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FRENCH INHERITANCE LAW


pip24
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We bought a house in France 18 months ago. After reading several books that advised having a tontine clause to the sale, on seeing the Notaire we asked for a Tontine clause to be added.  After asking us several questions (First marriage, 2 children etc) He said , in your case there is something better than that.   ' A CONVENTION DE LA HAYE ' would be better for us. So we accepted his advice and proceeded.  However we are not entirely sure how this covers our interests.     Can anyone give an explanation of this[8-)]

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There is already a Pip (with a capital letter) on the Forum - could be confusing if you keep this moniker, pip!

The only Convention de la Haye I know about forbids the pillaging of works of art etc. from an occupied territory during wartime.

Maybe he's expecting a "War of the Roses" scenario? [8-)]

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I wonder if it was a mis-hearing of "Hague".  Is there not a Hague convention that has something to do with taxation or inheritance issues?  This from memory - and sorry, just about to leave for a meeting, so will follow up in morning if no-one has come up with something better before then.

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Rather depends, but I think your notaire was refering to article 6 of the Hague Convention of 14th March 1978.

You can read the whole thing here http://www.hcch.net/index_en.php?act=conventions.text&cid=87   but in essence what it is saying is that you (or any couple married outside of France, with no children from previous marriages) can change your marriage regime to adopt the French one of communal estate.  A UK marriage is generally deemed to be seperation de biens/seperate estates, whereas changing to the France communaute universelle would mean that if either spouse dies the other inherits the property in full, avoiding inheritance tax liability.

But then I'm no expert, so get your notaire to confirm this for you.

 


 

 

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Nice one, Judith and Cat.  As it happens, Jude and I made exactly this arrangement when we bought our property - the advantages were described to us as Cat describes it here.  Nobody mentioned the Hague Convention, just that we should change our marriage regime to communauté universel.

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[quote user="pip"]

We bought a house in France 18 months ago. After reading several books that advised having a tontine clause to the sale, on seeing the Notaire we asked for a Tontine clause to be added.  After asking us several questions (First marriage, 2 children etc) He said , in your case there is something better than that.   ' A CONVENTION DE LA HAYE ' would be better for us. So we accepted his advice and proceeded.  However we are not entirely sure how this covers our interests.     Can anyone give an explanation of this[8-)]

 

[/quote]

I personally favour Clause Tontine but it's too late now. It has to be inserted at the time of purchase and you should have insisted. Clause Tontine is the best option of ensuring direct property rights pass to the surviving spouse. Notaries hate it because they view it as a tax avoidance scheme and a denial of blood line inheritance rights. It is that's why it's a better option.

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Is there a value limit on Tontine Clause? When we first bought we were told tontine was OK as long as value of house did not exceed £75,000 this was many years ago so limit may have been increased. However doing a search on the forum I cant find any mention of a limit [8-)]
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Yes, I think you are right because we looked into this as well. We had always heard that Tontine was the way to go, however, if the property is valued over 74,000 euros, it is very prohibitive. At the time of death of the first spouse, inheritance tax of around 60% (I believe) of the amount over 74,000 will be due immediately from the surviving spouse [blink].

I think it was very good years ago when property in France was generally very cheap and that is why most of us still hear about it. But nowadays in most cases from what I understand it would definitely not be the way to go. We adopted the CU as well.

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Cat 46

Thanks - memory not that bad after all and saved me work this am.  I think the problem with tontine and more expensive houses (on each share above the amount quoted surely) is that you pay some tax with a tontine, (but not convinced if it is between spouses the 60% is the correct rate - sorry book at home and I am not) whereas with CU you don't, but CU is no good with the children of previous marriages problem, so in our case tontine was the only definite solution to secure the property to the other spouse.  Some you win, some you loose, but with French inheritance laws you can't really win, and if you decide to live in France, that is one of the downsides you learn to accept.  If you can't, solution is simple, don't  live in France.

Sorry to be so pragmatic, I've learnt you can't win 'em all, and you can't take it with you, so as with buying houses, sort your must haves out, and then get on with the best solution within those parameters! 

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Yes, I believe Judith to be correct. My husband has children from a previous marriage so this was taken into account. With the CU, there could be a danger of that happening but with the 60% tax due immediately on the half owned by the deceased spouse, the Tontine was out of the question for us.

As has been said before, it would be best to speak to a Notaire about your particular situation. By the way we used a UK based Solicitor that is meant to specialise in buying French property but was a complete waste of money. So beware. If we were to do again, we would find a local Notaire that speaks English and only deal with him/her. In the end, it was the Notaire that did everything.

