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En Tontine


billy10
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HI Forum,

                I expect this question has been asked more than once but I cant find it in any thread, The situation is that my wife and i have had our house in France for six years, and actually been resident for two years. We have both been married before and each have children from those previous marriages ( we have no children together), When we bought the house it was En Tontine, can someone correct me if I am wrong, I beleive that shoul;d one of us die then the house is inherited by the surviver who then is deemed to have owned it from day one. I understand that at this point there is a charge for changing the house into the survivors name and that if the house is worth more than 252,000 euros that there is a sliding scale of taxes to be paid from 5 % to 40%.on anything over this amount.

Once all this takes place it is my understanding that the surviver can then sell the house without having to consult or pay the children from the previous marriage , in other words sell up and move either to another country or buy in france.

The property we own is our only house as we have nothing in the UK therefore it is our primary residence.

Can anyone confirm (or not as the case may be)

Regards

Billy10

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Hi Billy10.

We have bought en tontine with my wife she having children from two previous marriages. We have no children from this union.

Therefore and to be blunt it would be better if I were to go before my wife in that should I survive her then the line would go to my two elder brothers who do not wish or have any need for any part of my estate. In Essential Welsh terms they could buy and sell me ten times over.

If I survive then upon my death my 'family' would have to pay 60% of the value of the estate. I may have this wrong.

Inheritance in France goes back to Napoleon and indeed the EU has now started on the road to try to overcome the archaic rules here in France.

If in the UK we would wish on our ultimate deaths to give our estate to the Dogs Trust Charity (which we do with our UK estates) then no problem.

You try here to set up either a Trust or a discretionary Trust then it is not recognised under the so old fashioned French system.

I have tried to ring fence our estate here in France somewhat difficult.

It is madness that someone is charged 60% tax in that their younger brother did not have children.
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Hi Dragonrouge,

                         lets hope you both live long and properous lifes , but if you were left as the surviving member surely you could sell up at a minimal cost , put the money where ever and rent a place or go to another country , that way your money stays with you

Billy10

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yes of course Billy10 but is it not just a throw of the dice?

Sometimes all of this just gets to me and of course you also think to make sure that no mess after you go then you should go first.

Essentially all I wish is that after my death either my wife or her family benefit and having spent lots of euros on the quest I am fairly certain that one cannot overturn the French system
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Hi,

      I am pleased to say that both the previous posters are taking a too pessimistic view of their situations. As french inheritence law now stands there is almost no situation to which a reasonable solution cannot be found.

      Billy 10;  You don't have to stay in tontine ,you can convert to 50/50 ownership via a notaire. You can then make various arrangements (which I can detail in a PM if you are interested)

      Even the tontine is not as bad as you describe-as you are married the survivor takes the property without any taxes (no inheritence tax between spouses, since 2007).

     The only problem ,which you may both be prepared to accept, is that the children of the first to die will never get any part of the house. If the survivor sells and stays in France and wishes to give or leave anything to their step -children, this is not really sensible ,as they would be subject to gift/inheritence tax of 60%.

      However, once out of the tontine, there are several ways to arrange an equitable outcome,(see above).

Dragonrouge;

    If you were advised to buy in tontine then you were badly advised. As above you can start to sort things out by getting out of the tontine into at least 50/50 ; it may be possible to put more into your wifes name, particularly if she has proof that she paid more than 1/2 of the purchase price.

    Once in 50/50 (if thats the best you can get--a good english-fluent notaire is essential--if you are near Montpon 24, I can put you on to one), you can immediately gift 79221€ of the house value to your wife without gift tax, then repeat every 6 years till she owns the house out right, and then continue until all your assets are in her sole name.(As I understand it this does not affect your rights in the event of separation or divorce). At the same time as you come out of tontine you should make a "donation entre époux" from her to you ,so if she dies first you will have a life interest in all her assets.( She will automatically inherit from you without any inheritence tax, if you die first).

