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Inheritance Tax - Advice Please?


Noisetieres
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I have a friend who has been left a house in the South of France by a relative (auntie I think). They have been to visit the house and sort out the necessasry paperwork and have been left totally confused about how their inheritance will be treated. The house is in a poor state of repair and needs work doing on it and is full of old furniture.

Its my understanding that they have to pay 60% inheritance tax if they sell or not. Without much time or money they have to decide what to do with the house. Have you been in a similar situation. Can you offer any advice? My thoughts are:

1. If they sell they get 40% of something they didn't have before - although they may have to pay CGT on the difference in selling price etc.

2. If they clear out the furniture and bring any decent stuff to sell in England then the house is empty so saving on tax d'habitation bills.

3. Rent the house as unfurnised under good advice - at least this buys them some time (3 years as I understand it) to decide what they would like to do.

Lastly, is there any way the inheritance tax can be "lessoned" in this situation.

Appreciate any comments/thoughts and I'll pass them on.

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1. Correct

2. I don't think so, the house will still be habitable even if it is not furnished, so will be liable to tax.

3. There are many fors and againsts with this - French tenants are not particularly careful with other people's property, and can be very difficult to get rid of, whatever the agreement says - but it is an income for you, and the house will probably rise in value during the three years. If, as you say work needs to be done, then this should be carried out before rental starts, and we all know how long such work can take in France.

Your 'lastly' point - do take specialist advice as every case is different and we can only give very vague guidance here. This applies particularly when considering the capital gains tax implications, though tax should be fairly small as it is only imposed on profit made on sale, less certain allowances.

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Thanks Will - you sound quite knowledgeable on these matters.

After discussing with my friend it seems that she has to pay this tax within 6 months or so she believes. These seems a little harsh as even if she tried to sell the place it might not go within 6 months and she's landed with a hefty bill through no fault of her own.

Do you know if this is true?
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Try the definitive site, Notaires de France: http://www.notaires.fr/notaires/notaires.nsf/V_TC_PUB/GBACC

You should find answers to most of your questions on there - click on "Realized gains on real property" on the first page.

Incidentally, I was trying to find out about the time limit you mentioned (3 years) - I thought that it was 10 years (having recently been reduced from 30) - where did your friends find out about this?

Best wishes to your friends!

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Unless its truly spectacular I would advise your friend thinks long and hard about bringing furniture to England for resale. The trade in antique or second hand furniture is in the doldrums, with what is termed 'brown furniture' worse hit.

There may be a local auction house that would offer a good alternative.

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[quote]Try the definitive site, Notaires de France: http://www.notaires.fr/notaires/notaires.nsf/V_TC_PUB/GBACC You should find answers to most of your questions on there - click on "Realized gains on rea...[/quote]

Arkon

With reference to your comment "Incidentally, I was trying to find out about the time limit you mentioned (3 years) - I thought that it was 10 years (having recently been reduced from 30) - where did your friends find out about this?"

I was referring to the length of tennancy agreements in France which I thought were generally 3 year agreements. Is that not right?
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Alas, yes, I think it's always something of a "cadeau empoisonné" to leave a French property to someone who is not your spouse or your children.

Presumably this aunt had neither, so had no other option.  It is hard that the inheritors have to pay more than half the value of the property in tax, and so are fairly likely to have to sell it and not be able to enjoy it.  But c'est la vie in France.  You just have to think that - as was said earlier - 40 per cent of something is better than 0 per cent of said something.

Angela

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Having spent the last 18 months up to my neck in the Code Napoleon (Thanks Dad!!) regarding inheritance I have learnt a few things along the way.

(a) Get a good Notaire (and a big dictionary! or a translator and pay for the service)

(b)  The system is very sequential, i.e. the tax for the Droits de Succession have to be paid prior to the transfer of ownership...and that is before the building can be sold...at which point the next fee is payable. Fortunately the Notaire has a 'book' of fees that gives the fee payable to the government for a certain value of property so this figure is very transparent. Don't forget that the Notaire works for the State, rather than for you.

(c) I hope that there are no dependants (other then themselves) because that is a whole other nest of vipers as they cannot be disinherited in favour of others ((great if you don't talk to one sister and another is going bankrupt...believe me - it happened))

(d) Appreciate that it will take time

(e) See (a) above.

Good Luck

 

Finn 53

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