 Best of luck

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These posts about Clause Tontine are not correct. I have recently had a meeting with a notary regarding this issue.

The situation for Clause Tontine is this: Surviving spouse assumes full ownership of property on death of other as if he/she had purchased it originally in sole name. The value of the property is not considered for inheritance tax. The contents and any other property however is and is treated in the normal manner under the sucession rules and tax is off set by allowances both for spouse and blood line children. Where this figure of 60% originated is a mystery. I am looking at a paper the notary prepared for me and it's complicated. However it's clear to me that Tontine versus CU is  a better tool to achieve the result must of us wish for. Spouse to inherit first, kids later on.

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Hi folks,

When we purchased our house 3 years ago for 95,000euros the tontine clause was added.  We have no children and it's both our first marriage.  Reading the comments it seems we would have faired better with the CU option especially as the property is now renovated so is worth a little more.  

It seems to me that if my husband dies I'm going to need a fair bit of cash stashed away so perhaps a life insurance policy may be worth taking out anyone got any views on this.  We hope to move to France on a permanent basis next year.  We keep working out our finances to ensure we can afford to live on my husband's pension (we are taking early retirement next year) but the more I read this web site the more worried I become about the amount of money I will need if my husband dies before me especially if my mother-in-law is still alive.  We both love France and our home and friends there but seriously every time I think we have covered all the issues something else creeps out of the woodwork. I'm told that that in this month's issue of Living France magazine, there is an article that says you must cut all ties with British bank accounts and savings to prove to the authorities you really do want to become part of the French regime.  If this is so we are stuffed as my husband's company will only pay his pension into a UK bank account !

How on earth are all you brits coping out there as I am getting very despondant with all of this and we haven't even got there yet!   We have bought and read numerous books on finances, tax and the health system in France etc but I really think it's time to invest in some proper advice - can anyone recommend a good financial adviser, has anyone tried Siddells or Blevins Franks?

Look forward to hearing from you - off to get a capuccino to drown my sorrows! - well it is only 11:35 am.....................Chris

 

    

 

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Logan, that would be perfect if it was true. But everything I have been told from the agents, the so -called French expert UK based Solicitor and the Notaire have been the above. It appears the amount is 76,000 not 60,000 but is still very low. However, if what you say is true and the information we have been given is wrong, I would very much like to know this.

However unfortunately, here is a thread that has recently appeared on TF of an actual case with the "en tontine" [:(].

http://www.totalfrance.com/france/forum/viewtopic.php?t=19300

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Certainly my understanding is that the tontine is not often the best solution where a value of estate over about 75,000€ is involved. However, in many cases neither the CU/marriage regime/Hague convention (call it what you will) nor the SCI solutions are appropriate either, so the tontine can still be the best of a bad bunch.

It is sometimes possible to register your marriage regime under the CU, if that is what you want to do, after signing for the house, though it is more difficult and will cost more than doing it before the acte de vente.

I don't know where this latest news about severing ties with Britain comes from, my initial thought is that it applies only should you wish to establish your domicile (as opposed to just residence) for tax purposes outside the UK. My experience of the type of advisors you mention is that they are fine if you plan on retiring overseas, and/or have a large sum of money that you want to invest in the right way, but their expertise does not extend to important matters such as planning for social security etc for those of us who have to work.

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Hi Will, 

I've checked out my with my source re severing ties with Britain and it IS regarding domicile.  Having read you final para perhaps we don't need to contact an advisor as the lump sum is not that large (depending of what large is of course). 

Thanks, Chris

PS, sorry you are still working hard.  We have both worked full time for 37 years, have never claimed any benefits (no children) and my husband has had only 1 week off sick during his entire working life.  The state pension rules are had I been born 4 weeks earlier, I would have collected my state pension at 62 I now have to work till 65 to collect.  This set the grey matter into motion so out of interest I got a pension forcast via the DWP website when I was 50, (2 years ago) The calculations were that if I retire now the state pension would be 25 pounds per week less when I collect at 65.  Which means I would have to work full time for the next 15 years to get 25 quid a week more pension or pay a lump sum to them in order to get full pension - forget it, I'd be better off with a savings plan and at least if I snuff it my husband at least gets some money and with my family history I will probably be dead before collection time.  That's when we got serious about early retirement !

