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| WHAT YOU SHOULD KNOW | ||||||
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| BRITTANY PROPERTIES |
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| BPS AGENCIES |
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| Successions |
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SUCCESSION TO AN ESTATE
In France, an agreement whose purpose is to create or waive rights to a succession that has not yet been opened is not authorized, since it would constitue an agreement on a future succession, prohibited by law. Successions to estates take place according to law when the wishes of the deceased do not prevent this trhough voluntary disposition (essentially by gift or will).
LEGAL TRANSMISSION The estate is transferred by law to the parents of the deceased and to his/her spouse, when the have the qualities required for an heir (mainly meaning worthiness to inherit). Transmission to relatives In the absence of a spouse, the succession is transmitted to the relatives of the deceased, in the following order :
Each of these four categories constitue an order of heirs ruling out any more distant relatives. Within the same category of order, if there are several heirs, the one most closely related to the deceased (counting the number of generations that separate them) supplants the most distant, while those with the same degree of relationship share equally in the succession (in the collateral line, the generations are counted back until a common ancestor is reached). For example, the deceased is separated from by his child by one generation, from a grandchild by two, from his brother or sister by two generations, etc. However, there are some exceptions to the rule, such as successional representation, which allows a descendant of a predeceased child to exercice the rights of the predeceased in the succession.
Conjugal transmission The surviving spouse is firstly the holder of specific rights of enjoyment as regards the residence ans a living allowance claimed against the succession. Secondly, he/she benefits from transmission of the estate in whole or in parts as follows. If the children or descendants of the deceased are in competition with the spouse, the latter has a right in the succession. However if all of the descendants are from the same spouse (that is to say, no child exists from another marriage of the deceased), the spouse may claim enjoyment of all the assets in the succession. Failing any descendants, if the mother and father of the deceased are in competition with the spouse, the spouse will have right to one half of the estate, or three-quarters if the deceased is only suvived by one parent. Apart from these cases, the spouse has right to the entire succession (subject firstly to the rights of brothers and sisters and/or their descendants) on half of the family assets that the deceased received gratuitously from his/her parents (if she/he conserved such assets), while grandparent, or even great grandparent, may also claim a right to a living allowance against the succession (if they are in need).
VOLONTARY TRANSMISSION The rules of transmission may sometimes be defeated by the expressed will of the deceased, when such transfert is made by a volontary disposition such as a gift or will. Such an instrument may partially or totally disinherit a legal heir.But it may also favor such an heir by giving the latter or bequeathing him more than the share provided by law.
Deceased's attempt to disinherit an heir First of all, the power of the deceased in regard to his estate is not limitless. He may not completely disinherit his legally protected heirs (either directly by a clause in the will or indirectly by bequeathing his assets to a third party). The legally protected heirs are the deceased's relatives in the descending and ascending line, and now the surviving spouse when there is no competing legally proteced heir. The quantum of these legally protected heirs is often variable. For example, if there is one child, it is ons half; if two children, it is one third; if three ore more children, it is three-quarters. The surplus is the disposable portion of the estate, that is to say the part of the succession that the deceased may legally dispose of through volontary disposition.
Desigantion of a preferred heir In the second case, the deceased may seek to favor an heir or third party by gift or will up to the amount of the disposable portion. It should be noted that this disposable portion increases if the preferred party is the spouse, in particular for the right of enjoyment for the whole of the estate.
THE INHERITANCE FILE An inheritance file is generally composed of certain documents and includes the following :
The Affidavit The affidavit establishes proof that a person is an heir. It is most often drawn up by a notary at the request of an interested party (heir, universal legatee, etc.). Through this document the heir certifies, on his responsability, that to his knowledge the succession has been made to himself and to other beneficiaries as the case may be (after checking with a file recording the provisions of the last will and testament). With this deed in hand, the beneficiary may allege his rights, for example with a bank in which the deceased had an account, in order to obtain funds placed on deposit, in the proportion of inheritance rights applicable to the heir. This documentary evidence may nonetheless be challenged by proof that it is false or inexact. Nor is such a document the only form of evidence that may be used; for example, the town halls may issue succession certificates enabling the release of small sums deposited by the deceased with banking institutions.
Inventory of the estate As a conservatory measure (for example, within the framework of an inheritance accepted without liability to debts beyond inherited assets, or in the event of an usufruct stipulated in the will, or to prevent application of the fixed rate on movables of 5%, an inventory of the assets in the succession (assets and liabilities) may be required in particular by the heirs of the deceased or by the surviving spouse. This inventory is drawn up on the premises by a notary in the presence of the heirs and spouse. The notary gives a description and valuation of the assets in the estate, as the case may be, assisted by an auctioneer who values the assets.
The authentic certificate after death The authentic certificate after death is a document authenticated by a notary, which must be issued within four months of the death of the deceased. Its purpose is to record the transfers or creation upon death of rights in rem over real property for the purposes of publishing same in the land registry, thus making them binding upon third parties. This document is indispensable for a totally efficient transfer of inheritance, beacuse in its absence, an inherited building may not be sold by the heir because such a sale cannot itself be published. The authentic certificate must also be issued in the event of creation of rights in rem over real property, such as when the surviving spouse claims his/her legal right to occupy the residence (French Civil Code , Art. 764)
Publiaction of the succession Once the succession is opened, in principle the heirs have six months to file a declaration of succession to the French tax authorities. This declaration is drafted and signed by the heir (or his representative) and involves making an estimation of the assets in the succession and the deductible liabilities, so as to determine the basis for any inheritance tax due. He then settles the inheritance tax according to the applicable rate, taking into account the tax exemptions and reductions he may claim (for example 46.000 betwenn father and son). The filing of this declaration is accompanied by payment of any inheritance tax.
