Today is: 22 May 2012
British people who have to deal with Probate matters in France are frequently confronted with unexpected pitfalls. Below, we give some examples of matters which can trip up the unwary.
English Will Applying to French Property
One of the questions we are frequently asked is whether or not clients should have a Will applying specifically to their French property. In our experience, it is advisable to have a Will per jurisdiction. This is because the law in France and in England come from two different “families” of law, Civil Law and Common Law respectively and the concept and rules of each are often diametrically opposed.
Matters which are commonly dealt with in English Wills, such as the appointment of trustees and the creation of trusts, are not appropriate in respect of a French property. If such measures are applied in France, they often complicate the winding up of the estate in France and can lead to additional inheritance tax being levied.
A further issue is the treatment of beneficiaries, such as minor children, and the manner in which they own property in the different countries. Whilst people are often aware that forced heirship provisions may apply in respect of their children, they may not be aware that any property left to beneficiaries, even minor children, will be transferred to them automatically on death. This can lead to difficulties in dealing with the property in France, as the mechanisms applicable in France to minor children to protect their assets are difficult to put in place if the minors are neither French nationals nor French residents. Of course, in England, this is generally dealt with by leaving the assets on trust for the benefit of the minor children. The age of majority is 18 in both the UK and France for these purposes.
Will Relating to French Property/Forced Heirship Provisions
Problems of this nature can arise in one of two fashions. Either the testator has failed to take into account forced heirship provisions, thereby leaving both their descendants, normally their children, and say a second wife jointly owning the same property. Alternatively, the family may have agreed that the children would renounce their forced heirship rights and the notaire refuses to carry this out.
Forced heirship is common to many European countries, it is often considered to derive from the Code Napoléon and it is enshrined in the French Civil Code. The principle behind it is that the blood line is the most appropriate vehicle for passing assets between parties. As such, it is only recently that spouses in France, for example, have benefited from tax free transfer from the predeceasing spouse on death.
The simplest forced heirship provisions are those from a parent to their child. Where a parent leaves one child they may only freely dispose of one half of their French estate, where a parent leaves two children they may freely dispose only of one third of their French estate and where a parent leaves three or more children, they may freely dispose only of one quarter of their French estate. However, spouses can be left a special legacy that can “encroach” of the share received by the children. Special provisions apply when the surviving spouse is not the parent of the children of the deceased. Care needs to be taken to maximise the planning potential available to people who purchase French real estate so that issues of this nature are considered in advance, rather than bereaved clients dealing with unpleasant family situations at a stressful time.
We also see situations where families have agreed between themselves that the adult children will waive their forced heirship rights and believe that they have communicated this to the notaire, without this actually taking place in the required form. It is possible for an adult beneficiary in an estate to renounce their rights, be they forced heirship provisions set out by law or given under a Will. However, most French notaires are not favour of doing this and often take the view that the non-French beneficiaries are not aware of the full impact of their decisions. Quite often there is a basic communication difficulty to complicate matters further. In our experience, without specialist cross-border probate assistance, such matters are rarely resolved successfully.
The need to involve an apparent “third party” where the deceased left no reserved heirs and a Will.
Many English clients are surprised to discover that despite a Will being in place the people who would have been deemed beneficiaries under the French laws of intestacy are involved in the estate. This is specifically provided for under the French Civil Code and requires the “legal heirs” to “deliver” the legacies to certain categories of legatee under a Will. This can be a time consuming and frustrating process as understandably a party who has received nothing under the Will, will be reluctant to cooperate with some French procedural matter from which they derive absolutely no benefit.
When is a Charity not a Charity
Another frequent issue we see with non specialist Wills dealing with French property is where assets are left to charities.
As in the UK, there are charity exemptions in France, but generally these are only open to French charities. We have seen Wills leaving the estate to a charity result in the estate being taxed at 60% instead of being exempt because the “wrong” charities were named. Often careful drafting could avoid this, say by leaving the French property to the Red Cross in France and not to a UK branch. Anyone considering leaving money to charity should definitely seek advice on a French will and not leave it automatically under an English will.
General Issues
It is quite common that estates involving an international element are dealt with piecemeal, and thus, once the English estate has been wound up, the French estate still remains in limbo. This can cause issues with inheritance tax, as this must be paid within six months of the deceased’s death in France or twelve months after the deceased’s death if the death occurred outside of France. There is no twelve months provision where the deceased was not habitually resident in France but died there. The late payment of French inheritance tax leads to a series of penalties and late interest being levied. It is sometimes possible to have some, or all, of these sums remitted “graciously”, however, an appropriate application must be made to the French tax authorities in these circumstances, and there is never a guarantee of success.
Most UK solicitors are able to deal with estates in the UK, but have difficulty understanding the complex Civil Law positions in France. This can easily lead to long delays in winding up the French estate and misunderstandings with professionals, such as notaires, in France. Planning with separate wills at the outset and, where necessary, involving solicitors with specialist French experience in only the French aspects of the estate can make things considerably simpler.
February 2012
David AndersonSolicitor Advocate and Chartered Tax Adviser
Nicole Gallop Mildon
Solicitor and former French clerc de notaire