Chris

 

 

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cs, I don't know what the problem is with maintaining a bank account in the UK.  We are in the same position and my accountant here has no problem declaring our UK income over here.  We have no children and our French Notaire advised strongly against the Tontine clause for us and recommended the CU instead.  He also seemed to indicate that you can't alter it - I take it that's still true - does anybody know?  We went to Siddells before we came here and all they seemed to be interested in was handling our investments (no doubt to get a bit of commission!).  Don't know about BF.  You might try an English speaking French accountant - we use SFPN, or talk to your Notaire. Their website is very useful http://www.notaires.fr/notaires/notaires.nsf/V_TC_PUB/FRANCE-ACCUEIL
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[quote user="Will "]

Certainly my understanding is that the tontine is not often the best solution where a value of estate over about 75,000€ is involved. However, in many cases neither the CU/marriage regime/Hague convention (call it what you will) nor the SCI solutions are appropriate either, so the tontine can still be the best of a bad bunch.

It is sometimes possible to register your marriage regime under the CU, if that is what you want to do, after signing for the house, though it is more difficult and will cost more than doing it before the acte de vente.

I don't know where this latest news about severing ties with Britain comes from, my initial thought is that it applies only should you wish to establish your domicile (as opposed to just residence) for tax purposes outside the UK. My experience of the type of advisors you mention is that they are fine if you plan on retiring overseas, and/or have a large sum of money that you want to invest in the right way, but their expertise does not extend to important matters such as planning for social security etc for those of us who have to work.

[/quote]

The surviving spouse receives an allowance of 76K euros before inheritance tax is applied. Each child 50K euros . The amount of tax due is on a sliding scale depending on the amount of the estate. So the more you leave the more the estate pays. A property purchased in Clause Tontine is not subject to inheritance tax for the surviving spouse only. It's a legal technicality that has the effect of putting the property into a "state of suspension" when it's applied pending the demise of one spouse. This is how it was described to me by my notary in the last few weeks and is current law. Forgive me but I accept his advice. Not advice on this forum,  estate agents, UK solicitors et al. The children who go on to inherit the property are taxed above 50K on the same sliding scale and I suppose that tax level could in theory reach 60% if the property was valued at more than 250K euros.....Perhaps less. I was motivated to have the meeting with the notary because of posts on this forum and friends who believed tax was applied to the surviving spouse at 60%. It is not so. This subject is incredibly complicated even for the French to understand. If you want to know the truth arrange a meeting with a notary explaining in advance what it is you want to discuss. He can then read it up before you arrive and give you advice on the updated laws. The charge is small.

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We're married, no kids and our notaire has advised to to do a donation entre epouses which should make it easy for the other to remain living in the house and pay a minimal amount of inheritance tax on the other's death.  We own the house 50-50. From my understanding, it also delays any other inheritors claiming their share (as even parents can get a share if there are no kids in the marriage).  We don't have to change our marriage regime: our notare really didn't think it worthwhile.  Obviously once we have kids the whole ball game changes.  Our notaire went through all the maths and it really does seem to reduce the tax burden considerably and would make it feasible for the other to continue living there.

I find it interesting that donations never seem to be mentioned on this or on other forums - according to the notaires.fr site it can also help those that have children from previous marriages. 

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In our situation, as much as we love it here "together", after one of us dies neither of us would want to live in a big house with lots of land in a rural situation alone. Therefore, I would imagine other Brits feel the same and want to do as they please with the property and not be forced to live in it or own it for the rest of their days.

I assume that is how the donation entre epouses works. This was never mentioned to us so if it works differently and the surviving spouse can do as they please with it,  I would be very interested to find out. In fact after reading Logan's post, I must admit I am very confused and surprised to hear that a Notaire has given this advise.  I too do not want to accept as gospel what I read on this forum but nonetheless very interesting to read about the different answers that are given to different people from Notaires [blink]. Perhaps we should look at visiting ours once again.[:(]

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This is a complicated subject and it is often better to go and visit the Notaire.  A lot of money is at stake sometimes.

However, from January the law is changing and it will become much easier to change the marriage regime to contract universal with no visit to the tribunal.  So says my SIL because as it stands now, 40% for her and 30% each for her two daughters if BIL dies.

So children are basically 'in control' and we all know of families where Mum has not enought money and wants to sell up but it is blocked by the children to safe guard their inheritance.

The daughters have yet to sign...they could both refuse.  This actually happened to MIL years ago.  Guess which daughter???

We have a donation entre epouses.  My property remains mine as it was purchased before I married OH so it is just for a house we bought together.

