderful country with lots to offer, but is spoilt by awful Bureaucracy.  Good Luck

[NormanH]

With such sums involved you really should consult a Notaire.

Inheritance and tax are a minefield here and you are right to be taking steps to find out everything now.

[nomoss]

[quote user="NickP"]Forgive me for seeming negative but as you're asking for advice; my advice would be. There is no way at your OH's age would I consider spending £600K on a house in France. I would rent in France there are loads of rental properties. Keep my UK residency, I know "you can't stay more than so many days", absolute nonsense as no body cares, and when the awful moment arrives do what you want to do with your money that is invested in the UK. A reasonable UK investment would pay for the French rent and you have no French inheritence minefileds to go through, also the French property market is not a good one to get involved in if you want to sell quickly. France is a wonderful country with lots to offer, but is spoilt by awful Bureaucracy.  Good Luck

[/quote]

+1

[HoneySuckleDreams]

Isn't next year supposed to be when the inheritance laws change, where you can decide under which country's law you can use ? (in this case French or British law).

Inheritance Tax will still be under the French rules though.

[EuroTrash]

I tend to agree.

Moving to France and making your entire estate subject to French taxation (both during your lifetimes and on your demise), in exchange for the privilege of being the owner of a huge French property, requires careful thought. Especially when France is big on trying to bring in new wealth taxes to refill the empty State coffers.

If you really want to buy in France, why not consider buying a modest holiday home. For 200 000€ you could get something very nice and your kids wouldn't have to worry about inheritance tax. And you could remain officially UK resident and not have to worry about French wealth taxes.

If you're determined - your notaire will advise you on all this at the time of purchase, it's part of what the notaire does. In any case you can't set anything in stone yet because in a few years time all the rules might have changed.

[Sprogster]

When French property prices

were appreciating there was a degree in logic in buying rather than renting a

property in France. However, with French property prices depreciating (OECD

recently said French property prices were still 29% overvalued.) and forecast

to do continue to decline for the foreseeable future, careful thought needs to

be given, especially as to whether or not you should keep a foot in the UK

property market. As statistically it is likely you will eventually return to

the UK as most Brit retirees in France and Spain tend to do, usually because of

missing family, illness, infirmity or death of a partner. Another consideration

is that the £ is strengthening against the Euro and whilst that is good news

for those with a UK source pension it means you get less £ for your Euros if

you sell your French property and want to return to the UK property market.

 

My advice would be at the

very least to bide your time if you are not looking to retire for a few years,

as the risk in rushing to buy a property now, is that if it turns out you

subsequently bought in the wrong place and want to move, selling could be very

difficult without taking a substantive loss in the current French property market,

especially in the price bracket you have budgeted for. One of the reasons a lot

of Brits who retire to France often look to move after a few years is that the winter

climate is much harsher than expected, or the property is just too big to

manage as one gets older.

 

In summary, for most Brits

retiring to France it is not a forever move and whilst I am sure you will have

a fantastic retirement in France, it is prudent to have an exit strategy for

the day that personal circumstances change and a move back to the UK, however reluctantly,

maybe the sensible thing to do.

 

[parsnips]

[quote user="retirement planner"]

Hi,

We have been following the forum for a while now as we are planning to buy

in France in the not too distance future. We are therefore trying to gather

information together now, so we should be better informed when the time

arrives.

My husband is early sixty's, so have a few years before we retire fully to

France, but we are planning to buy a couple of years before then, so we can move

in full time when the pension starts and the house is ready.

We have a couple of questions regarding the way we buy the property, if

anyone can advise us on these points would be great.

Our situation is we are UK married and we have two children in

their thirty's (both ours, not stepchildren or adopted)  

 

Please correct me if I am wrong but, I believe the rules were changed

recently to allow spouses to pass on to each other all their estate, with no tax

payable on death?

I understand from a tax point of view in the long term this may not be the

best way, and that if some of the deceased estate was left to the children on

the first death, then they would each receive a tax free allowance on their

inheritance, from each parent?

 

So, does anyone know which of these ways is how things would work on first

death.

 

A

 

If the house was brought in joint names both owning an equal share, the

remaining spouse would receive the deceased spouses estate fully and with no tax

to pay, but on the death of the second spouse then the property would be left

50/50 to the children who would have a tax free allowance of  100K euros each,

then would have to pay tax on any remaining value.

 

B

 

If the house was brought in joint names both owning an equal share, on the

death of the first spouse is the house treaded as each spouse owning 50%,

therefore the deceased spouse’s 50% would be split up according to French

inheritance law, with 1/3 each for the children and a third for the surviving

spouse.

 

Purely as an example,  on a house with a value of 600K , would it work

out that each spouse owned 300K, then on first death that 300K would be divided

in line with French law, with 100K going to each child and 100K to the surviving

spouse, therefore no tax to pay on death.

On the death of the second spouse, the children already owned 100k each of

the property and the second spouse owned 400K.  This 400K is then split 50/50 to

the children, each would again receive 100K tax allowance each and each would

have to pay tax on the 100K they received.

 

Is it this straightforward, or are we missing anything?  We have read that

it is important to set up how you wish things to happen at the time of buying. 

Sorry its a grim subject for our first post.

 

Thanks,  Julie.

