This section covers the basics of French property inheritance. You should review these guidelines and think about how they might affect you and your family in the event that you should die. French law is very different to the laws in the UK and it is important that you understand the implications for you once you become a French house owner.
Even if you are a UK resident and leave a legal will, the disposition of your French property will be decided under French law in almost all circumstances.
Let us start with a simple situation. If you are the sole owner of your property and you die then the property will be divided between your children (or other relatives if you have no children). It is possible to dispose of part of your property to a third party by making a will but only a portion of your property can be willed and that portion is set by the number of children you may have. If you have only one child then you can give away half of your French property to a third party. If you have two children then you can will a third of your property but if you have three or more children that portion is reduced to a quarter of the property. A husband or wife is not a legal heir under French law so if you are married and die then your children will own your property and not your surviving spouse.
If you and your wife (or partner) buy a French house jointly then things work in the same way but the calculations can get a bit more complex. In most circumstances you will have purchased your property together under the French method known as "indivision" - you each own half of the property. If you die, then your partner still owns half of the property but your children (all of them, not just those of your current marriage) will share the ownership of your half between them.
I am sure that a moments thought would see how complex the equations can be in deciding your children’s shares if you both had children together and from prior relationships and you should both unfortunately die.
If you and your partner purchase your French property “en tontine” then (just as in the equivalent United Kingdom instrument) the survivor(s) becomes the owner of the property. This might be just what you intend but such an arrangement could complicate things in the future should you need to unravel the agreement to make alternate dispositions.
If you are a fairly organised sort then the final alternative is to set up a special variety of French company (a sociétés civiles immobilières or SCI for short) to own the property. You and your partner could then hold shares in this company and such shares can be disposed of and willed in any way that you see fit. Indeed in this circumstance your shares in the SCI could be disposed of in your will under UK law. The major disadvantages of this approach are that you have the additional expense of setting up the SCI and you have to abide by French company law. This requires an annual French tax return, holding an annual general meeting and keeping proper records as a minimum. These requirements are not particularly onerous but you should not enter into such a commitment lightly.
If you are likely to choose to set up an SCI to own your new home then it would probably be best to obtain suitable taxation advice in advance of house hunting to make sure that you understand the costs and commitments. Make sure that your advisor understands UK tax legislation as well, as there have been reports of difficulties with the Inland Revenue misunderstanding the nature of SCIs and demanding tax on the supposed “benefits in kind” that your SCI share ownership attracts. In addition, changes to the French capital gains tax regulation on the disposal of property may have made this form of property purchase less attractive as there is no taper relief available on the nominal value of the shares in the SCI.
Possible Future Changes?
Dominique Perben (the French Minister of Justice) has promised a review of the inheritance system to coincide with the 200th anniversary of the Napoleonic Code.
It is already clear that there is no mood in France to change the basics of the system that favours the children as the French are used to this idea and feel comfortable with it. There is however likely to be some changes to protect the interests of unmarried or gay couples and to reflect the large increase in second marriages. It would probably be wise to make your decisions on the basis upon which you will buy a property in France using the current law as a guide - changes are unlikely to bring things into line with the United Kingdom.
Just as a final point on inheritance you should read our section on French taxation and in particular the points on gift and inheritance taxes.
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