     You should put all liquid assets into french life assurance plans in your wifes name , written in quasi-usufruit (PM me for details) which ensure that in the event of her death , the cash comes to you ,but a tax-free debt to her children is created which they recoup from your estate at your succession. So if at your wifes death ,some of the house remains in your name , if she  has sufficient cash in life assurance (which are 100% secure) ,then the debt created could go a long way to wipe out any tax liability on the house at your death.

       You should put all the assurance money you receive into a life assurance in your name naming her children as beneficiaries(Life assurance money passes outside succession so no tax-up to 152 000€ per beneficiary..

  As I have said this a complicated subject but believe me I know what I am talking about as our situation mirrors yours (except I have the children) and all that I have set up has been run past a notaire and agreed.( PM me for more detail)

              

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[quote user="Jonzjob"]Hi Parsnips, we are in the common situation of me having children from a previous marriage and my OH doesn't and we are trying to find out just how usufruit works with regard to our bank accounts and investments as opposed to our house.[/quote]

Hi,

      To ensure that the survivor, if it is the step-parent, has the fullest use of the accounts and the investments, the spouse who has the children should make a french will specifying that all his/her"biens mobilier", ie. cash, bank accounts, investment portfolio, cars , furniture and personal assets, shall pass to the other spouse "dans le cadre d'un QUASI-USUFRUIT  au sens de l'article 587 du code civil.   La durée dudit quasi-usufruit sera viagere, et il/elle aura le droit de tirer les dividendes et interets, de realiser les plus-values, et de vendre les titres , actions et parts de fonds , ou pour encaisser les produits, ou pour les re-investir, et de utiliser ou disposer de tous mes biens comme il/elle juge convenable. Il/elle devra payer tout impot du sur ces demarches. Pour jouir de son usufruit il/elle sera dispensé(e) de fournir caution."  (very important to use exactly these words).

      In a quasi-usufruit the survivor has virtually full disposal of all these assets and the children of the deceased spouse each receive a "creance", or IOU for their part of the value of the assets passed under the quasi-usufruit , which they present for (tax-free) payment at the succession of their step-parent.(If there are not enough funds remaining to fully meet these IOUs , its just bad luck! -I should say ,though , that if the heirs think that their step-parent is recklessly and irresponsibly wasting the assets they can take legal action to restrain him/her.)  

     You should get a notaire to draft the will including the above wording, so that you can copy it in your own hand-writing. If you are proficient in french you can draft it yourself , but get it registered by a notaire, and have him check it for you at that time.

( You can of course write your will in english , but include the above french passage)

   

If the assets are left in a normal usufruit there are severe restrictions on the survivors use of them --the notaire may switch them into a special "usufruit account" which only gives access to interest.

  We have put all our accounts and investments in "anglo-saxon" jurisdictions into joint names, so that they will already be in the possession of the survivor , before the succession process is started. If you are in a french "communauté" marriage regime, you can change to joint ownership without any tax implications as there cannot be donations to spouses in such a regime.  

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Hi Parsnips, sorry to have taken so long to say thank you for the very informative and helpful reply.  It seems that each bit of information poses more questions.  You are certainly right in saying that this is a complicated subject!

I'm sure the answer to this is no, but can the  'quasi-usufruit'  be used for a house?  Our understanding is that the 'usufruit' for a house is for life or sale and the sale is dependent upon the agreement of the heirs. Also, from what you say, I take it that the  'quasi-usufruit' can be used for accounts/investments in the U.K.  Could you confirm this please?

We do not totally understand your final paragraph regarding joint ownership of  'anglo saxon' accounts and investments, and the French communauté marriage regime?

Frances not John...

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Hi,

    No, the quasi-usufruit cannot be used for a house. It was originally conceived to deal with the situation where a consumable, like crops in field , or wine in a chai, was inherited in a classic usufruit, which was obviously inappropriate.   Quite recently clever lawyers have resurrected it to cover all non-fixed assets , like cash , investments and similar, also cars and household goods.  It can be used for  non-fixed assets in the UK (provided the deceased was french resident).

