Estate Planning in France

Estate Planning in France

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Estate Planning in France : How to make sure your surviving spouse will receive the maximum share allowed under French law

By Jessica Dillon, Esq.[1], with editorial by Timothy Ramier

gavel, globe, and booksAlthough French inheritance laws are still very much based on old principles of transmission to children and parents, surviving spouses have seen their rights increase over the past decade.

Forced Heirship Rules in the French Civil Code

French law has a hierarchy between the different heirs who come in the estate. There are four categories of heirs and the principle is that one category may not supersede another.

The first category of heirs consists of descendants: your children and their own children. Within this category, the children are treated equally, and the grandchildren are treated equally in representation of their predeceased parents.

The second category consists of ascendants: your mother and father and their own parents. They inherit the estate only if you die without having children.

The third category consists of other ascendants who are not your parents: grandparents, great grandparents, etc… They inherit the estate only if you die without any children and with no surviving parent.

The fourth category consists of your siblings and their own children. They inherit the estate only if you die without children, without surviving parents and without other ascendants in your family.

This hierarchy dates back to the Old Regime, when surviving spouses – often women – had no legal rights over the estates of their deceased spouse. Based on this historical hierarchy, French law has created rules to protect these heirs: as they represented the ideal of the French family, the French legislator did not tolerate that the decedent would want to benefit someone outside of that family nucleus. Forced heirship rules were there to maintain the existence of this ideal French family, by simply making it impossible to disinherit these protected heirs. In other words, a share of the estate is necessarily distributed to the protected heirs, while the remainder can freely be disposed of. Gradually, luckily for surviving spouses, the family nucleus was reduced down to children and their own children, with the suppression of forced heirship laws in favor of ascendants in 2007.

The forced heirship share is calculated in the following manner:

FORCED HEIRSHIP SHARE AND FREELY DISPOSABLE SHARE

The Deceased Leaves:

Forced Heirship Share

Freely Disposable Share

1 Child

1/2

1/2

2 Children

2/3

1/3

3 + Children

3/4

1/4

The surviving spouse can therefore “compete” with the surviving children of the decedent and obtain his/her share in the freely disposable share. However, it is important to note that the surviving spouse receives the disposable share only if the decedent did not fully allocate it to someone else through a legal instrument.

Forced heirship rules make it important for clients who wish to provide for their spouses upon their demise to think of how exactly they wish their disposable share to be distributed, whether partially or in full to their surviving spouse. Instruments such as donations and wills come in handy to make it known to the public how you intend to have your estate distributed.

Minimal Protection Offered to the Surviving Spouse

With the evolution of the French society and of the French family in particular, the Legislator had to finally catch up on reality. In 2001, a bill was passed which recognized spouses in estate laws and gave them minimal rights in the estate of their deceased spouse.

Since then, if the decedent dies with no descendants or ascendants and if s/he did not leave a will stating otherwise, the surviving spouse is entitled to the full estate, i.e. the surviving spouse supersedes the decedent’s siblings.

If the decedent had children, the position of the surviving spouse will depend on whether the children are common to the spouses or if they were born of a previous marriage. When the children are common, the surviving spouse is entitled to choose between either a life interest over the entire estate or one quarter outright of the estate. When the children are not common, the surviving spouse is entitled to one quarter outright.

Spouses no longer pay inheritance tax for their share in an estate opened after August 22nd, 2007[2]. In other words, surviving spouses benefit from a full exemption.

Most importantly though, the surviving spouse is now guaranteed against greedy children who would like to kick him/her out of the house/apartment where the spouses were living, but that was held only in the name of the decedent.

The surviving spouse has a one year automatic right to stay in the couple’s principal residence or to request that the lease on the principal residence be put in his/her name.

Within one year of the death of the decedent, the surviving spouse can also manifest his/her intention to have a life interest over the couple’s principal residence and its furniture.

If in need, the surviving spouse can request that the estate distribute alimony.

Ways to Further Benefit Your Surviving Spouse

One way to benefit your spouse is to adopt a favorable matrimonial regime.

Indeed, when spouses are married under a community regime (the default regime, under French law, for spouses who got married without adopting a marriage contract), everything the spouses acquire during the marriage is presumed to belong to both of them, in equal shares. Upon the death of one spouse, the community is dissolved and half of the assets that were acquired during the marriage automatically vests in the surviving spouse, the other half goes to the estate. Until the community is liquidated, the shares of each heir in the estate cannot be calculated.

Matrimonial regimes also allow the spouses to make donations to themselves or decide how their estate will be split between their heirs and the surviving spouse during their lifetime.

More interestingly, the French legislator has amended one important provision in the Civil Code, allowing you to execute a will in favor of your spouse and by which you declare that you wish to give him/her the largest possible share by law. With this provision, your will will be interpreted as giving your surviving spouse a life interest over your children’s forced heirship shares. Several challenges to this provision were brought before the courts by children claiming their full rights under forced heirship rules, but the courts have ruled that the spouse’s life interest did not infringe on the protected heirs’ forced heirship share. So long as the children get their share in the maybe-not-so-near future, the surviving spouse can benefit of his/her life interest over the assets normally distributed to the children.

In order to be able to claim this “special disposable share”, a clear will must be executed. There can be no doubt on the decedent’s intention to give his/her surviving spouse the maximum share allowed by law. This mechanism gives your surviving spouse an option:

MAXIMUM SHARE DISTRIBUTED TO THE SURVIVING SPOUSE

Heirs Competing With The Surviving Spouse

Options Given to the Surviving Spouse

1 Child (or grandchildren coming in representation of the predeceased child)

– ½ outright (normal rules)

– ¼ outright + ¾ life interest

– life interest over the entire estate

2 Children (or grandchildren coming in representation of one or several predeceased children)

– 1/3 outright (normal rules)

– ¼ outright + ¾ life interest

– life interest over the entire estate

3 Children + (or grandchildren coming in representation of one or several predeceased children)

– ¼ outright (normal rules)

– ¼ outright + ¾ life interest

– life interest over the entire estate

No Children

Entire estate

Ramier Law Office can guide you in preparing the estate plan best suited to your particular situation, whether purely French or with added international complexities.

RAMIER LAW OFFICE
5, Rue Cambon – 75001 Paris, France
T: +33(0)1 42 61 55 34
F: +33(0)1 42 86 94 07
email: [email protected]

Our next installment will address the issues concerning French estate and gift taxation.


[1] Jessica Dillon is a junior associate at Ramier Law Office. She has French and American citizenship and holds a Master degree in French and Anglo-American law from the University of Paris X-Nanterre, as well as an LL.M degree, Magna Cum Laude, from Albany Law School (New York). Jessica Dillon is admitted to practice law in New York State and recently passed the Paris Bar exam.

[2] It is important to note here that this exoneration is now applicable to couples who, although not married, have entered into a civil union (“PACS” in France).

 

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