I will be glad to leave the inheritance laws behind.  I have never known a country for counting their money before the poor parent even dies.  Or even falls ill!

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Life would be a good deal simpler if all notaires interpreted the law

in the same way!  I know several people in this area have been

advised by (different) notaires that tax is indeed payable by the

surviving owner of a property held en tontine and there was a post

earlier this summer on this very forum by someone seeking advice on

behalf of a widower friend who found himself being asked by the

authorities to shell out tax in just this situation. 

If there is new legislation which, as your notaire suggests,

effectively puts the inherited value of the deceased’s half of the

house into suspension, this will be very interesting for those who have

a property en tontine.

Meanwhile, regarding allowances, there is, I understand, better news

regarding exemptions for widows and children inheriting either en

tontine (should it turn out that tax is payable) or through the normal

succession route.

Spouses currently have an allowance against succession tax of

€76,000.  There is an additional entitlement of €50,000

(introduced recently) shared amongst the family who inherit; as sole

beneficiary a husband/wife can claim the whole allowance. 

Therefore the widow(er) as sole beneficiary should be able to set total

allowances of €126,000 against the value of the estate. In addition,

the value of the property can be reduced by 20% for succession tax

assessment provided it is occupied as a main home by the spouse or

children. This means (if my sums are right) that if the property is

worth up to €302,400  when the survivor inherits, and assuming the

property represents almost the whole of the estate, then no tax should

be payable on the first death. However, if the value of the half share

exceeds the allowances available, then tax is payable at a scale of

rates of between 5 per cent to 40 per cent on the excess. 

One good thing, Logan, is that should the law on tontines and taxes

ever be put to the test in your personal circumstances (and I sincerely

hope you both live long and healthily and that the situation never

arises!) then the person most likely to administer the estate is your

notaire. As he has stated in writing that the survivor is not liable

for tax on the deceased’s half of the property then I somehow don’t

think you’ll be getting a tax demand.  As you say, in the final

analysis, if you seek professional advice then it makes sense to take

it above any other you are offered.

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Logan, I'm not sure if you actually meant to reply to me because I was not disagreeing with you - it is a complicated subject and it is impossibe for anybody on a forum to say 'tontine good, CU bad' or vice versa. My point is that, in particular for higher value estates (and we include everything in this, not just the house) it gets very difficult to say what inheritance regime is the best, in fact as circumstances vary so much the only answer is to get proper legal advice. What I would add is that you cannot guarantee to get the best answer for you by just visiting one notaire. They are supposed to know the law, but are not all au fait with tax, which is probably even more important to most in these matters, and it is not uncommon to ask three different notaires and get three different answers.

In any case, as Alexis says, there are changes coming in from January, so a valid answer now may not be the best solution in a few months time. Don't you just love French law?

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There is a huge amount of misunderstanding and misinformation in this thread.

(1) French inheritance law is complex and extremely restrictive.  It can not

be overridden or avoided by making a will.  Its effects can,

however, be controlled to some extent by (a) the legal form of marriage

contract, and (b) the legal form of ownership of property.

(2) La Haye is the French name of the Dutch city known as "The Hague" in English and "den Haag" in Dutch or Flemish. 

(3) An international agreement known as "The Hague Convention" ("la

Convention de La Haye") affects the ability of expatriates to make, or

modify, a marrriage contract valid in France.  (In some

circumstances expatriates may have more flexibility than French

citizens in this respect.)

Consult a French notary.  Explain exactly what you own and what

you want to achieve (e.g. what rights do you want your surviving spouse

to have?  What rights do you want your dependants to have? 

How much do you trust your children?)  These are hard questions,

but you have to know the answers.  Do not be led astray by magic words like "tontine". 

If you don't speak enough French, find a notary who speaks English, or

use an interpreter.   This, at least, is my opinion; I think

that a French notary who speaks a bit of English will do you more good

than an English solicitor who speaks a bit of French.  And he

would have to speak more than a bit of French to understand French

inheritance law.

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I find myself in broad agreement with most of your posts about this subject and yes Will I do realise Notaries in France give conflicting advice and more often than not are wrong. I am currently on my third Notary having suffered financially in the past from the other two. (Ever tried getting compensation - forget it!!) This particular one came well recommended and is unusually younger and more dynamic than the average. Since he is likely to outlive me and will be the Notary who administers my French estate I draw comfort from his advice. He has actually calculated how much tax will be due should I peg out today. Very helpful to put your affairs in order.[:D]
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