Ownership options

[EGisvold]

My wife and I are in the process of buying a house in France  (Normandy) .

 

We both have previous marriages behind us. I have 5 children from previous marriages, my wife none. It is important for us to arrange the purchase in such a way that:

 

a) My children can't make any claims in the case of me dying before my wife.

b) Minimum Inheritance tax when one of us dies.

 

The property we are expecting to purchase would have a value of approximately 160,000 Euros (This will increase as we develop the property). For the first 6 months to 2 years it would be a secondary home, but long term we intend to live in France permanently.  

 

As far as we have seen there are different options open for us:

 

a) My wife can be sole owner. (Implication: I then would have to pay full inheritance tax)

 

b) We can have a split (let say 80/20 between her and me) and include En Tontine (Implication: My Wife's share would be 80% of 160,000 = 128,000 - within En Tontine?, My share would be 20% 160,000 = 32,000 - within En Tontine, and children would not be able to claim anything, and no inheritance tax)

 

c) Buy it 'Usufruit' and 80/20 (combined with a will). (Implication: My wife would have the right to to stay in the property, but IF she wanted to sell and move, she would have to pay-up my children (e.g. 32,000 Euros))

 

Is this about right?

 

Kind regards

Espen Gisvold

 

[Will]

Although you have obviously done some homework on this, I think you definitely need to take specialist advice.

The basic principle of French law is that you cannot disinherit your own blood line, and they will have precedence over spouses. So although buying en tontine etc can safeguard the surviving spouse's right to live in their home, it's not a way of avoiding the succession and inheritance tax issues - it merely delays them (I don't think what you say about inheritance tax in option b is totally correct). Also, French financial practice is to look at couples, or households, so buying in one name only won't necessarily work.

So it looks like bad news - it will be very difficult to achieve exactly what you seek.

One other option is to buy through a property-owning company (an SCI) which is often a good way of overcoming complicated inheritance issues, though this has potential tax implications in both France and Britain and I don't think it might prove to be the best option in your case.

Also consider your wife adopting the children (most lawyers seem to think this is still possible even after the age of majority, though some lawyers disagree). This may not fulfil all your conditions but it would certainly make things simpler and less costly in tax terms.

[Alexis]

It is all very complicated and everyone seems to have a different tale to tell.  Nobody ever seems to be in the same situation!

My OH is French and we married here.  No contract de marriage.  All my previous properties stay mine however.  For my daughters.  He had nothing in the property line when we married but he has since bought Chateau Despair where we both live.  He has a daughter.

When we bought here, we signed a donation entre epouse which means that his daughter can't chuck me out if he pops his clogs.  I know nothing about the tax implications.

Also, his money in his bank account will be frozen and his daughter will receive all of it.  That is why the money is in my account!  If we had a joint account, this doesn't apply.

Get all the advice you can and ask around as much as you can.

[Dave&Olive]

we have just had same problem, I have 2 and wife has 3 we did talk in depth on this with our notaire but she seemed the only way out was for each of us to make out a french will leaving everything to each other .

but like everyone says ask, try your  notaire ...

like she said to us was, the best plan is do not die in france           

     dave

[EGisvold]

Maybe an even better plan is not to die at all!!!!!

Thanks for the laugh.

[Iceni]

[quote]we have just had same problem, I have 2 and wife has 3 we did talk in depth on this with our notaire but she seemed the only way out was for each of us to make out a french will leaving everything to ...[/quote]

Dave

We are in a similar situation to you and took advice from our Notaire which was totally different to the advice you got. We have bought en Tontine. Now neither of us own the house but when one of us dies the survivor owns the house outright (but will have some tax to pay due to low thresholds for tax levels [€75,000 or there about]). The three children belonging to the one to die first are disinherited, the three children from the one to die last get the property but have no rights to the property until the death of the final spouse.

We checked this again recently and she confirmed that the above was correct. Everything we own is in joint names (except my business account) and we were also told that there was no need to make a will.

The thing that scared us was not that three of the children would own the house with the surviving spouse but that the surviving spouse may well need to sell the house to release enough money to look after themselves in their old age. Selling and having to give a half of the property away is a nightmare. We have made sure our children are OK and not sitting there tapping the table waiting for us to 'pop our clogs'. On a final note. What happens if say a spouse and three step-kids own a house, what is to stop the step-kids from turning up for a summer rave for a couple of months each summer with all their mates etc - they do own half the house and are not asking the remaining spouse to sell up, just to put up with the co-owners and friends... Just a thought. Before you think that things like that never happen in families, well trust me, families and co-ownership of property can turn into a horror story.

[Alexis]

I've read your posts about this before Di and I just can't see that three of the children will be disinherited.  It just does not work like that here.  They would have a very very good claim if they wanted to make one.

I'm not arguing with you!  Just cannot understand how you arranged this.

[Guest CFrost]

I think that it does work like that here. We are in a similar situation i.e. both having previous marriages and children by those marriages but none together.  We did the rounds of solicitors and notaires before buying our house and becoming resident in France.  We were presented with the worrying scenario of the children of first to die ‘who probably have no reason to cherish their parent’s present spouse’ effectively controlling the way of life of the survivor. Therefore our primary aim became to safeguard the survivor in the event of the death of either of us.