 

[/quote]Hi,

   Sorry to quote all your post but that's the only way i can post on this site:

  As you have an uncomplicated marriage , the best policy is to make a mutual "Donation entre époux"* when you buy your house (50/50).  This is more advantageous to the ultimate heirs  (your children) than any UK will clause.    On the first death the surviving spouse has the option of taking the deceased's estate (including , but not limited to, the house) in life interest (usufruit, and for liquid assets , quasi-usufruit), the children get the bare - title or nue-propriété.     As the bare-title is worth  less than full title there is less to be covered by their allowances.  On the second death the usufruit disappears and the children inherit the usufruit without tax;  full allowances then available to cover the assets inherited from the second deceased.

     If you wish to further reduce the potential tax bill, you can each make life-time gifts (again in life-interest) , of investments or parts of the house , up to the 100 000€ tax-free limit ; if you then survive for 15 years , another set of 100 000€ allowances comes due.

      This time restriction used to be shorter , and could quite possible shorten again with a future change of government.

      The great difference between France and the UK, is that France positively encourages "gifts with reservation" ie usufruit, whereas in the UK , it is difficult to give away title to your assets while retaining the income or enjoyment of them.

      * If you do have the notaire draw a "donation entre époux" , make sure it includes the words "quasi-usufruit au sens de l'article 587 code civil pour tous les biens consommables , y inclus comptes bancaires, investissements , et tout bien semblable"

          

[retirement planner]

Many thanks to you all for replying to this question, we really appreciate your advice, some things to think about there for sure. It is always nice to hear what people from the UK who already have homes in France think and advise, having seen it from the "inside".

We were planning to keep a place in the UK, as in later life, we also feel it may be a wise thing. Many years ago when  friends of ours where looking in France for a place to live, we went along to view a couple of houses for sale with them, this was in 2004, ten years later and one of them is still for sale now, same price as it was back then, and it did seem a good buy to us at the price. This must be what Norman meant in another thread when he said he only pays French prices.

Thanks again,

Julie.

[Sprogster]

Julie,

your very good example highlights what has happened to a large number of Brits with properties in France and Spain, in that they cannot sell as their properties do not appeal to local buyers. This is especially relevant in France where Brits tend to go for older rural properties, whereas the French prefer new properties in suburban areas nearer job opportunities, that are inexpensive to heat and maintain.

[NormanH]

I would also stress that those of us who post here are informed  amateurs, and that many 'Anglophone' publications especially 'The Correction' are not even  informed.

The only information which counts is from official French sources and is mostly only in French.

A fairly random example which could be relevant to your case

http://vosdroits.service-public.fr/particuliers/F456.xhtml

and

http://vosdroits.service-public.fr/particuliers/F1270.xhtml

That said I would have more confidence in anything   parsnips says than in any other English language source [:)]

[suein56]

[quote user="retirement planner"] 

Purely as an example,  on a house with a value of 600K ... [/quote]

If I had 600K I would not spend it all on a house here in France. Though, having said that, a lot would depend on where you want to live as you won't get much for that price on the Côte d'Azur but an awful lot more in some other places.

Rather I would spend a max of 400K and invest the rest in the UK either in property, if you want the hassle, or other investments.

I say 400K as we live on the coast so prices here are relatively high compared to some other areas; paying 400K here should buy a modest 120 sq mtr 4 bed house on a plot of 800 sq mtrs a short distance from the sea.

Sue

[Kitty]

My advice to anyone who wants to move to France is to rent first (for at least a few months) and see how you like it, especially in the winter.  Coming on holiday is so different to living here.

The bonus of renting is that when you think that you would like to buy, you are already here and you can look for the bargains.

[suein56]

[quote user="Kitty"]My advice to anyone who wants to move to France is to rent first (for at least a few months) and see how you like it, especially in the winter.  Coming on holiday is so different to living here.

[/quote]

Seconded; it it what we did as when we arrived from the UK the house prices in our area were way above our budget. We rented for a number of years until the local housing market calmed down. There was also the added bonus of having got to know our locality really well so we knew exactly where we preferred to live.

Sue

[vette]

I'm shocked. My house is over that value and I'm in my 60's and here I am being seemingly written off because of my age.

My next property will cost me nearly 7 million and I can say for sure that my age doesn't have any bearing on my plans what so ever.

Hey ho, horses for courses. If someone wants to spend that kind of money I have to assume that they have a larger pot in the first place.

Good luck to the OP and I hope that you enjoy France if you do relocate.

[NickP]

[quote user="vette"]

I'm shocked. My house is over that value and I'm in my 60's and here I am being seemingly written off because of my age.

My next property will cost me nearly 7 million and I can say for sure that my age doesn't have any bearing on my plans what so ever.

Hey ho, horses for courses. If someone wants to spend that kind of money I have to assume that they have a larger pot in the first place.

Good luck to the OP and I hope that you enjoy France if you do relocate.

[/quote] I don't think anybody is writing any one else off because of age, just trying to give advice based on personal experiences. Although as your next buy is 7 million, you could save yourself a few bob and buy mine. a snip @ 6 1/2 million. If you're interested; you can pm me[:D]

[vette]

Sorry Nick.

Her ladyships mind is set in stone.

[Daft Doctor]

As far as the OP's plans go, renting first is of course the best thing to do. In the longer term however, if a decision is made to remain in France, from experience better value can be had from buying land and having a house built. In our case this was much cheaper than buying anything that was on the market when we were looking, and of course you should get the house you want design wise. In addition and quite important for resale, as well as for making your pension go further, you get the benefit of all the modern energy efficiency standards.