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En tontine and inheritance.


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When we purchased our house in in 2006 we had the en tontine clause inserted to cover each other. There are 3 children from a previous marriage.  Ideally we would like the property to be owned entirely by the remaining person on the first death.  At present we are selling our present house and want to downsize and take some money out of the property.   When we buy the next house what is the best way to secure the property and remaining money that we do not have to pay tax .  The children can inherit when we are both gone but we would prefer to secure each other's future first.   We are not sure how the en tontine works as our notaire and our french was not good at the time we bought.  Any advice would be much appreciated as when we sell this house and buy the next one we want to better prepared for the future.

 

 

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Depends who dies first, if the spouse who is the parent dies first, then as you realise, the kids get nothing and then if their step parent leaves them their estate they will get a small untaxed allowance, approx £1000 and then pay 60% on the rest.

If their step parent dies first, then when their parent goes, they get the lot and half decent non taxable allowances and a smaller percentage of tax to pay if in fact their is any to pay.

 

Still I don't think that it is as 'easy' as that. I know when I mentioned it to a notaire in France, he said that the houses were worth far too much in our region and I took it that there were tax implications, which no one seems to mention.

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My wife and I bought our house en tontine and when she died it was treated as though I had always been the sole purchaser. I have a total right to dispose of it in any way I see fit and without reference to my children. When I die, the usual inheritance rules will apply. Since our marriage was the only one either of us had, and since neither of us had children outside the marriage our circumstances were uncomplicated. However, if she had had children outside our marriage, the tontine would have effectively disinherited them.

In my case, the house was valued so that I did not have any tax to pay (it was not large or expensive) I merely had to pay a registration fee. This, together with notarial fees came to about €500, if I recall correctly. There is a value beyond which a tontine cannot be used and other methods of securing the desired transmission should be considered.

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[quote user="Newcomer"]

When we purchased our house in in 2006 we had the en tontine clause inserted to cover each other. There are 3 children from a previous marriage.  Ideally we would like the property to be owned entirely by the remaining person on the first death.  At present we are selling our present house and want to downsize and take some money out of the property.   When we buy the next house what is the best way to secure the property and remaining money that we do not have to pay tax .  The children can inherit when we are both gone but we would prefer to secure each other's future first.   We are not sure how the en tontine works as our notaire and our french was not good at the time we bought.  Any advice would be much appreciated as when we sell this house and buy the next one we want to better prepared for the future.

 

 

[/quote]

Hi,

     I take it that you are married with a UK marriage regime .    As has been said , only if the step parent dies first is the tontine satisfactory if you both want the children to inherit finally.

Provided you both get on with the children , the fairest solution when you purchase the new house is to buy it in the name of the natural parent , and for that parent to make a "donation entre époux" in favour of the step parent.   Then if the natural parent dies first the step parent can take a life interest in the house , and have undisturbed use of it during their lifetime .  Only if the step parent wishes to sell will they have to settle up with the children for the value of their title.   If they sell to return to the UK then they can make any arrangement they wish between themselves .   Whatever you do there is no inheritance tax between spouses.    Natural children have at present  159 325€ each tax-free in their parent's estate, but if they inherit from a step parent they pay 60% tax on everything.  Discuss with a good ENGLISH-FLUENT notaire.

    

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Hi, thanks for info.  We are married under u.k system.  Just worried as children don't always do what is right.  Would prefer to legally inherit just like we would in u.k where everything is left to the remaining spouse.   I think the remaining spouse would probably sell up and return to U.K so that would solve the inheritance problem.  It is just if the step parent survives what taxes and restrictions would come into play. Would the children have entitlement to the property if the parent dies first?  It has been set un en tontine.

We will take your advice and speak to an english speaking notaire this time round.

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Newcomer, I have already said that tontine was not advised where I lived in France. You are going to have to check up on this, as no one ever mentions the implications of a tontine purchase.

edit, I have just had a nosey and seen that it must not be over 76K€, which jogged my memory and I'm sure that that was a similar figure to the one I was told by a notaire. What tax implications there are when it is over 76k€, I don't know.

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[quote user="idun"]

Newcomer, I have already said that tontine was not advised where I lived in France. You are going to have to check up on this, as no one ever mentions the implications of a tontine purchase.

edit, I have just had a nosey and seen that it must not be over 76K€, which jogged my memory and I'm sure that that was a similar figure to the one I was told by a notaire. What tax implications there are when it is over 76k€, I don't know.

[/quote]

Hi,

 The 76 000€ limit on tax relief for tontine is now irrelevant between spouses ,as they are no longer subject to inheritance tax .

 The problem with tontine is that if the natural parent dies first the step-parent becomes sole owner and at death the property goes to his nearest blood relatives , or if he wills it to his step- children they pay 60% inheritance tax.

 

There is a way round all this; get all the family together to make (before a notaire) a "pacte de famille" incorporating a "legs residuel" of the house (bought in sole name of natural parent) with the step-parent as first beneficiary , and the children as second beneficiaries.  The surviving step-parent inherits the house fully , and can sell or lease it(but not give away or will to a third party).  On the step -parent's death the children inherit  AS IF DIRECTLY FROM THEIR NATURAL PARENT with the full tax relief.

      If this is what you want, Newcomer, I suggest you take a copy of this post to discuss with an english - fluent notaire.

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Parsnips, you are right, and when I asked, it was before the new rules came in.

Still unmarried couples use the tontine system and they certainly would have tax implications if it is over 76k€. They use expressions like 'my partner' but unless there are legally 'joined' then maybe they should reflect upon getting a tontine set up.

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