60% inheritance tax or not...

[milkeybar kid]

Could some one please put me right!

Scenario ... Mr & Mrs Jo Blogs have one child also Mrs Blogs has one child by a previous marriage.

Mrs Blogs dies and as I understand the law the husband inherits.

After some time the husband dies.... now the question is, because the child that belonged to Mrs Blogs is not a blood relative of Mr Blogs is she allowed to inherit anything and will the 60% inheritance tax be applied to that child of Mrs Blogs (yet there was a will that said Mrs Blogs child could have a share of the inheritance) .

[parsnips]

[quote user="milkeybar kid"]Could some one please put me right!

Scenario ... Mr & Mrs Jo Blogs have one child also Mrs Blogs has one child by a previous marriage.

Mrs Blogs dies and as I understand the law the husband inherits.

After some time the husband dies.... now the question is, because the child that belonged to Mrs Blogs is not a blood relative of Mr Blogs is she allowed to inherit anything and will the 60% inheritance tax be applied to that child of Mrs Blogs (yet there was a will that said Mrs Blogs child could have a share of the inheritance) .[/quote]

Hi,

      Mrs Blogs has 2 children so cannot, even with a will, leave everything in her estate outright to Mr Blogs. She can only freely dispose of the "quotité disponible" , in this case 1/3 of her estate. The two children are entitled to 1/3 each. With a will or "donation entre époux" she can leave the childrens' part in life interest to her husband (and that part not consisting of real estate in a "quasi-usufruit" which means he can spend any cash or investments -this needs to be carefully drawn up by a notaire).

       When Mr Blogs dies the step daughter is entitled to assets from his estate -free of inheritance taxes- up to the value of the part her mother passed under the life interest. This is automatic , and Mr Blogs does not have to will it to her -she should be holding an "IOU" called a "creance" for the amount , which Mrs Blogs  can specify should be index-linked  at the time of making the will or donation.

       Only if Mr Blogs wills assets to his step-daughter will she be liable to inheritance tax at 60%.  If they want to equalise her eventual share with that of their own joint daughter , they can do this by using french assurance vie plans, which they can use as savings accounts during their lifetime, but which can go to the step-daughter with a tax-free allowance of up to 152500€ when the second spouse dies.

  If "Mr and Mrs  Blogs" think  they might wish to do any of this , they should find a good ENGLISH-FLUENT notaire who knows his business (not all of them do) and explain EXACTLY what they want the final outcome to be.

[Loiseau]

[EDIT]  Whoops! 

Missed the fact that Mrs and Mrs B had one child in common.  Doh.  And that the OP's question did not involve a property.

I'm glad that parsnips has popped up with a much more authoritative reply; mine, below, can therefore safely be ignored...  [:)]  

[END EDIT]

As I understand it, on the death of Mrs Blogs, her child would inherit one-quarter of the property (if it was held in the joint names of Mr and Mrs Blogs), with the other portion going to her husband.   He could buy out his stepchild if he wanted to retain the place in its entirety and if the stepchild agreed.

When Mr Blogs dies, only his child will inherit, if he owns the whole thing.  There is a small proportion of the property that he could leave to whomever else he wished, but they (including the stepchild, who is not a blood relative) would have to pay 60% tax on the value so it's a bit of a "cadeau empoisonné".

If Mr Blogs did not buy out the stepchild, then his own child inherits his three-quarters, and would have to negotiate with said step-sibling about what to do with the property - keep or sell etc.

Angela

[parsnips]

[quote user="Loiseau"]As I understand it, on the death of Mrs Blogs, her child would inherit one-quarter of the property (if it was held in the joint names of Mr and Mrs Blogs), with the other portion going to her husband.   He could buy out his stepchild if he wanted to retain the place in its entirety and if the stepchild agreed.

When Mr Blogs dies, only his child will inherit, if he owns the whole thing.  There is a small proportion of the property that he could leave to whomever else he wished, but they (including the stepchild, who is not a blood relative) would have to pay 60% tax on the value so it's a bit of a "cadeau empoisonné".

If Mr Blogs did not buy out the stepchild, then his own child inherits his three-quarters, and would have to negotiate with said step-sibling about what to do with the property - keep or sell etc.

Angela

[/quote]

Hi,

     The OP did not mention "a property" ie a house ; he asked a general question about inheritance so discussion of buying-out etc. is not necessarily relevant.  It is a frequent mistake on the part of expats of UK origin to think about inheritance purely in terms of houses. This probably reflects the british obsession with home -"ownership" ie.lifelong mortgage indebtedness.

[milkeybar kid]

Certainly a complex subject, thank you very much for all the input.

It would appear if I have understood correctly as regards the property its a must that one of parsnips suggestions would have to be in place to allow the step-child to inherit a part of the property without the 60% inheritance tax in my above scenario, thats if I have understood correctly .

[Val_2]

I am currently in the middle of inheritance issues here due to my husband dying three weeks ago. The house was valued within a week of the funeral as the notaire kicks in within a couple of days of death as does the banks, and if the value is over €300,000 then inheritance tax kicks in. My children are allowed a max inheritance value of €150,000 each but if I had no children and it was going to my siblings or other no direct line heirs, they will pay 60% inheritance tax and if you are not a french resident, it gets even more complicated.

[milkeybar kid]

Val_2 , thanks for replying, my heart goes out to you.

May I ask if you know should that the house be of value less than €300,000 (and the step childs share just 60,000) would the step child still have to pay 60% inheritance tax on the property using my scenario of Mrs Blogs.

[parsnips]

[quote user="milkeybar kid"]Val_2 , thanks for replying, my heart goes out to you.

May I ask if you know should that the house be of value less than €300,000 (and the step childs share just 60,000) would the step child still have to pay 60% inheritance tax on the property using my scenario of Mrs Blogs.[/quote]

Hi, Assuming that the couple want the maximum possible to go to the step-daughter, Mrs Blogs can make a will leaving 2/3 of her estate to the step-daughter and 1/3 to the "mutual" daughter--with life-interest (usufruit for her part (1/2?)  house and quasi-usufruit for all other assets) to Mr Blogs.  On Mr Blogs death all his own assets will go to his daughter and the step daughter can take the value of 2/3 of her mother's assets free of tax from Mr Blog's estate.

     If we take just a 300 000€ house , at Mrs Blog's death Mr Blogs still has his 1/2 which leaves 150000€, left 2/3  (100000€) to- step daughter and 1/3( 50000€) to "mutual" daughter. Mr Blogs retains full control of the house (unless he wishes to sell -then the daughters' agreement is desirable -but not essential).

     At Mr Blog's death his daughter gets his 1/2 of house , plus 50000€ worth of assets tax-free (including part of the house value , if not enough other assets) and step-daughter gets 100000€ of assets , if necessary taken from the house value. If the house was still worth 300000€ and no other assets, then step daughter would get 100000€ and daughter would get 200000€. At present rates (which may be about to be made much more punitive -but that's another story)  all would pass tax-free.   

[idun]

There is a couple I know in exactly this situation and reckon that they have sorted everything out properly.

Get legal advice, go and see a few notaires and go over it all. I can see the the only child will always get the lions share as their hafl siblings only have their parent to inherit from.

Still the half siblings may have their 'other' parent to inherit from too?

[milkeybar kid]

Fantastic information. Thank you all especially Parsnips.

[Val_2]

Sorry I cannot reply about step children. Mine are direct heirs from our marriage and the notaire was only concerned with them. Parsnips probably has the best info but as always, it maybe best to check with an actual notaire.