French
///Estate
Administration
we can provide you with the expertise
There are various scenarios in which you may end up being confronted with having to administer an estate where there is a connection to France.
Even when an estate has been carefully planned, there can still be hurdles in dealing with the administration of the estate, due to the fact that the French and English estate administration processes are very different from each other, which can lead to confusion, and sometimes a full deadlock, when for example a document is required to be produced in France does not exist in the UK. And with the deadline for payment of any French inheritance tax being either 6 or 12 months from the date of death (depending on whether the deceased died physically present in France, regardless of domicile), ensuring that the process in France is started in a timely fashion is particularly important.
Key considerations will be any provisions made in the Deeds, whether there is an English or a French Will, which law applies to the estate, where the deceased was domiciled so that the inheritance tax position can be ascertained, and finally what documents will be required for the administration of the estate to progress in France.
When advising on the administration of an estate with connections to France, we can always assist with ascertaining ownership and date of death values of the French assets, whether there is a French Will, and would be pleased to assist with any of the following:
When the estate comprises a French immoveable asset
In such circumstances, a Notaire will need to be instructed to draw up the French inheritance paperwork, including a Deed confirming the identity of the beneficiaries and whether they accept their inheritance, the Deed of transfer of ownership for the immoveable asset(s), and the French inheritance tax return. Notaire’s fees are state regulated, and mostly based on the value of the assets. We can recommend a trusted Notaire, and accompany you through the process, providing them with the required documents, reviewing the French inheritance Deeds, ensuring that they are accurate and that you understand their contents, and assisting you in signing the required French Powers of Attorney so that the Notaire can execute the Deeds without the need for you to be physically present at their office.
To be noted that whilst SCI shares are considered moveable assets, because an SCI is a transparent company which owns a French immoveable asset, we would always recommend treating them, for estate administration purposes, as an immoveable asset, and involve a French Notaire with the process.
When the estate comprises French moveable assets only
We can advise on the required documents and formalities to deal with and encash any of the following assets, as well as deal with the process from start to finish for you, from ascertaining the assetholder’s requirements to the date the funds are received in your designated account:
- Bank accounts (current, savings or general shareholding account)
- Directly owned shares or bank managed shares in a publicly traded company (the most common being Pernod-Ricard or Schneider Electric)
- Assurance-vie contracts
When a UK registered charity inherits French assets
The French Civil Code sets out that where a foreign entity (which includes UK registered charities) is due to inherit immoveable assets in France, the legacy must first be authorised by the French government. This can be a particularly rigid process, with many documents and translations being required before the French government issues their agreement (for which they have a period of 12 months following their confirmation of having a “complete file”). Coupled with the fact that since Brexit, UK-registered charities are no longer able to benefit from a French inheritance tax exemption and therefore having to pay French inheritance tax at a rate of 60%, means that those estates are particularly tricky to navigate. If you are an Executor of an estate where a UK charity is due to benefit, or are a UK charity having been notified of being the beneficiary of an estate which comprises French assets, we would be pleased to advise and assist with the process, including ascertaining the level of costs and taxes involved, and if required the best way to renounce the French legacy.
When the estate comprises a Trust with connections to France
Estates which involve a Trust and a connection to France are a minefield to navigate, and advice must be sought early in the process due to the high financial stakes of a lack of understanding or compliance with the relevant regulations. Particular attention should be paid to the following:
French inheritance tax
The entire French inheritance tax system is based on the relationship between the deceased and the beneficiary. When taxable French assets are due to form part of a Trust, this poses difficulties as there are often no ascertainable beneficiaries at the date of death, especially when dealing with a discretionary Trust, which can result in an inheritance tax liability at a rate of 45%, or in most cases 60%. Solutions to minimise the impact on the estate can be considered, such as a Deed of Appointment or a Deed of Variations, but with caution as there is some uncertainty as to whether this would be accepted by the French tax authorities, or whether they would decide to view this as a double transfer (deceased to Trust, then Trust to beneficiary), which would result in both transfers being taxed.
Reporting obligations
In addition to the high inheritance tax rates applicable to Trusts “inheriting” French assets, since 2011, foreign Trusts with a connection to France (and this would include a bare Trust where there is a minor beneficiary) must comply with a set of reporting obligations. Non-compliance is sanctioned by very high fines.