    The part of the house owned by the childrens' parent should be left , by testament or "donation entre epoux",to the step-parent, with the maximum part in "pleine propriété" (full title) and the rest in usufruit. The amount in full title depends on the number of children, (1/2 with 1 child, 1/3 with 2 children, and 1/4 with more than 3).  If the house was bought in indivision (joint) this means that a survivor with 2  step-children will own 67% of the house in his/her own right, with only 33% in usufruit. If he/she wishes to sell, the heirs must agree and ,if necessary, be paid their part. Their part in my example would be 33% of the sale price minus the value of the usufruit, which if the survivor was between 61 and 70 would be 40% of the 33%. So the step-children would end with 20% of the house value which would not be that costly. If  minority nu-propriétaires oppose a sale they can be overruled by the court.

    My comment about the "anglo-saxon" accounts and investments is based on what I have done to ensure that the notaire does not get a chance to interfere with the passing of such assets into my wifes name. In "anglo-saxon" jurisdictions a joint account/investment passes automatically to the co-holder on production of proof of death of the other co-owner. If this is done before the opening of the succession, the notaire is required only to legitimise the fait-accompli with a "convention du quasi-usufruit".

    If as in our case most of the investments are originally in one name, if married under an english "separation des biens" any transfer between spouse counts as a potentially taxable donation, but in a communauté regime ,as everything is deemed to be jointly and equally owned there cannot be a donation between the spouses, so the altering of the names on the investment is without any significance. The french don't have joint investment accounts so all has to be apportioned by the notaire.

    I have discussed all the above with a notaire.

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I'm in a similar situation - both been married/divorced. We bought the house in 2004 in joint names but not 'en tontine'.  Any one know a good English speaking notaire in 36 who could advise - maybe the 50/50 option could help us, since my partner does not want anything to go to his children. We are not resident in France.
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[quote user="JeanS"]I'm in a similar situation - both been married/divorced. We bought the house in 2004 in joint names but not 'en tontine'.  Any one know a good English speaking notaire in 36 who could advise - maybe the 50/50 option could help us, since my partner does not want anything to go to his children. We are not resident in France.[/quote]

Hi,

       I can't help with the notaire, but you can google notaires.fr ,for a national directory of notaires which includes their (claimed) language abilities--best to test this with a telephone call before committing.

        Although your partner cannot stop his heirs from ultimately inheriting part of the house, I do advise you, when you have found your notaire,(if you are married) , to look at the option of a "donation entre époux",which gives the survivor the option of taking the deceased's part, 1/4 in full ownership and the rest in life interest.( The deceased's children having no rights of access or interference).

       If you are not married it is much more difficult.   In fact the only real suggestion I could find in the literature, is to marry, and then do a donation entre époux as above.

       If one of you dies ,unmarried , then a small part (depending on the number of children) of the deceased's portion of the house could be left to the surviving partner by testament, but they would pay 60% tax on it for no great advantage, as they would be in "indivision"--part-ownership-- with the deceased's children who would also have rights in the house . There are some arrangements which a specialist notaire may be able to suggest, but they are likely to be expensive and not entirely satisfactory.

       In the UK marriage is a "life-style choice" ,in France it is a financial necessity in many cases.

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Hi Parsnips, we saw our notaire yesterday and were told that if the quasi-usufruit wording you quoted is used  it would, nevertheless, be necessary for the heirs to give their consent to the sale of any investments.

How do you see the quasi-usufruit actually being achieved for investments in the U.K.?

I believe that U.K. investments in a sole name have to be sold/cashed in after the death anyway and, if that is the case, agreement or otherwise from the heirs would be irrelevant.  I cannot remember if a death certificate is sufficient for this or if other authority is required?  Proceeds would go into an account in the deceased's name and when all proceeds are in that account, I suppose IOUs would be written for the heirs in the appropriate amounts and then the contents of the account made available to the surviving spouse according to the will?????  Can it work like this do you think?