 

We had lots of conflicting advice and indeed had commenced buying via an SCI when another advisor pointed out that as French residents this would be totally ineffective!  Eventually we bought ‘en tontine’ with a ‘donation entre epouse’ to tie up the loose ends.  This again despite advice that ‘en tontine’ would not be possible because of the age difference between my wife and self and the difficulty of proving that we had both contributed to the purchase in close proportions.

 

One of the drawbacks of buying the way we did was the tax the survivor would have to pay on the death of the spouse.  In our case this is currently about £15000 and rising.  Changing the marriage regime to comunaute universal (c.u) would knock this on the head but again it is said that because of our children this would not be possible.   However we know of a person in a similar situation to ourselves who had actually changed their regime to c.u.  The children of the previous marriage were advised of the facts and raised an objection because they had not been consulted but in the end bottled out because of the associated costs of mounting a challenge and the fact that they did not wish to damn their relationship with the survivor for ever. We have considered explaining the situation to our children and asking for their consent for us to change our regime.  One wonders if, on the basis that the survivor would probably return to the UK and invoke a UK will, they would ‘dare’ refuse!?

 

It is a pity that French laws which it is said are designed to protect the rights of children of the marriage can actually have the reverse effect.  Our UK will splits everything equally amongst the surviving children; here it is possible we have been forced to disinherit our respective children.

 

Sorry to go on about this but having exceeded my three score years and ten it is a subject near and dear to my heart. I worry about statements like ‘it doesn’t matter what you think you have achieved or agreed via your notaire –  he merely interprets the law as he sees it. In any contentious situation it is a judge who will decide how to apply the law’.  Have no precedents regarding children’s rights and ‘communaute universal’ or ‘en tontine’ been set in France?

 

[Clarkkent]

Have no precedents regarding children’s rights and ‘communaute universal’ or ‘en tontine’ been set in France?

I hope I can be forgiven and corrected if I am wrong, but I have always believed that since French law is codified the concept of "precedent" doesn't exist. Each case is tested against the law as it is written and previous decisions have no effect.

[Iceni]

As Scorpio says, IF you have no children jointly but all children are step-children (ie we have three each) then you can ensure that the surviving spouse gets it all - less tax of course. As I keep saying, we do not own the house we live in, it is En Tontine (does anyone remember the film where I think Alistair Sims played all the parts of a family whose estate was held in a Tonitine in the UK) they murdered each other one by on, the last survivor gets the lot.

We keep reading things on here so we went to confirm this with our very clued up Notaire who had all the relevant books on her desk. She confirmed to us that YES we do have it right, one of us will get the lot and their children inherit all (though our aim is for there to be nothing left to inherit). Regardless of what folk think French law says, we have seen the books and are now pretty sure we got it right in the first place, unless they change the laws next week of course .

[Guest CFrost]

Clarkkent is absolutely right in stating that ‘precedent’ has no place in French Civil Law, ‘a judge in the civil law system is not legally bound by the previous decision of a higher court in an identical or similar case and is quite free to ignore the decision altogether’.  Faced with so much hearsay and possible scenarios,  I should have asked if anybody actually knew if children of a previous marriage had successfully challenged the conditions of an ‘en tontine’ purchase or even a change of marriage regime to ‘communaute universelle’.

[EGisvold]

Just to confuse (maybe) more, is it possible to have ‘en tontine’  AND a marriage regime to ‘communaute universelle’.

Espen

 

[Jonzjob]

Hi Espen,

We sincelely hope that it is because we changed our marriage to CU and we are buying our house 'en tontine' on the advise from our notaire, also very 'swiched on'. This was decided after a lot of investigating by our notair and several meetings. I must admit that the CU bit was a bit of an anti-climax. We just sat there, talked about it and signed several bits of paper and it was done.

By the way I have 2 children by a previous and Frances has none. As said before SCI does not work for residents and along with Di this is a Ski adventure for us, Spending the Kids Inheritance and if we get it right there won't be much left. That is with my childrens blessing, they said "You earned it, so you spend it!"

John (nearly in his new house  )

[Coral]

Iceni / Di

I remember that film but wasn't it Alec Guinness?

Coral - halfway to Ariege

[Clarkkent]

[quote]Iceni / DiI remember that film but wasn't it Alec Guinness?Coral - halfway to Ariege[/quote]

The film you are probably thinking about is "The Wrong Box" made in 1966 by Bryan Forbes. It starred Ralph Richardson. About a tontine.

You may, of course, be confusing it with "Kind Hearts and Coronets" which did star Alec Guiness as the eight members of the d'Ascoign family who stood in the way of Dennis Price inheriting a dukedom. Not about a tontine.

[Teamedup]

Tontine is only of benefit if the property is under a certain value and no notaire would even suggest it as a possibility where I live.

