By Sue Busby, France Legal (original version published in France magazine)
One aspect of French succession law that often horrifies British purchasers of property in France is how little protection it affords to the poor widow or widower left behind after the first death.
Children have always been well looked after, owing to the very long-held belief that property should stay with the bloodline. Therefore children cannot easily be disinherited and must be left a minimum of half, two thirds or three quarters of the deceased’s estate depending on the number of children. The rights of other relatives such as parents, brothers, sisters, nephews and nieces were also put before the spouse until relatively recently.
On 3rd December 2001, a law came into force to give much improved rights to the surviving spouse. The surviving spouse’s situation varies depending on whether the deceased leaves only children of the relationship with the surviving spouse or children from another relationship.
When the deceased leaves children from another relationship, the very minimum right that a spouse has is to occupy the marital home for one year after the first death. After that, the surviving spouse has an additional right to occupy it for the rest of his or her life and use the contents. However, the widow or widower can be deprived of this second right by a provision in the deceased’s will. Previously, the spouse had no right to stay in the property unless he or she was a joint owner. Under the new law, the surviving spouse is also entitled to receive a quarter of the deceased’s estate, even where there is no will.
When there are no children from other relationships but there are children from the relationship with the deceased (produced during the marriage or otherwise), the spouse will have a legal right to choose between a quarter share of the estate (as an absolute owner) or a life interest in the whole estate. A life interest is a right to use and enjoy the property and to receive revenue from it. The spouse could therefore rent the property and move elsewhere if she or he so wished. This is obviously a more valuable right than that of occupation only, which does not give any rights to revenue such as rent.
A life interest in money, shares etc is as good as an absolute interest as the spouse can use and dispose of it as desired during his or her lifetime. Under the December 2001 law, the reserved heirs can ask for the life interest to be converted into a rent, if they wish, but only when the property concerned is not the surviving spouse’s main residence. In the absence of agreement on the amount of rent, the courts would have to decide.
Previously, when the deceased left no children but left surviving parents, the surviving spouse would only be entitled to an absolute interest in a half-share of the deceased’s estate. If there was only one surviving parent the spouse would be entitled to an absolute interest in three quarters of the estate. A law which came into effect in January 2007 abolished the parents’ reserve and it is now possible to leave everything to the surviving spouse, in the absence of children.
The exception to this is when the property concerned belonged to the family. This might apply if a house was inherited by the deceased from his parents. However, it must be exactly the same property. If the inherited property was sold and another property bought with the proceeds, the aforementioned relatives would have no rights over it.
All the rights mentioned above are subject to inheritance tax except the right to occupy the premises in the year after death. The value of the right to occupy the premises is calculated as 60% of the value of a life interest. The value of a life interest is calculated according to the age of the recipient. The younger the surviving spouse, the greater the value of the life interest.
Does French law go far enough to protect the surviving spouse? For those used to the common law system (England, Wales, United States, Australia), it probably does not. The majority of British purchasers want to give the maximum power and protection possible to their spouses. So is there anything else that can be done to improve the situation further? There are two other methods that are worthy of mention; which is the most appropriate depends entirely on the objectives of those concerned and on their particular family circumstances. They are outlined very briefly here:
Communauté universelle avec clause d’attribution
When people get married in France, it is possible to adopt one of several types of marriage regime. The regime adopted determines how property is dealt with on death. The regime of Communauté universelle means that everything you own is considered the property of the marriage. The English marriage is not considered by the French to be under this kind of regime. It is therefore necessary to have a deed drawn up by a notary to change the marriage regime in respect of the French property. This is a right provided for in the Hague Convention.
On the first death, all the property passes to the survivor. In this way, the surviving spouse can inherit the whole estate.
The disadvantage of this regime is that children from a previous relationship have a right to take legal action to recover their reserve and thus the marriage regime would be set aside if they took this action. In these circumstances, the spouse will be treated as if there had been a gift between spouses (donation entre époux), described below. However, the law which came into effect in January 2007 enables children from a previous relationship to renounce their right to take action against the marriage regime arrangement during the life-time of their step-parent. They can then exercise the right again on the death of the step-parent. This can be a very useful solution in some situations. The surviving spouse is protected during his/her life-time but the children receive the property eventually and only pay tax at the lower rate between parents and children instead of the 60% rate that would normally apply if a step-parent left property to a step-child.
Donation entre époux au dernier vivant
This means making a gift to the other spouse, which comes into effect on the first death. The whole estate could be gifted in this way. However, if there are children from the marriage or otherwise, the gift will be reduced so that the spouse does not inherit the whole estate but may instead choose one of the following options:
- an absolute interest in that part of the estate that can be freely disposed of depending on the number of children (half, one third or one quarter)
- an absolute interest in a quarter of the estate plus a life interest in the rest
- a life interest in the whole estate
So even when there are children from another relationship, the surviving spouse can in this way be given some protection. By way of the donation, the spouse could use, enjoy and take revenue from the property. Under the December 2001 law, he or she has the right to occupy the principal residence. The two measures combined give reasonable protection.
When there are only children from the marriage, a change of marriage regime gives maximum protection to the spouse.
This article allows only a brief introduction to the methods available to property owners. You should seek legal advice on your own situation before making any decisions.
© France Legal 2016