A connection to France is established in any of the following circumstances :
- One of the Trustees is domiciled or habitually resident in France
- One of the beneficiaries is domiciled or habitually resident in France
- One of Trust assets is located in France
When the reporting obligation system is triggered, the creation of the Trust must be reported within a month of the event (which in most cases will be the date of death). Any further change in the Trust must also be reported on an ad hoc basis within a month of the event: this can be a change of Trustee, the removal or addition of a beneficiary, the acquisition of new assets, but also a distribution, even if the distribution is not of French assets, or not made to a French beneficiary. Finally, there must also be a yearly reporting of the value of the Trust assets as of 1st January of each calendar year, with the deadline usually being in June.
If you are dealing with an estate which involves a Trust and a connection to France, we would be pleased to advise as regards the French inheritance tax consequences, reporting obligations, and whether any solution can be implemented to mitigate the issue. We can also assist in preparing and submitting the French reporting forms.
NB: where there is a French domiciled/resident beneficiary receiving distributions from the Trust, or the Trust assets (even outside of France) would meet the threshold for French wealth tax, additional taxes may be due in France. In such circumstances we would be unable to advise or assist with the Trust or French reporting obligations, and would recommend instead that specialist advice is obtained from an avocat fiscaliste (French tax lawyer).
When there is a need to claim double taxation relief in relation to inheritance tax
In some specific circumstances, it is possible for an estate to be subject to double taxation. This would be the case when inheritance tax is due both in the country of domicile on the worldwide estate, and in the country of location of the assets. Between France and the UK, there is a double taxation treaty which sets out tie-breaker rules where a deceased is considered domiciled in both the UK and France under the national definition of tax domicile. The treaty also sets out in which country assets are deemed located for inheritance tax purposes (for example, a bank account under the treaty is deemed located in the country of domicile, so for the estate of a UK domiciled individual – either under the national definition or deemed domicile under the treaty – a French current account would have to be declared in France, but no French inheritance tax would be due on the balance).
If you are unsure as regards the application of the treaty rules to determine deemed domicile or if there has been a double taxation and you are unsure as to whether relief is available, or would like assistance with making a double taxation relief claim on an estate, we would be pleased to assist. To be noted that the deadline to make a double taxation relief claim is 5 years from the date of death.
When a beneficiary wishes to renounce a French inheritance
There will be instances where you are due to inherit assets in France, but would prefer not to, either due to the costs involved, high taxation, not getting along with the other beneficiaries you would own the asset wish (or any other reason, there is no need to provide one), and therefore wish to disclaim (renounce) your French inheritance. We would always recommend taking advice as to how to formalise the renunciation, and this is due to the fact that under French law, a beneficiary can be held personally liable for the debts of the deceased. There are many factors that can come into play, including which law applies to the estate, but if a French creditor tries to recover the payment of one of the deceased’s debts against you, there is no better protection than a French renunciation certificate. Before going ahead with the renunciation, it is also important to take advice as to the consequences of the renunciation, as sometimes the assets may simply pass to your children instead (and the process to renounce is very complex for minor beneficiaries), or you would not be able to reject the French assets whilst still inheriting the English assets.
When a minor beneficiary needs to accept a French inheritance and/or sell an inherited property
In some estates, mainly those which are governed by French law, it is necessary for each beneficiary to accept their inheritance. When the beneficiary is a minor, it will be necessary for a Court to approve the minor’s acceptance of their inheritance. When the minor is habitually resident in France, the process is standard with the simple submission of a form with the local French Court. However if the minor is habitually resident abroad, the process is more complex especially if accepting an estate is not a process that is required in the local law, such as is the case in England & Wales. If you are dealing with an estate where the Notaire has required Court authorisation for a minor to accept their inheritance and they are habitually resident either in France or in England & Wales, we would be pleased to assist with the process.
EXPERT LEGAL ADVICE
Our French Experts
Marc White
Solicitor, Notary Public & Accredited Mediator
Madeleine Carin
French Paralegal
Léa Maynard
Solicitor & Head of French Law