[Guest CFrost]

[quote]Tontine is only of benefit if the property is under a certain value and no notaire would even suggest it as a possibility where I live.[/quote]

Are you referring to the value of the property over which one starts paying tax? Currently I think this is 152000€.  A spouse would generally pay 20% tax on her half over 76000 €.  The rate for the very rich can go up to 40%. For non relations (e.g. partners) the rate is 60%.  I suppose one has to weigh the benefits of ‘spouse protection’ against the tax to be paid. 

 

Our notaire was against us buying in this method, possibly because of the effective disinheritance of one set of children or possibly because wearing his tax collectors hat he saw it as tax evasion (tax free gift to wife).  Either way we were quite clear – we buy it this way or not at all. It is not a tax efficient way of buying and of course is not generally required by the French.

 

There was a very good article published on the buying saga and whilst it is slightly out of date the vast bulk of it is still true. Read it on  http://www.frenchentree.com/fe-legal/documents/DepinnaFrenchInheritanceAndTaxPlanning2003.pdf

[Coco]

"Also consider your wife adopting the children (most lawyers seem to think this is still possible even after the age of majority, though some lawyers disagree). This may not fulfil all your conditions but it would certainly make things simpler and less costly in tax terms."

Interesting that you say this Bill.  When my mum and step-dad were in the process of buying their house we tried 3 separate lawyers - specialist firm in UK, French avocat in London, with office in Coutances, and our own notaire.  All three said that it was not possible for my step-dad to adopt me now as it had been left too long, and yet every book and article we had read said that it was possible.  And yet they all agreed with the idea in principle!

This probably won't help answer any of the questions on here, as they were trying to do the opposite of everyone else here - find a tax efficient way of leaving money and house to me although my step-dad and I are not related at all. 

We still haven't overcome the money aspect, but in the end bought the house with a usufruit in my name.

[Tourangelle]

Coco,

Your situation apparently is becoming more and more of a problem for French people too and the famille recomposée. I heard a program on French radio just yesterday (I think it was BFM) which was emphasising that in the future there would have to be more legislation to try and get around the problem of step families where the step parent does not wish to disadvantage the child who is not theirs. So perhaps in the future things will change, although your situation seems fairly sorted.

[Coco]

Sounds promising!  It's sorted on the house but at the moment my step-dad can leave me 1500 euros (that's the thresshold for inheritance tax for non-related bequests, or it was last time we checked) and after that I would have to pay about 60% inheritance tax!  Even an increase in the thresshold to a similar amount to blood paent/child relationship would help.

[Babe]

Hi Coco. Having just read all the postings on this topic I/we are more confused than ever. At present we are still in Australia our house is sold and we should leave for France in the next 2 months. Our problem is the same as your's. I have a daughter by my first marriage and we are very concerned about protecting her inheritance. My Husband of 28 years has brought my daughter up as his own child since she was three, she is now 34. He unfortunatley did not legally adopt her, simply had her name changed (this was on advice at the time) Of course now, according to French Law our daughter has virtually no legal rights. Adopting her is no longer an option we have been advised.  Have you found out anything that might help? The idea of her possibly finishing up with nothing is not something we want to think about. We had decided to put any property in France just in my name, but from something I have read on this Forum it seems that's not an option. It is a real worry for us as we badly want to go to France but the implications are very real and everybody seems to have been told different things making it very difficult to judge what's right. Hopefully we can get some encouraging answers as we have to start making definate plans. Regards. Anne::

[EGisvold]

Hi All

 

We have now signed the first contract of the purchase, so here we go. We will keep you up to date on what we find out and what solutions we go for.

All solutions will of course have to be made according to what your goals are, ours are in the order of importance:

1. My wife can not be thrown out of the house by my children in the case of me dying before her

2. My wife shal not have to pay ANY inheritance tax in the case of my death

3. I want to pay as little inheritance tax as possible in the case of her death

4. We do NOT care about what Inheritance tax other relatives are subject to after we both are dead.

 

Might sound crule, but that IS our goals, and it is our priorety. We'll see what our Notar comes up with in the course of the next week ore so, keep on the line, and thanks for all your replyes and comments.

 

PS Agatha Christie had a story where En Tontine was mentioned a lot to : Murder she saw, and by coincidence I read it over the last week.

 

[Teamedup]

EGisvold, no tax to pay, your notaire will not be able to guarantee that at all. Currently there is a limit on the value of a property as to whether en tontine works without taxes being due. If it goes above that limit then your wife or you will have to pay tax.

[Teamedup]

Babe, if the property is just in your name then the property will go to your daughter. The thing will be if you go first then your husband will need protecting. You will need to make out a paper giving your husband the usufruit of the property, it would give him the right to live there or rent it out and keep the rent. If he wanted to sell though, your daughter could claim the proceeds.

You really need good legal advice about this.

[Tourangelle]

EGisvold. Good luck with all that I'll be interested to hear how you get on. With regard to your first objective, I heard a very informative programme on BFM (it is a French radio station, I don't know if you know it, it is very finance based.) and this programme was about changing your marriage contract and it is really complex, but what they were completly unambiguous about was that there is no way step children could throw a step parent out of the family home. So I hope that sets your mind at rest and good luck with the notaire.