20 December 2013

French inheritance taxes overview

Here is some information I've gathered from the French service public web site (this page, and this one) about the taxes incurred by heirs in France.

Several categories of heirs benefit from a tax abatement determined by their kinship line, or lack thereof, to the person leaving the inheritance. For example, since 2007, the suviving spouse or civil union (PACS) partner is exempt from inheritance tax on the entire amount he or she inherits (but the surviving partner does not necessarily inherit 100% of the estate automatically).

Direct descendants (children,  or grand-children representing the deceased's pre-deceased child) and ascendents (parents or grand-parents, for example) are granted an abatement of 100,000 € (euros). In other words, they pay no tax on the first 100,000 € of the value of the inheritance. That's a little less than $140,000 US at today's exchange rates.

The amount of the inheritance above 100,000 € is taxed as shown in this table:

Remember that the French use a period in big numbers where we use a comma, and a comma where we use a period.
In this table, one thousand euros would be written as 1.000 €.

My interpretation of this table — you'd need to consult with a French notaire to be absolutely sure about the tax amounts — is that an inheritance worth, say 200,000 € left to a parent or child would mean that the heir would owe a tax on the order of 18,500 €: No tax on the first 100K €; 5% of the next 8K € (400 €); 10% of the next 4K € (400 €); 15% of the next 4K € (600 €); and finally 20% of the remaining 84K € (nearly 17K €). I hope that's right. Higher amounts are taxed at progressively higher rates.

The important thing is to remember that, unless you have concluded a donation au dernier vivant (AKA donation entre époux) by signing papers in front of a French notaire, and if you don't have children, your surviving parents each receive, automatically, one quarter of whatever you leave behind as an estate. Without the donation, your surviving spouse, assuming their are no children, is entitled to either 50% or 75% of your estate, depending on whether you are survived by one or both of your parents. That could get complicated. If you have children, whether with your current spouse or from a previous lit (bed), as we say in French, it gets even more complicated.

Back to abatements. Brothers and sisters of the deceased qualify for an abatement of only about 16,000 € if they are the heirs. And they pay higher inheritance taxes on anything over that 16K €. If you are not survived by a spouse, PACS partner, a child or children, or a parent or parents, your siblings and other relatives will inherit your estate in the absence of a will. That's my understanding, at least. And the taxes incurred will be:



If my calculations are correct, your sibling would pay approximately 80,000 € on the hypothetical 200,000 € as follows: no tax on the first 16K; 35% of the next 24.4K € (8.5K €), and 45% of the remaining 160K € (72K €). I'm rounding off the numbers.

If nieces and nephews are your heirs, they get an abatement of only 8,000 € and would incur taxes approximately equal to those incurred by siblings, from what I read.

Finally, any other heirs — distant relatives, unrelated persons (including a partner to whom you are not married or PACSed) are taxed on the inheritance according to the following table, with an abatement of only 1,600 €.


In other words, a distant relative, a friend, or a partner to whom you are not married or legally bound to in a civil union (the PACS in France) would incur a tax burden of 55 or 60% of the value of your 200,000 € estate (110K or 120K euros).

I'll repeat my disclaimer: I'm no expert. The only way to be sure is to consult a notaire if you live in France. I know at least one notaire who speaks English (she's in Paris); there must be many others. If you want to protect the inheritance rights of your surviving spouse or partner — and especially if you own a house — it seems to me that you need to get married or PACSed, and then set up that donation au dernier vivant.

Besides my not being an expert, I'm not a great proofreader of my own stuff. I've read and re-read this, making corrections and changes. If you see errors, please leave a comment or send me an e-mail. As Antoinette said in her comment on yesterday's post, the best thing I can do here is to get expats in France, or potential ones, to start thinking about all these issues.

7 comments:

  1. AARO -- the Association of Americans Resident Overseas has been taking an interest in the issue for years. Our latest meeting on the subject was on Dec. 9, just a couple of weeks ago. I'm in a bit of a tizzy because the summary I wrote up is still not up on the website. For members, there will be a collection of worksheets, too, because what Tim Ramier, the lawyer who presented the inheritance part of the meeting, said was that getting organized beforehand is the key.
    Also remember that in the States, for example, the tax people are only concerned with the total amount of the estate and want their share (above the current threshold of $5,000,000) while in France, the heirs are taxed, as Ken has summed up, according to their rank (blood ties) and how much (over considerably lower thresholds). The country whose tax men get you depends on how long you've lived there, so if you've lived in France for more than 10 years, this is where it will be settled. There's more. As soon as I find the summary up on the site, I'll let interested readers of Ken's blog know.

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  2. This is all very fascinating, and so important to know, for those expats to whom it applies.

    Ken, do you know yet whether or not your U.S. marriage is sufficient to qualify you two Americans as married, in all of these inheritance or tax situations?

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  3. Judy, apparently our marriage in NY State is recognized as legal under French law. I'm working through the process to see if I can find out more.

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  4. Ken, that is great news! I hope you find that all details have been met!

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  5. Good to know about your NY marriage being recognized! OUF

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  6. Too much for my poor dim mind to figure out!

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  7. More on that AARO meeting. The written summary is still not up, but Ken's posts have covered most of the content. The video of the meeting is here: http://aaro.org/banking/424-facta-update-and-french-inheritance-law

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