 

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[quote user="Jonzjob"]

Hi Parsnips, we saw our notaire yesterday and were told that if the quasi-usufruit wording you quoted is used  it would, nevertheless, be necessary for the heirs to give their consent to the sale of any investments.

How do you see the quasi-usufruit actually being achieved for investments in the U.K.?

I believe that U.K. investments in a sole name have to be sold/cashed in after the death anyway and, if that is the case, agreement or otherwise from the heirs would be irrelevant.  I cannot remember if a death certificate is sufficient for this or if other authority is required?  Proceeds would go into an account in the deceased's name and when all proceeds are in that account, I suppose IOUs would be written for the heirs in the appropriate amounts and then the contents of the account made available to the surviving spouse according to the will?????  Can it work like this do you think?

 

[/quote]

Hi,

      My point, which I checked with my notaire, is that if your UK investment funds ( investment trusts etc.) are in joint names , they will automatically pass , on production of "proof of death"-(  "certificat de décès", which you get from the mairie ,not the notaire), into the sole name of the survivor. The notaire when he becomes involved ( up to several weeks or a month or so later) cannot get his hands on these funds, and will have to legitimise the fait accompli by  drawing up a "convention du usufruit" between the heirs and the survivor ,who as sole owner in the eyes of the fund holders can do as he likes with them.

      I think your notaire, like many , but not all, french notaires , is conditioned to thinking in purely french terms,where investments are always held in sole names, and the quasi-usufruit for investments is a recent concept.

      If the funds( eg .in an ISA) are in the sole name of the deceased , they can be passed on proof of death to the trustees of the deceased or to a beneficiary.(according to Gartmore's prospectus), but in these cases I think you get into the realms of probate and a mixture of jurisdictions. That is why we adopted the "communauté" marriage regime and put all our investments in joint names , because in the communauté even where all the assets are in the sole name of the survivor( which they will be by the time the succession is opened) , for french inheritence they are regarded as 50/50, and so the notaire can draw up the "creances" -IOUs- for the value of half the joint estate.

     You should ask your notaire how he would deal with the situation I describe --ie. survivor in "communauté" marriage, has all investments and cash (off-shore), in their sole name, and the testament or marriage contract leaves all in quasi-usufruit to survivor.

Quote from droitfinances.net...........................

  "En gardant un

quasi-usufruit, il pourra conserver l’entière

maîtrise du bien transmis en vertu de l’article 587 du Code

civil. Il pourra le modifier, en vendre une partie, etc.

En théorie, le quasi-usufruit ne peut pas s’appliquer

sur des biens “dont on ne peut faire usage sans les

consommer”, comme l’argent liquide. Mais

d’après les juristes, il est parfaitement adaptable aux

valeurs mobilières.

Le donateur quasi-usufruitier pourra ainsi continuer de

gérer son portefeuille sans contraintes. Quitte à

enregistrer des pertes..."
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[quote user="Jonzjob"]

Parsnips,

Once again many thanks for the helpful reply.

We are in a  'communauté universelle' marriage regime, but only for our 'biens mobilières et actifs financiers' in France.

[/quote]

Hi,

     Check with your notaire exactly what your marriage contract implies. As far as I know if you are french resident then "biens mobilièrs et actifs financiers en france" will be taken to mean all such assets which come under french inheritance rules and taxes, ie all such assets worldwide. The only way the "communauté" can be divided is into "biens mobiliers "only ,with "biens immobilier" staying in another regime, or the opposite "immobilier " in the communauté  and only" biens mobiliers" being in another regime or, exceptionally (under the Hague convention ) foreign "immobilier" only can be left out of a "communauté" which covers all other "mobilier" and "immobilier".  If I am correct you can put your UK non-realestate assets into joint names without a problem. Ask the notaire.

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