by Sue Busby, France Legal
The modern family
The days of stable families with Mum, Dad and 2.4 children are largely gone. Second marriages, stepchildren and families that the French charmingly call ‘familles recomposées’ are the norm. French law has traditionally favoured the old-fashioned type of family from the succession and inheritance tax point of view, which has led to many British owners of French property having to choose whether to give priority to their spouse or their children.
A conflict of interests
For example Pete has 2 children from his first marriage and decides to buy a French property jointly with his second wife, Sue. Pete wants to protect Sue and make sure she has a reasonable standard of living after his death. In the normal course of things, Pete’s children would be entitled to 2/3 of his French estate at the time of his death. Pete would like his children to inherit eventually but wants to look after Sue during her lifetime.
Applying a French marriage regime
One option available to Pete and Sue is to apply the French marriage regime of communauté universelle de biens to their French property. By putting the property into the regime, the surviving spouse automatically inherits everything on the first death. However, Pete’s children have a right under French law to take action (action en retranchement) to have the regime set aside insofar as it affects their rights to their share of Pete’s estate ie two thirds. If the children took no action at the time of their father’s death then the regime would work. However, if Sue then left her step-children anything on her death, they would be taxed at 60%, as there is no blood relationship between Sue and Pete’s children.
Fortunately, a law that came into effect in January 2007 provides a good solution to this problem. Children can now renounce their rights to take action against the marriage regime during the lifetime of their step-parent. Previously they could not renounce this right until after their parent’s death. The second spouse can then relax in the knowledge that she/he will be secure after the first spouse has died. What about the children though? They have given up their right to anything from their parent’s French estate. Well fortunately French law has provided that the renunciation of the right to take action against the marriage regime is a temporary one and therefore the children can still exercise the right to their inheritance after the death of their step-parent. They will then only be taxed as if they had received the inheritance directly from their own parent, with an allowance of 100,000 euros and the much lower rates applied between parents and children.
How it is done
To renounce their rights, the children must sign a document alone in front of two notaire’s in France. It is the notaire’s duty to make sure the child is acting of his/her own free will and that they understand what they are doing. This may cause a little inconvenience but it will be worth it to ensure that everyone is protected. In summary if your children do not mind waiting until the death of their stepparent to inherit their share of the parent’s French estate then everyone should be happy.
© France Legal 2016