Sharing out a succession In the event taht there are several heirs, the succession may need to be divided, in order to end co-ownership of an estate and transfer individual shares to the heirs. The division may be by amicable settlement if the heirs agree on composition of their shares and the valuations made. An amicable division may be carried out in the absence of a deed, in particular if the succession is of little value and only consists of furniture. However, it will require a deed authenticated by a notary if the division involves real property in the estate, so that it can be published in the land registry. If the heirs are unable to agree on the composition of their shares, the division can only be done through the courts. This has the drawback that the assets in the estate will often have to be sold by auction.
INHERITANCE OF A PERSON DOMICILED IN THE UNITED KINGDOM Mandatory French rights of inheritance on assets held by the deceased France and the United Kingdom signed an international treaty on June 21 1963 with regard to inheritance tax. Its purpose was to avoid double taxation, and divide taxable assets between the two countries. The term "United Kingdom" means Great Britain and Northern Ireland. It does not include the Channel Islands, nor the Isle of Man.
Domicile in the United Kingdom The deceased is deemed to be domicilied in the United Kingdom within the meaning of the treaty if at the time of death his permanent residence and the center of his vital interests were in the United Kingdom.
Taxation of assets The following assets are subject to French capital transfer tax upon death in France, since their material assessment basis is in France : -All real property assets and rights in rem (real property, constructed or otherwise, held in full ownership, usufruct or bare ownership), -All tangible movable assets (furniture, miscellaneous equipment etc.). -The following intangible assets :
Calculation of capital transfer tax upon death The capital transfer taxes upon death are calculated on the inheritance assets taxable in France according to the same procedures as for the inheritance of deceased persons domicilied in France. The taxes are paid on the share of the estate going to each heir, among the taxable assets defined above. A personal reduction is applied to this taxable share. The amount of the reduction depends upon the kinship between the deceased and the heir (46000 euros for transfers to each of the children surviving or represented or to each parents or grandparents; 76000 euros for the transfer to the suvinving spouse). The surplus is subject to a progressive or a fixed proportional transfer tax upon death depending on the kinship between the deceased and the heirs. The amount of the tax paid is subject to a reduction for family charges (610 euros for each child after the 2nd child with direct line transfers; 305 per child after the second child with collateral line transfers). Mr Jmes Smith, domicilied in London, died there on November 2, 2003. The deceased owned in France : -A villa located in Touquet Paris-Plage of a market value of 300,000 euros -A yacht registered in France valued at 30,000 euros 1st hypothesis : In his will, the deceased indicated as beneficiaries: -His surviving spouse with whom he had separation of estate, to whom bequeathed is one quarter of the assets making up the estate; -Two children from the marriage, to whom are bequeathed the remaining three quarters. The determination of the taxable assets goes as follows : Assets taxable in France : -the villa 300,000 euros -the yacht 30, 000 euros -a fixed tax of 5% for the furnishings in the Touquet villa where the deceased resided 16 500 euros 346,500 euros Transferred to -The surviving spouse for-in full ownership 86,625 euros -To each of the two children for-of the estate in full ownership 129,935,50 euros
Payment of tax Share received by the surviving spouse 86,625 euros Reduction 76,000 euros Taxable remainder 10,625 euros
From 0 to 7,600 euros : 5% on 7,600 euros 380 euros From 7,600 euros to 10,625 : 10% on 3,025 euros 303 euros Total amount of tax 683 euros
Share of tax to be paid by each of the two children 129,936 euros reduction 46,000 euros Taxable remainder 83,936 euros
From 0 to 7,600 euros : 5% on 7,600 euros 380 euros From 7,600 to 11,400 euros : 10% on 3,800 euros 380 euros From 11,400 to 15,000 euros : 15% on 3,600 euros 540 euros From 15,000 to 83,936 euros : 20% on 68,936 euros 13,790 euros 15,090 euros If one of the two inherting children also has four surviving children, the amount of tax owed by him/her comes to 15,090 euros (610 euros x 2) = 13,870 euros.
Second hypothesis : The deceased leaves as heirs in his will a full brother for half estate, and two nephews, as representatives of a predeceased brother, for the other half. The total taxable estate in France is still equal to 346,500 euros Transferred to : -One brother for one half : 173,250 euros -To each of the two nephews together for the other half, and each separately for : 86,625 euros
Pyament of tax : Share due to the full brother : 173,250 euros Reduction 1,500 euros Taxable remainder 171,750 euros
From 0 to 23,000 euros : 35% on 23,000 euros 8,050 euros From 23,000 to 171,750 euros : 45% on the 148,750 euros 66,938 euros 74,988 euros
In the full brother has three surviving children, the amount of tax paid comes to 74,988 euros - 305 euros = 4,683 euros The share received by each of the nephews : 86,625 euros 1,500 euros Taxable remainder 85,125 euros Tax due at a rate of 55% on 86,125 euros 46,819 euros
Notification obligations The heirs are required to file statement of inheritance on a special tax from at the Non-residents Tax Office, 9 Rue d'Uzès, Paris, within one year of the deceased's death. After this deadline, they will be liable for late penalities at a rate of 0,75% per month, and increase of 10% on the total amount of tax due.
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