Estate planning for your French property

Despite the implications of Brexit, France remains a popular place for British people to purchase second homes in search of sunnier climes. However, France’s approach to succession law and certain recent legal developments mean that owning assets in France is not always straightforward. Here we look at some of the key factors that impact UK-based French property owners considering their global estate planning.

Inheritance laws

The French legal system is notably different from the regime in England and Wales as it is based on a civil law system rather than a common law system. There are marked differences in the approaches taken by France and the UK in relation to inheritance of assets (commonly referred to as “succession”).

In the UK, we have testamentary freedom to leave our assets however we wish. However, France has a system of forced heirship whereby a deceased’s children are entitled to a minimum share of the estate. This minimum share is generally between half and three quarters of the estate (depending on the number of children who survive their parent).

The entitlement of a surviving spouse can be complicated, especially where the deceased has children from a previous marriage who might not be pleased that their stepparent can claim a lifetime interest over the property. It is usual for a surviving spouse either to inherit a minority interest in French property owned by their deceased spouse or a life interest. However, it is possible to vary the usual rules by holding French property en tontine (broadly similar to an English joint tenancy arrangement).

France also applies a matrimonial property regime, which governs how property is held between spouses and can have implications on tax and estate planning as well as on divorce. For more information on matrimonial property regimes, please see our previous post on this topic here.

In addition to the differences in succession regimes, there are also practical issues to bear in mind when creating an estate plan that includes French assets. It is important to find a French notary with an appreciation of cross-border issues, who will be able to advise on the best way to deal with French assets from both an inheritance and a tax perspective. In France, notaries are responsible for both conveyancing matters and the administration of estates, including the vast amount of paperwork involved in both, so finding a good one is essential.

French protection of forced heirship

The EU Succession Regulation, (also known as ‘Brussels IV’) provides for an individual to elect for the law of their country of nationality to apply to the succession of their assets on death. This means that if an individual is a British passport holder and has assets located in France, they could opt out of being subject to the French forced heirship rules by electing English law to apply to the succession of their worldwide assets, including those in France.

However, in 2021, France varied its Civil Code to protect its forced heirship rules. Broadly, this variation applies where the deceased or at least one of their children is a national of or is habitually resident in an EU member state at the time of the death and the deceased has made an election for a law to apply to their estate that does not provide for forced heirship. In this situation, a forced heir who does not receive the share they would have been entitled to under French law may make a compensation claim against the deceased’s assets located in France.

A compensation claim is very likely to lead to delays and increase costs associated with the probate process in France. Given that the EU could challenge the validity of the variation of the French Civil Code under EU law, there is also now some uncertainty surrounding the position of forced heirs who do not receive their full entitlement under French law. As a result, it is worthwhile bearing in mind the protective stance of the French state towards forced heirship when making an estate plan involving French assets and EU resident family members.  

Occupancy Status of French property

France recently announced that the owners of French property have until 30 June 2023 to submit a one-off declaration regarding the occupancy status of their property for French tax purposes. They will be asked to outline the identity of the occupants and the basis on which the property is occupied. This will involve describing the property and providing information on whether it is a main or secondary home, if it is rented out or if it is vacant.

After the June deadline, the declaration will only need to be updated if there has been a change in circumstances relating to the property. Individuals will need to register for this online and there is a €150 fine per property for non-compliance.

French Residence

Having a second home in France is a wonderful opportunity to spend holidays there and, as lifestyles become more flexible (perhaps because working from home is more convenient or because retirement is on the horizon) it is tempting to spend more time at a holiday home.

It is important for individuals to be clear on their residence position in France, as this will determine the basis on which they will be taxed during their lifetime and how their estate will devolve and be taxed on their death. French tax residents are subject to French tax on their worldwide income and France is well-known for its low tolerance of offshore jurisdictions, leading to higher and even penal rates of tax.

Broadly, having a permanent place of residence that can be considered the individual’s or their family’s place of habitual residence will lead to being considered French tax resident. Where an individual has multiple permanent residences, the French authorities will consider where their centre of financial and personal interests lie. Time spent in France will also be taken into account.

If an individual is classed as being tax resident in the UK under the UK’s statutory residence test (for more information see here) and also in France, the tie breaker rules set out in the double tax treaty between the UK and France will apply.

Since Brexit, it is also necessary to consider French immigration laws and whether it will be necessary to obtain a visa to spend longer periods of time on the other side of the Channel.

There are many factors to consider when owning assets in France and the above is a non-exhaustive guide. Estate planning is a complex area, especially when different jurisdictions are involved, so obtaining specialist advice is imperative.

With many thanks to Siobhan Murray, a current trainee, for their help in preparing this briefing.

We are a firm of solicitors practising law in England and Wales. This article is a statement of our experience and understanding of the French position and does not purport to give advice on French law. This publication should not replace legal advice tailored to your specific circumstances by an appropriately qualified French lawyer.

© Farrer & Co LLP, May 2023